V Kumar Singh (Executive) 11 January 2021

Non-solicit competition for x months after resignation

my organization has asked me to sign an appointment letter with condition that I cannot solicit/work for a competitor for up to 3 months after resignation, for whatever reason I am terminated or I resign. they say they reserve the right to pursue legal action against me if I do so.

My question is: Is this not bad in law? and can they proceed legally against me if I do so? If I leave, my intention will not be to hurt/damage/steal business, secrets, employees from my previous employer, but for my own betterment, to earn my bread (period). How can an employer prevent the employee from working elsewhere after resignation ? Please suggest.

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8 Replies

SIVARAMAPRASAD KAPPAGANTU (Retired Manager) 12 January 2021

Yes, it is a standard clause for every employer especially. The Point one should understand is that when a person works in an organization, unwittingly he/she shall be getting privileged information regarding the business and its clients, etc. If such a person is terminated/resigned and starts using such information, the employer's interests shall be affected. For that purpose, the above clause is inserted in all employment agreements for the simple reason that nobody can be sure about how a person shall use/abuse the information he possesses once he is out of the organization.

V Kumar Singh (Executive) 12 January 2021

Sir, Thank you for your reply.

My intention is not to share any confidential information, I will never do that.

My query is: Can the organization take me to court and will I be penalized by court if I resign and join elsewhere within 3 months?

SIVARAMAPRASAD KAPPAGANTU (Retired Manager) 12 January 2021

Yes, the organization is perfectly in order in including the clause mentioned by you to safeguard their interest. The clause is not meant for you alone, you may be a good person, but it is a general condition that is being inserted in-service condition. If you do not like the clause, you can inform the company and not join them.

Ritesh Maity (Labour Law Advocate) 12 January 2021

After your resignation, you can join any company including the competitor of your ex-employer. Upon resignation, your ex-employer has no right over you. That apart, any agreement restricting trade or profession is void in terms of sec. 27 of the Indian Contract Act.

For more details you may check my blog post - https://labourlawhub.wordpress.com/2016/02/19/your-company-cannot-stop-you-from-joining-its-competitor/

Dr J C Vashista (Advocate) 13 January 2021

The emloyer reserves its rights to prosecute if is empolyee join company/ organisation/ business with similar function, which is valid.

V Kumar Singh (Executive) 13 January 2021

Thank you, Sir. Though I am not as learned as you, I had guessed as much that this clause should be bad in law. Thanks again.

SIVARAMAPRASAD KAPPAGANTU (Retired Manager) 13 January 2021

It is not a bad law. It is necessary for the smooth functioning of business without competitors poaching each other's employees and gain unreasonably.