Is This Restrictive Clause in My Employment Contract Legally Enforceable? Seeking Advice

Dear All, I need your opinion on how legally valid and enforceable the below clause inserted in the employment agreement is. I am planning to earn my living through offering services or being employed as I am no longer employed since they cited a lack of business for the continuation of the contract.

Clause in the Contract

Below is the clause in the contract which restricts the employee from being employed, self-employed, a partner, collaborating, advising, or consulting in the area of business which is similar to the organization. Please advise.

The employee hereby agrees and undertakes that he shall not, at any time during employment and for a period of three (3) years after the termination for any reason whatsoever, undertake or carry on either alone, in partnership, or in collaboration, nor be employed directly or indirectly in any capacity whatsoever in India in any manufacture/service which is of the same kind and nature as the business and manufacturing carried on by this company or any of its associate companies or firms or concerns to which his services may be transferred. The employee shall also not be involved in the manufacture of any products, articles, or things for which this company or such other company or firm or concern to which his services may be transferred have experimented in and/or prepared designs for the manufacture of such products or have made preparations for the manufacture of such products. Irrespective of whether such products have been manufactured or not during the said period, the employee shall not lend his assistance for such services in any form or manner whatsoever, whether as a consultant, advisor, or in any other capacity or manner as an employee.

Please let me know your thoughts on the above clause. Thank you.

This is kind of a monopolized trade agreement. I am not finding this as fair.

However, as the employment terms are primarily considered a contract between the employee and employer, you have to examine the sanctity of this with a contract expert or a legal professional.

How can anybody bind after the termination of the contract? This type of contract is invalid in a legal scenario.

Whoever wants this kind of agreement to be signed cannot be fruitful in the purpose.

As per contract law, two consenting adults of sound mind can make a valid, enforceable agreement on anything that is not illegal. A clause prohibiting future employment in a competitive firm is not illegal per se. The clause may sound unjust, harsh, or one-sided, but that does not render it illegal in the eyes of the law. Protection of intellectual property or trade secrets is the right of a firm, and this is definitely a way to ensure this. How this agreement can be enforced is to be determined by the firm, though it is not a very easy task.

Dear Friend, Companies thrive on one key principle, "Fear Is The Key." They know that the poor employee will get scared with these unfair business tactics. Companies know that one single employee will not have the guts and capacity to fight the might of a corporation that has all the resources at their disposal.

Restrictive clauses and their implications

Restrictive clauses are a product of such perverted thinking. Though such practices are illegal, as in some cases, courts have held them to be unfair and illegal. Unless the specific instances are clearly outlined with logical reasoning, they are illegal and unenforceable. Motherhood statements of restriction are void ab initio.

The impact of restrictions on employee growth

The employee learns something new with every job; if every employer starts putting such restrictions, there will be chaos. These restrictions violate the right of the employee to learn and exercise acquired skills freely. Incompetent companies, scared of competition, enforce such restrictions so that employees are prevented from joining the competition.

I am personally against any such restriction.

Warm regards,

Bharat Gera HR Consultant

I agree with Mr. Bharat. Moreover, an employee who is working has to be attracted to work for a longer term in the organization with better conditions and pay. This will definitely motivate him to come back even after his voluntary exit.

Management should be made aware by HR about this kind of policy and employment terms, instead of these absurd terms in the employment clause.