Is My Employer's Exit Agreement Legal? Seeking Advice on Relieving Letter Issues

I am working as a Sales Manager in the healthcare industry, and now I have resigned from my current employer and am serving my notice period. During my exit formalities, HR is insisting that I sign an exit agreement, which was not mentioned in the terms and policies I signed during my appointment. Please let me know the legal validity of this requirement, and also, if I choose not to sign, how can I obtain my relieving letter.

What is the content of this exit agreement?

No one can take away your right to work, including with competitors. You are, of course, expected to maintain the secrecy of your former employer's processes, etc.

What does your appointment order say about the exit procedure?

Please share the legality of the separation agreement which my employer is insisting I sign to obtain my relieving and F&F claim. What will be the legal remedies to overcome this issue?

Specific wordings of the exit agreement need to be examined. If the agreement is confined to asking you to maintain the company's commercial secrecy, it is all right. However, clauses that deny the right to work in similar organizations would not be in order.

At any rate, you need to consult a lawyer and sort out the matter, as you state the company wants you to sign the exit agreement, and only then will they release your FNF.

Dear Mr. Sapez, Please carefully read, understand, and seek advice before signing any Exit Agreements. As Mr. Nathrao stated, the terms and conditions of the Exit Agreement would include not joining competitors and maintaining the confidentiality of information. However, your company should have had you sign such agreements at the time of your appointment, not after resignation.

If you are considering joining a competitor company, please refrain from disclosing this to your current employer and avoid agreeing to any clauses related to it, as your current company may take legal action against you. You may also discuss the Exit Agreement with the HR/Management of the new company if necessary, but only after gaining clarity on its clauses.

Regards, Sumit

Separation Agreement Key Points

In my appointment, it is a two-month notice period, and there is nothing called a separation agreement mentioned.

The obligations of the parties post-acceptance of the resignation were discussed between the parties, particularly with reference to the obligation of the employee regarding non-solicitation, non-compete, confidentiality, and any statement against the company. All the issues were sorted out and agreed upon to the mutual satisfaction.

The employee, in consideration of the acceptance of the resignation and settlement of his terminal dues, hereby agrees and undertakes obligations relating to non-disclosure, non-solicitation, and non-compete, and obligations against making any adverse comments against the company as set out below:

3.1 The employee accepts that during the tenure of his employment, he had access to confidential information (whether written or oral) which may relate to the company and/or its affiliates or their clients and business partners. This includes, but is not limited to, past, present, or future plans, forms, methods, technology, inventions, computer software programs, copyrights, research and development activities, employee information, organizational structure, customer, financial and business information, trade secrets, or other confidential or proprietary information (‘Confidential Information’). The employee promises to hold Confidential Information in strict confidence and further promises that he will not directly or indirectly use, reveal, report, publish, or disclose such Confidential Information to any person, firm, or company. He shall not use such information to cause any prejudice to the rights and business of the company and/or its affiliates or their clients and business partners.

3.2 To protect the company's and/or its affiliate’s rights in and to the Confidential Information and to ensure that no unfair advantage is taken of the employee’s knowledge of and access to the Confidential Information of the company, the employee agrees that for a period of 6 months after his relieving from the services of the company, he shall not:

- Directly or indirectly solicit or encourage any employee of the company and/or its affiliates or any consultant to leave the employment of the company and join any other company, firm, or undertaking and take up employment/engagement elsewhere.
- Commit any act or omission which may cause prejudice to the company and/or its affiliates or their business. He shall not, directly or indirectly, as owner, officer, director, stockholder, partner, associate, consultant, manager, advisor, representative, employee, agent, creditor, or otherwise, attempt to solicit or in any other way disturb or service any person, firm, or corporation which is (a) in a business relationship with the company or its affiliates or (b) is a competitor of the company or its affiliates. He shall do nothing which may tarnish the image of the company in the eyes of the public. Further, the employee agrees not to make any adverse statement against the company or its business or its employees in public, either through media, print, electronics, or otherwise.

6. The employee acknowledges that each of the prohibitions and restrictions contained in the provisions above:
(i) Must be read and construed and will have effect as a separate, severable, and independent prohibition or restriction and will be enforceable accordingly; and
(ii) Is reasonable as to period, territorial limitation, and subject matter. It is the intention of the parties that all combinations of such prohibitions and restrictions will apply and be enforceable.

8. The company shall be entitled to injunctive and other equitable relief permitted by law in the event of a breach or threatened breach of this agreement by the employee. The employee shall not plead as a defense that there would be an adequate remedy at law. Any such relief shall be in addition to, and not in lieu of, money damages or any other legal or equitable remedy available to the company.

9. No waiver of any provision of this agreement shall constitute a waiver of any other provision(s) or of the same provision on another occasion. Failure of either party to enforce any provision of this agreement shall not constitute a waiver of such provision or any other provision(s) of this agreement.

10. This agreement may be executed in counterparts, each of which when executed and delivered shall be an original, but all of which shall constitute one and the same instrument.

WITNESS WHEREOF the parties have appended their signature on the day, month, and year mentioned above in token of having accepted the above terms and conditions.

