Can My Former Employer Withhold My Final Pay Until I Sign a Non-Compete Agreement?

Hello Team, Greetings to all. I was working with a 100-people company offering cloud solutions as a Technical Product Manager. I left the company in October 2014, and my last salary was held due to Full and Final settlement (F&F).

Now, when I started inquiring about my dues, they are asking me to sign a non-compete agreement, stating that it is company policy, and without signing, my dues will not be released. Can anybody help me with this? Can a company do that and change policies once an employee has left the company?

Awaiting your assistance.

Regards

F&F Settlement and Non-Compete Agreement

The Full and Final (F&F) settlement should have been completed in October 2014. There is no need to sign the non-compete agreement now. If the employer does not pay, send them a registered letter to demand immediate payment of dues. If they do not comply, approach the inspector under the Shops and Establishments Act.

Thanks,
Sushil

Legal Implications of Non-Compete Agreements

The action of the company is illegal. Non-compete agreements with an employee are illegal, amounting to violations of the constitutional right to employment. The non-compete agreement is valid only for promoters, shareholders, and business owners who have sold their businesses. There is no provision to withhold payments on this ground. You can discuss this with them or file a complaint with the labor officer in your region.

Technically, you can sign the agreement and then act as you wish because the agreement is not valid and enforceable. However, in that case, speak to a good lawyer first.

You may send them a legal notice through a lawyer demanding your full and final settlement and/or file a case in a court of law under the MRTP & PULP Act.

Regards,
Adv. Goswami.

I am not really sure if what Saswata Banerjee mentioned is correct—"Non-compete agreement with an employee is illegal..."—since most technology companies have this in place for employees along with non-disclosure agreements.

Having said that, I too think what your earlier company did was absolutely wrong—for the simple reason that you have left it and any changes/amendments to HR/Company Policies can't be with retrospective effect to those who left. However, please clarify whether there was any mention of such a clause in your Appointment Letter when you joined them. If not, either they are trying to pull a fast one on you or they are plain dumb.

Like the other members suggested, just go legal—BUT in most cases, the very mention of "I plan to go legal" should suffice. But, before that, please ensure you have their request in writing (through email, letter, etc). Else, you could create another problem while trying to solve this.

All the best.

Regards, TS

VFS Global Services Pvt Ltd v. Mr. Suprit Roy Case (2007)

In VFS Global Services Pvt Ltd v. Mr. Suprit Roy, decided in 2007 by the Bombay High Court, the distinction between a non-compete clause and a non-disclosure clause is evidently set out. The former is held to be void in restraint of trade, business, or profession, whereas an injunction pertaining to the latter clause was granted.

Thanks,

Sushil

Thank you, everybody, for the valuable reply. I am on good terms with the HR of the company. It is not his decision, but his seniors are pressing him for that. According to him, they have defined 'Competition' and according to that, I cannot join the company which is doing the same business (which is obvious) i.e., a service provider. But I can join anywhere else, which is not a service provider but a service taker.

I somehow understand this point but am still confused about whether to sign anything in black and white or not...!!

Regards,

There is nothing mentioned of this kind in my appointment letter. However, while I signed policies, there was a mention that, "Any change in policies will be informed to us and will be automatically binding on us." In short, management's decision is final and binding on us.

Full and Final Settlement and Non-Compete Agreement Issues

After quitting your job, the employer should have completed the full and final settlement immediately. The Payment of Wages Act is applicable to your establishment under Section 38 of the Bombay Shops and Establishment Act. If there is a delay in the payment of wages, you can approach the inspector. Therefore, file a complaint with the inspector under the Bombay Act.

Non-Compete Agreement Concerns

Regarding HR's insistence on you signing the non-compete agreement, inform the manager that it is illegal to do so under Section 27 of the Contract Act. Furthermore, it could be considered as cheating under Section 420 IPC, as the intention is to deprive you of the security provided by your appointment letter, which entitles you to a full and final settlement regardless of the non-compete agreement. Consider sending a legal notice to your former employer.

Thanks,

Sushil