Worried About Full & Final Settlement After Joining a Client? Here's My Situation

Please advise if my Full & Final Settlement will be cleared by my company or not. I work for a Fortune 500 recruitment firm, and at the time of joining, they had us sign a contract stating that once we terminate our employment, we cannot join a competitor or any clients of the company. I will be joining a client; hence, I wanted to know if the company has the authority to withhold my Gratuity, PF, and pending salary. Worried! Please reply. Thanks.

As specified by you, if the company terminates, you are not supposed to join the client company. Here you are resigning voluntarily, and hence there is no need to worry.

Although, ensure whether your gratuity amount is paid along with F&F or not. Some companies pay the gratuity amount along with F&F, while some do not. They pay separately. Therefore, make sure to ask for clarification.

Keep it confidential until you receive your F&F from the old company and a month's salary from the new company. Alternatively, you can extend confidentiality until you receive the gratuity amount if it is not paid along with F&F.

The old company (resigned one/serving notice period) will be issuing the PF form post 45 days from your relieving date. You will need to submit this form to the PF office.

Thanks,
Anil N

Thank you for your response. Termination according to the company can be either the company terminating the employee or the employee resigning on their own. The clause states that we cannot join a competitor or client. Hence, my concern is that on the day I join the new company, these individuals will know even before my Full and Final settlement is cleared. Gratuity here is paid in the Full and Final settlement.

The confidentiality agreement is signed on the company's letterhead but is not vetted, attested, or on stamp paper. Therefore, is it a valid document that the company can use to halt the Full and Final settlement?

As specified by you, if the company terminates you, you are not supposed to join a client company. Since you are resigning voluntarily, there is no need to worry.

However, ensure whether your gratuity amount is paid along with the Full and Final settlement or not. Some companies pay the gratuity amount along with the Full and Final settlement, while others do not. Therefore, it is advisable to confirm.

Maintain confidentiality until you receive your Full and Final settlement from the old company and a month's salary from the new company. Alternatively, you can extend confidentiality until you receive the gratuity amount if it is not paid along with the Full and Final settlement.

The old company (the one you resigned from or where you are serving notice) will issue the PF form post 45 days from your relieving date, which you must submit to the PF office.

Thank you.

Regards, Anil.N

Hi Ruchi, first for your question regarding F&F settlement, it will happen only if your current company doesn’t know that you have joined their client because your current company is going to be very unhappy with your behavior of joining their client or competitor.

Couple of Points for Your Knowledge:

1. In India, the rules are very clear that contracts or bonds of any type, even if done on stamp paper, are not valid (only regarding employment agreements such as a two-year bond or restrictions on joining clients, etc.). However, you are liable for any damages caused by you leaving or any expenses that the company has invested in your training programs, etc. If you have no dues left, you are free to walk away from them at any time with the respective notice period served. There are cases where even the notice period can’t hold an employee who wants to leave the company.

2. Recruitment is a vast field, and any company involved in recruitment is a competitor to others. I’m not sure how many years of experience you have; let’s say you have 3 years of experience. What would you do? Quit recruitment and start over in a different job? It’s not practically possible. Therefore, you can join any other companies that are in a similar business.

3. As I mentioned before, contracts of any type related to employment will not hold in India. If someone tries to trap you with it, it is illegal.

4. In case you are trapped by your company, you can always file a case against your company in the labor court. It is a lengthy and time-consuming process, but don’t worry, you will be favored.

According to Indian law, anyone directly involved in the company’s strategy-making, a vital part of the company’s overall function, or a key source of business operation, if they join a competitor causing potential loss or advantage in business, is restricted from joining the client or competitor for an agreed-upon period of time.

Suggestions for You:

1. Talk to your client where you are planning to join about the clause in your offer letter that states you cannot join the client. If your client confirms they have no such clause signed with your company, then relax and join them. If your client is skeptical, I would recommend finding a different opportunity to avoid potential issues. Many cases have been seen where people joined the client’s place, and the company couldn’t do anything about it (even in a recruitment firm).

