Is It Fair for Management to Demand a Non-Compete Assurance from a Resigning Manager? How Would You Handle This?

My name is Prakash. I work in an MNC company. Our production manager is resigning. Our company is in the automobile industry. He has more than 8 years of experience in the same field.

Management is not accepting his resignation. They require the production manager to provide a written assurance that he will not join any competitor or customer. The manager has refused to provide this in writing.

Please advise if the management's request is reasonable. How can we resolve this issue?

Dear friend,

What you are asking is against the law. Please refer to the following link for discussions on this topic: https://www.citehr.com/568707-employ...er-letter.html.

Thanks,
Dinesh Divekar

Focus on the Situation

Leave the other points aside and focus on the situation. If you continue to work for 10 years in the automobile industry, generally, you would also prefer to work for another automobile industry. Hence, your outgoing GM is likely to opt for the automobile industry only.

Legal Implications of Employment Bonds

Obtaining a bond falls under bonded labor, and at the Supreme Court level, there are numerous judgments stating that such bonds are unethical/illegal and do not hold up. If your GM complains to the police or raises a dispute in court, you all will have to face the consequences.

Post-Employment Considerations

In case your GM leaves and starts a consultancy or joins as a consultant/freelancer, what can you do? You all should bear in mind that the outgoing employee should leave the company fully satisfied and happy as they are going to be the ambassadors of the company. Any negative talk will tarnish the company's image.

Employee-Driven Organizations

Specifically, in today's employee-driven organizations, we need to take care of people. Actions like bonds/agreements will harm the company's reputation. According to the communication, yours is an MNC, and the process you mentioned should be handled by roadside vendors and unethical organizations. Please advise the management accordingly.

Regards

Thank you, sir, for your reply. I completely agree with your suggestions. It is very difficult to convince management, especially since our management is Korean. They never listen, making it challenging to explain things to them. I will follow your points regarding this issue and try to advise management accordingly. Thank you for providing useful information.

Further to what Kamesh mentioned, the situation you described falls under the purview of something called a Non-Compete Clause/Agreement. Usually, this is signed by the company while joining, not while leaving or resigning. Perhaps in your company's case, they may have had some recent issues with people leaving and joining competitors.

However, please note that this practice is not illegal, provided—repeat, provided—there's a timeline associated with it, such as "you can't join competitor companies within 1/2/3/... years." In fact, even the Indian Defence Forces have this clause, called a "Cooling Period," where the officer can't join any company that has done business with the Armed Forces and in which the individual concerned has been involved, for a period of 1 year after being relieved from the forces.

One can't have a timeless or permanent bar from joining competitors, as Kamesh indicated. The primary purpose of this is to protect the company's trade secrets, etc. The more senior the person quitting, the more seriously this is followed.

I don't think your company being Korean has anything to do with this situation—Korean, Japanese, and Western companies have this practice as a standard operating procedure, which, as I mentioned above, is a part of the initial joining policy itself. I wouldn't be surprised if your production manager knew about this earlier but chose to ignore it until now.

Regards,
TS