Senior Manager Joins Competitor Without Notice: What Legal Steps Can We Take?

One of my company's Senior Managers resigned without following the one-month notice period clause and instantly joined a competitor company. There is a restriction clause in the appointment letter that prohibits working with a competitor for a period of 24 months after leaving the service.

Legal Action Suggestions Needed

Kindly suggest what legal action we should take.

Regards,
Nitesh Sharma
HR Head
Manlift India Pvt. Ltd.

Legal Considerations for Employee Breach of Contract

As per the contract act, you can't contract on human life. The only solution you have is to blacklist the employee and send their data to your business union. Consult a lawyer to see if any action can be taken.

Regards

In such cases, you have to take a pragmatic view. Apart from withholding the balance of his dues, there is actually little else you can do. The clause in his contract relating to not working with another competitor for 24 months is not enforceable in any court. It is far too long a restriction.

His argument (which would be considered very reasonable) is that he is restricted from earning a living; particularly as he is a senior manager, he knows nothing else apart from this line of work. Taking this to court will result in a huge cost, and you will gain little if anything. In other words, you must consider the economics involved.

However, you should try to find out the cause of his resignation and take steps to ensure that such causes are negated.

If you value him, then consider if you would take him back. If so, then I suggest you write a polite letter asking for his reasons but leave the door open for him to return either now or in the future when he has even more experience.

Blacklisting a person in most circumstances does no good to anyone, especially as you run the risk of getting a reputation as an aggressive employer, in which case good candidates will not want to work for you. So in the long run, you will lose.

I hope the above helps and gives you some food for thought.

Regards,
Harsh

I would like to add my personal views.

This kind of action from a senior manager is not acceptable as they are supposed to be responsible persons. We should always maintain a good relationship with our ex-employer.

In India, its citizens are free to choose professionals across the country. So, you cannot restrict him from joining a competitor as this would be a violation of his fundamental rights.

You can take legal action against him on the grounds that he has not served the notice period as per the employment contract, and you can recover the notice pay.

We need to be broad in our imagination and actions. Instead, we should focus on the root cause that compelled him to act this way and take actions to prevent this in the future.

No use unless patents and trade secrets are violated. Be prepared that this trend will continue. Do not go to court. This just benefits lawyers.

Regards,
Rajesh

You can establish a tacit understanding within your trade association not to poach others' employees. If one company does not honor that, play the same game with them!

Selecting and Promoting Individuals

When selecting or promoting individuals, you must be careful that they are reliable. Recommendations from trustworthy people can be very helpful in this regard.

Managing Departures of Senior Managers

Senior Managers departing can potentially take away many of the company's secrets, causing harm. It is essential to review the steps the company takes to promote loyalty. Introducing incentives such as increasing rates of incentives, a superannuation fund accessible only after a certain number of years of service, etc., can be beneficial. It is crucial to make them feel valued and treat them in a friendly manner from the top management so that they feel a sense of ownership towards the company.

Best regards,
R. Ramamurthy

Legal Action for Breach of Contract

First, get a legal notice issued through a lawyer referring to the clause(s) that are violated. Depending on your terms of the contract, you can approach the civil court to claim restraint or damages. When a senior employee leaves and joins a competitor, it is detrimental to your company's business and cannot be taken lightly. That is the very reason why the restraint clause is included in his contract. By and large, it is a settled law that such restraint is valid and justified for up to 3 years but not beyond.

Regards,

This is applicable to posts related to management positions, not managerial positions. The employee in question is a senior manager. The company can recover only the notice period salary, nothing more. Even for that, the company will have to go to civil court. It is true that such restrictions are valid, but only for certain positions. Generally, these restrictions apply to positions with policymaking power within the company, those who have knowledge of future projects, or positions involving confidential information that could severely impact the company's business if leaked.

For instance, if a person is involved in preparing tenders for the company, and that person leaves to join a competitor, they could potentially leak the tender bid amount. Such individuals can be prevented from joining a competitor, but they should be provided with sufficient support to sustain themselves during the period of non-employment. Otherwise, they may argue how they will survive during the restriction period, especially if they have specialized skills that limit their job options.

I hope this clarifies the situation.

Regards,

The legal route shall be a long road. You can definitely catch him for not serving the notice period and take appropriate action in accordance with your company's policies and procedures. As far as joining a competitor's company is concerned, there is little that you can do. You will have to prove the misuse of confidential data, violation of patents, etc., which is practically very difficult. Please keep in mind that the expertise and contacts gained by the employee during his/her employment period with your organization belong to the person and not to your organization, as established by a court judgment; so you can't have that as a basis for your legal argument. My suggestion will be to let it go, frame a proper exit policy, and try to foster a culture of ownership in your organization.

[QUOTE nitesh.adv;2081677]
Hi, Friends,

One of my company's Senior Managers resigned without following the one-month notice period clause and instantly joined the competitor company. There is a restriction clause also in the appointment letter that prohibits working with a competitor for a period of 24 months after leaving the service. Kindly suggest what legal action we have to adopt.

Nitesh Sharma
HR-Head
Manlift India Pvt. Ltd.
[/QUOTE]