How Do I Handle a Non-Compete Clause After Leaving Due to Family Health Issues?

I left my previous company after a month on probation due to family health issues. I sent a resignation email to the company stating that I couldn't serve the notice period due to family health issues. The company is showing the below clause for employees to serve the notice period.

Non-Competition

Employee agrees that during Employee's employment by Company, and for two (2) years following the termination of Employee's employment for any reason, Employee shall not, directly or indirectly, work or engage as an employee, agent, consultant, owner, stockholder, partner, or otherwise for or with any individual or entity that is a client, vendor, or supplier of Company and its client. This paragraph shall survive the termination or the expiration of this Agreement.

Non-Solicitation

Employee agrees that during Employee's employment by Company, and for two (2) years following the termination of Employee's employment for any reason, Employee shall not, directly or indirectly, solicit, accept, contact, or divert any of Company's clients, vendors, suppliers, employees, consultants, candidates, or prospects for employment or engagement, or staffing contracts, or otherwise take away or attempt to take away from Company any business Company had or was actively soliciting during Employee's employment, without regard to whether Employee introduced any such individual or entity to Company.

Employee further agrees that during Employee's employment with Company and for two (2) years following the termination of Employee's employment for any reason, Employee will not, directly or indirectly, induce or attempt to induce any Company employee, consultant, contractor, candidate, or prospect to terminate his or her employment, contract, or business relationship with Company, or, directly or indirectly, otherwise solicit or divert from Company any such individual. This paragraph shall survive the termination or expiration of this Agreement.

Non-Disparagement

Employee agrees that during and subsequent to Employee's employment by Company, Employee shall not make any statement or take any action that impairs or reasonably may be expected to impair the goodwill or the business reputation of Company or to be otherwise detrimental to the interests of Company.

Remedies

In the event of a breach by Employee of Sections 5.01, 5.02, or 5.03, Employee agrees that Company will be irreparably harmed, thus entitling Company to injunctive relief enjoining Employee from further breaching this Agreement, in addition to any monetary damages and other relief to which Company may be entitled at law or in equity.

Dear member, I wish that after copying the text, you had pasted it in Notepad. Then, you could have copied the contents from there and pasted them on this forum. I say so because your post came as a single paragraph, and editing it took a while.

Okay. Now, coming to your query. There are six paragraphs in your post. The first one is an introductory paragraph from you. The other five paragraphs are divided into four clauses: Non-competition, Non-solicitation, Non-disparagement, and Remedies. None of the clauses mention the notice period. Did you forget to paste the paragraph about the notice period when pasting the contents of the appointment letter? Please check.

When replying, please follow the guidelines in the first paragraph of this reply.

Thanks,

Dinesh Divekar

Dear member, rather than just copying the contents relevant to your query, you copied the entire contents of your appointment letter and pasted them here. However, while doing so, four times the name and address of your company were disclosed. I wish you had learned how to review or modify the document. By disclosing the name of your company, you took a great risk. For the disclosure of the contents of the appointment letter on the public forum, the company could have sued you. Anyway, the second time I edited your post and deleted your company's details.

The paragraph about the notice period during probation is 2.01. This clause demands the probationer to give a notice of sixty days for the separation. Since you have accepted the appointment letter, giving a notice period of 60 days is binding on you. If you don't serve, then the company could create a problem for you.

General comments for the HR professionals:

Paragraph 2.01 demands the employee to serve for 60 days on resigning. However, the same requirement is not binding on the company. The company can terminate the services of the employee with or without a notice period. The appointment letter is a contract between the employer and the employee, and the essence of the contract lies in placing both parties at par. However, as this contract violates the principles of equality, it does not stand the scrutiny of the Indian Contracts Act of 1872. The appointment letter appears to have been drafted by the legal professional. By creating a one-sided agreement, the legal professional appears to have thrown his/her legal acumen to the wind. If the legal professional is at fault, so is the HR Head of the company. To understand the conditions imposed are one-sided one need not know the law. Those who talk loudly about employee engagement or emotional intelligence have faltered at the grounding principles on which the organization is raised.

The final comments for NB Shankar:

As written in the paragraph preceding above, the conditions of paragraph 2.01 are one-sided. These may not serve the test of the Indian Contracts Act of 1872. Therefore, should the company sue you for not serving the notice period, you can defend your case. However, the court cases move at a snail's pace in India. Secondly, much depends on the forcefulness with which your lawyer pleads your case. Therefore, whether to serve the notice period or not is a call you need to take judiciously.

Thanks,

Dinesh Divekar

Dinesh-ji, equality is not a requirement of contract law in India. So, to that extent, the agreement/contract/appointment letter is perfectly valid. All that is required is: offer, acceptance, and consideration. Consideration in this case is the salary agreed upon and the promise to serve.

However, Mr. Shankar, you do not need to worry about the clauses that are in the agreement (as in your original post). It has no validity in India. Specifically, the non-compete clause is applicable only if you have sold your company to them and got a goodwill payment for it, which is obviously not the case. Neither will the non-solicitation clauses hold true.

You can just laugh it off and tell them to get their 'injunctive order'.

The notice period is probably a bigger problem for you, but again, it is unlikely they will enforce it. The cost of doing it is probably higher than the recoverable value.

Dear Mr. Saswata Banerjee,

Under the provisions of the Indian Contract Act, 1872, an appointment letter is a contract between the employer and the employee. If the appointment letter mentions an unequal notice period for the cessation of employment for the employer and employee, then the contract is unfair and arbitrary. Such contracts are not tenable under the said act.

However, as stated in my earlier post, it requires legal expertise to prove the unfairness or arbitrariness of the contract in court. Much depends on the force the lawyer exerts through his/her arguments to sway the court ruling in his/her favor. For further reference, you may refer to 1986 SCR (2) 278.

If the unequal notice periods were to be tenable, then it would have given a field day to the employers. For the cessation of employment, they would not have imposed the condition of giving the 90-day notice on the employee. It could have been a year also. While serving the notice period, the employer would have terminated the employment contract without any liabilities.

Thanks,

Dinesh Divekar

Dear Dinesh-ji,

Yes, the lawyers have a way to twist things their way. However, there have been many cases before the courts in connection with unequal powers of parties to the contract. The case you have pointed out, Central Inland Water Transport Corporation Ltd. & Anr. Etc. vs. Brojo Nath Ganguly & Anr., the judgment was given more so because of the fact that the petitioner was a government-owned company liable to Article 14 of the Constitution.

In other cases, courts have struck down contracts that are 'unconscionable and oppressive,' which is not the case here. Just a difference in the period of notice does not fall under that particular requirement.

On the other hand, not giving a notice period may actually be a violation of Standing Orders and other provisions that will have its own impact on the validity of the appointment letter.

Again, to clarify, I repeat that the 4 clauses the OP first put, all are disallowed under Sec 27, which makes any agreement in restraint of lawful trade and employment as void.

Dear Mr. Saswata Banerjee,

I refer to your replies posted as Sl. No. 7 and 9 of this thread. My reply is about the unequal notice period. I wish to draw your attention to the following Supreme Court case:

McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 & ONGC Ltd v. Saw Pipes Ltd [(2003) 5 SCC 705]

The Court, while dealing with the unequal bargaining power of the workmen and the employer, concluded that any term of the agreement which is patently arbitrary and/or arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Indian Contract Act.

Therefore, unequal employment terms are not acceptable while issuing the appointment letter.

Regards,

Dinesh Divekar