(Guest)

Binding an employee from starting his own business

Hi Experts

Currently an employee has resigned from our organisation and we have come to know that he might be starting his own business with his friends (employees of our company who have previously resigned). He is trying to start his work in the same domain (of R&D) in which the company operates.

To avoid this undue competition (our company being just 2 years old), my senior has asked me to get a Rs. 10 stamp paper signed by the employee, mentioning that he won't enter into such a business for atleast 3 years and won't use the R&D skills he has gained in the company to develop his own product.

Kindly help me in understanding how legal this is and for how long is the bond valid? And if it is, what shall be the content for the bond?

Thanks in advance!

Anshu

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3 Replies

Rajesh Hazra (Mediator and Legal Counsel ) 11 November 2011

This is a case when the employee has executed an service agreement which does not have a clause of cofidentiality. Hence you have to execute an Non Dosclosure Agreement between the employee leaving to assure taht the secret os nor used or exploitated.

Regards

(Guest)

Hi Rajesh

Thanks for your response. I would like to highlight that the clause of confidentiality was mentioned in the employee's appointment letter. The excerpt is mentioned below:

"During the course of your employment with Company Name you will have access to confidential / proprietary information relating to the company such as its clients, business transactions, and associated companies. You shall not during the course of your employment with Company Name. and for two (2) years after you have ceased to be in the employment of Company Name., disclose such confidential / proprietary information to any third party and / or any other person unless specifically authorized in writing to do so by Company Name"

But is this clause in the appointment letter sufficient? Or should we take preventive measure and get Rs. 10 stamp paper signed?

Thanks

Anshu

Rajesh Hazra (Mediator and Legal Counsel ) 11 November 2011

Hi Anshu,

I think the clause is sufficient to stop them for the stipulated period, but though it seems unehical to some extent based upon the information, you may ask for exection of a seperate NDA before the final settlement of the employees. This can be perhaps avoid the chances of information being passed over.

Make this a part of the relieving letter.

Regards