2. Keep the client’s details where you plan to join confidential until your F&F settlement to ensure you receive all the necessary papers and settlements without any problem. After that, if you wish, reveal the information to them. Even if they threaten legal action, be prepared to face them and consider seeking compensation for any harassment.

I hope I have provided enough details. Please feel free to reach out for more information if needed. Also, check other threads on the same topic as many people have posted similar queries. All the best,

Regards,
Sarathy

Whatever the reasons may be, even if an employee is being terminated, the full and final settlements have to happen. So don't worry, your company is liable to make the settlements. Additionally, the company can deduct any dues from your end as well. Hope this helps.

Non-Compete Agreement and Employment Transition

When the earlier company has made it clear, in writing, that after leaving the job, the employee cannot join its competitor or client, how justified is it for such an employee to break this commitment, whether legally or morally? I personally do not support Ruchi. Of course, her Full & Final Settlement (F&F) will certainly be done as per rules. It cannot be withheld.

@Abhaybandekar, you have to understand that any company involved in recruitment will be considered a competitor, and every consulting company works with almost all clients in their respective fields. So, kindly tell me, what should Ruchi do? Resign from her current company and sit at home doing nothing? How would you justify that legally or morally?

Indian Law on Employment and Competition

Indian law clearly states that as long as you are not a key strategic player in your company, you can join any company, and no one can or should stop you. Even for the key strategic player of the company, they cannot join a competitor or client company until the mutually agreed duration by both parties. It is illegal to trap a person by prohibiting them from joining a competitor or client just because they have joined your company and performed well. This is not just my personal opinion; it is Indian Law. I apologize if I have offended you in any way.

Dear Mr. Sarathy, anyone would be fully satisfied with your detailed comments, which also have great clarity, and so am I. However, I still have an argument:

When a company has Ruchi sign a contract that prevents her from joining a competitor or client (which she must have signed willingly at the time of accepting the job), it may not be just a routine formality.

Every company has some secrets or sensitive issues that they may want to protect, as far as possible. That is why this clause may be imposed on an employee at the time of joining. At the same time, if the employee breaches the contract, the company will certainly have tactics that may align with the law, allowing them to potentially harass the person, even at their new place of work.

In the present case, when Ruchi is joining a client (for her current employer, the client is more dangerous than a competitor), her present employer will certainly be concerned. It is a known fact that legally nobody can prevent her from joining a client. However, she may always carry some tension, at least during the initial few months, that her employer may try to exert pressure on her, making her feel guilty.

Legally, Ruchi may be 100 percent safe, but morally, no - something will be bothering her.

I would appreciate hearing some candid feedback from you.

Thank you.

Clarification Needed on Employment Transition and Legal Concerns

My problem is somewhat different, but I am presenting it here for advice. There are a few clarifications needed. I was working in a company directly dealing with clients. One of the clients suggested my name to their peer company and offered me a good opportunity. I accepted the offer and resigned. The company I was working for was not paying me on time. I did not receive my last 6 months' variable pay. So, I suggested they deduct the amount as I was not serving the notice period. However, they threatened to file an FIR and take legal action under non-solicit terms. The new company I accepted the offer from did not have a direct contract or agreement with my previous company. How can they make such claims? Is this legal?

The previous company has not provided me with a relieving letter or experience letter, and they are asking me to pay 45 days' salary to obtain them. Additionally, I was never officially confirmed as a permanent employee after the probation period, but they are asking for 2 months' salary as notice instead of one. There is no mention of settling the variable pay. They also never reimbursed me, as mentioned in the offer letter. They are now stating that I cannot join a client, even though there was no formal agreement between the companies.

What should I do? I informed them that I cannot make the payment. The new company is willing to onboard me without a relieving letter. Can they take any legal action?

Please advise on the best course of action. Thank you.