Exit Agreement Key Points

The Employee, in consideration of the acceptance of the resignation and settlement of terminal dues, hereby agrees and undertakes obligations relating to Non-disclosure, Non-solicitation, and Non-compete, and obligations against making any adverse comments against the Company as set out below:

4.1 The Employee accepts that during the tenure of employment, he had access to confidential information (whether written or oral) which may relate to the Company and/or its affiliates or their clients and business partners. This includes, but is not limited to, past, present, or future plans, forms, methods, technology, inventions, computer software programs, copyrights, research and development activities, employee information, organizational structure, customer, financial and business information, trade secrets, or other confidential or proprietary information (‘Confidential Information’). The Employee promises to hold Confidential Information in strict confidence and further promises not to directly or indirectly use, reveal, report, publish, or disclose such Confidential Information to any person, firm, or company. He shall not use such information to cause any prejudice to the rights and business of the Company and/or its affiliates or their clients and business partners.

4.2 To protect the Company’s and/or its affiliate’s rights in and to the Confidential Information and to ensure that no unfair advantage is taken of the Employee’s knowledge of and access to the Confidential Information of the Company, the Employee agrees that for a period of 6 months after his relieving from the services of the Company, he shall not:

- (a) Directly or indirectly solicit or encourage any employee of the Company and/or its affiliates or any consultant to leave the employment of the Company and join any other company, firm, or undertaking and take up employment/engagement elsewhere.
- (b) Commit any act or omission which may cause prejudice to the Company and/or its affiliates or their business. The Employee shall not, directly or indirectly, as owner, officer, director, stockholder, partner, associate, consultant, manager, advisor, representative, employee, agent, creditor, or otherwise, attempt to solicit or in any other way disturb or service any person, firm, or corporation which is (a) in a business relationship with the Company or its affiliates or (b) is a competitor of the Company or its affiliates. The Employee agrees not to make any adverse statement against the Company or its business or its employees in public, either through Media, Print, or Electronics, or otherwise.

5. The Employee agrees to surrender all the properties and other documents, either in hard copy or in electronic form, to the Company which had been entrusted to his possession or had come to his possession during the course of his employment.

6. The Employee acknowledges that each of the prohibitions and restrictions contained in the provisions as above:
- (i) Must be read and construed and will have effect as a separate, severable, and independent prohibition or restriction and will be enforceable accordingly.
- (ii) Is reasonable as to period, territorial limitation, and subject matter. It is the intention of the parties that all combinations of such prohibitions and restrictions will apply and be enforceable.

7. This Agreement shall be governed by and construed in accordance with the laws of India without giving effect to any choice of law or conflict of law provisions. The Parties consent to the exclusive jurisdiction and venue in the courts of Karnataka in the city of Bangalore.

8. The Company shall be entitled to injunctive and other equitable relief permitted by law, in the event of a breach or threatened breach of this Agreement by the Employee. The Employee shall not plead as a defense that there would be an adequate remedy at law. Any such relief shall be in addition to, and not in lieu of, money damages or any other legal or equitable remedy available to the Company.

No waiver of any provision of this Agreement shall constitute a waiver of any other provision(s) or of the same provision on another occasion. Failure of either Party to enforce any provision of this Agreement shall not constitute a waiver of such provision or any other provision(s) of this Agreement.

10. This Agreement may be executed in counterparts, each of which when executed and delivered shall be an original, but all of which shall constitute one and the same instrument.

WITNESS WHEREOF the parties have appended their signatures on the day, month, and year mentioned above in token of having accepted the above terms and conditions.

"In order to protect the Company's and/or its affiliate’s rights in and to the Confidential Information and to ensure that no unfair advantage is taken of the Employee’s knowledge of and access to the Confidential Information of the Company, the Employee agrees that for a period of 6 months after his relieving from the services of the Company, the employee shall not:

(a) Directly or indirectly solicit or encourage any employee of the Company and/or its affiliates or any consultant to leave the employment of the Company and join any other company, firm, or undertaking and take up employment/engagement elsewhere."

Concerns About Restrictive Agreement

Restriction to join any other company for 6 months is unreasonable. Will the company pay 6 months' gross salary in addition to the FNF settlement?

Secondly, the offer letter did not make any stipulation of such a restrictive agreement on exit. I am sure the company would have specified clauses regarding exit from the company.

By the way, how long did you serve this company? Personally, I would not sign any such agreement which prevents the lawful exercise of your right to livelihood.

Non-Compete Clause in Exit Agreement

In the recitals, the clause reads, "The Employee, in consideration of the acceptance of the resignation and settlement of his terminal dues, hereby agrees and undertakes obligations relating to Non-disclosure, Non-solicitation, and non-compete, and obligations against making any adverse comments against the Company as set out below: ..."

Here, the term 'non-compete' is questionable, to say the least. Besides, if there was no mention of the appointment letter, why should you agree to such conditions at all?

Receiving the full and final settlement for the work you have performed is your right. Other than that, what consideration is the company offering for signing this agreement?

Be careful before you sign this agreement.

Regards,
A. S. Bhat

At the senior level, exit agreements are becoming quite stringent to protect the company's inside information. The latest trends can be seen in this link: [Big Four consultancies EY, PwC, Deloitte, and KPMG fencing staff with stricter exit clauses - The Economic Times](http://economictimes.indiatimes.com/jobs/big-four-consultancies-ey-pwc-deloitte-and-kpmg-fencing-staff-with-stricter-exit-clauses/articleshow/48061065.cms)

There was nothing mentioned in the appointment letter regarding an exit agreement. However, non-disclosure, non-solicitation, and non-compete clauses are mentioned in the terms and policy which I agreed to at the time of appointment.

Now, what I feel is, are they trying to link both agreements and aiming for legal validity? Do I need legal advice to overcome this situation?