Employment contract after termination
Pi
(Querist) 29 February 2012
This query is : Resolved
Hi Experts,
I need your expert advice and suggestions.
I have an contract in my employment letter on which I had signed while joining my current employer in 2007:
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"In consideration of his/her employment with the Company, the receipt of salary and other employment benefits from the Company and other good and valuable consideration and for the reasons set out in clause 5 hereinabove, the Employee, during his/her employment with the Company and for a period of three years after he/she ceases to be an employee of the Company for any reason whatsoever, shall not,
(i) take up employment with any other person, firm, company, body corporate or organization of any other kind whatsoever, engaged in or proposed to be engaged in any activity.
(ii) involve himself/herself directly or indirectly, alone or in association with others, whether as principal officer, sole proprietor, director, agent, partner, joint venturer investor, lender, lessor, consultant, advisor or otherwise or have an interest, in any business,
(iii) carry on either by himself/herself or in association with any other person any business or be associated in any manner with any business, which in the opinion of the Company, is similar to or competitive with that carried by the Company. Such opinion of the Company shall be final conclusive and binding on the Employee."
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Does this mean after termination or leaving current employer I cannot join any client with which i worked during current employment ? I had an offer from one of the client, proposed work will not be in the same business line. Will it be legal ?
Please advice.
Thanks
Pi
Kirti Kar Tripathi
(Expert) 01 March 2012
After termination, the employer has no control over the employee. No condition restraining a person from securing job can be enforced under the law as it is against the public policy. In case, the employer files any suit restraining from obtaining employment, you can very well defend yourself.
Guest
(Expert) 01 March 2012
Dear Author,
Your presumption is quite correct, as you were bound by the contract not only during your employment, but also after three years of leaving service. Such damaging clauses of agreement need to be watched very clearly before joining service or signing in the agreement.
No doubt, as mentioned by Shri Kriti Kar, employer does not have any control over the employee after termination of his service, but in your case you are legally bound by the terms of the class for 3 years even after your termination and the employer can, if he notices you as employed or associated with some one to entertain any such service/business, as stated in the clause, the past employer can legally claim damages from you through a court of law.
Deepak Nair
(Expert) 01 March 2012
Very well advised by the experts above.
But, you have to note that such clauses are considered void in the eyes of law.
As per se.23 fo contract Act, any contract which is opposed to the public policy is considered as void.
AND
as per se.27 of contract Act, "Every agreement by which one is restrained from excercising a lawful profession, trade or business of any kind, is to that extent void."
Thus, even if the employer files a suit against you in case you join another organisation of same sector, then you can very well defend yourself and there are scores of judgments to that effect.
Kirti Kar Tripathi
(Expert) 01 March 2012
Mr. Dhingra,
In the present query, it has to be seen that at the time of entering into the contract, the employer was in dominant position and taking advantage its dominant position, included a clause, which is opposite to public policy as well as provisions of Indian Contract Act, thus this clause is not binding .
Guest
(Expert) 01 March 2012
Dear Kriti,
I can understand well that at the time of entry in to the service contract the employer is in dominant position and he tries to take maximum advantage of the dire need of employment by the applicant. The applicant on his part also does not care to check the implications of the derogative clauses by weighing the pros & cons of the terms and conditions and signs the agreement in a hurry.
But on the other hand, once the candidate joins service agreeing on the conditions, the employee gets the upper hand and nothing is left in the hands of the employee. The instance if reviewed or reported after a lapse of considerable time does not benefit the employee. The matter is left at the sole discretion of the court of law to decide whether that falls within the scope of public policy or not as individual cases do not normally fall within the purview of public policy unless fought tooth & nail collectively by the employees of the organisation either through union platform or by filing a PIL.
prabhakar singh
(Expert) 01 March 2012
(i)1st clause is void
(ii)2nd clause is also void
as per provisions already told by Mr. Nair.
But clause (iii) would be subject to test of reasonableness to be tested by court in case of disagreement between parties.
Pi
(Querist) 01 March 2012
Thanks to all for your reply,
let me provide more details:
I worked with the client (bank) at their location in US in 2008, but in india, I want to join their non-bank subsidiaries.
And I will be in different line of business from my current employers' business, so will not be providing same services which my current employer provides. So i think there is no loss to my current employer if I join client's subsidiaries in india for different line of business (not in competition).
how can i get confirmation whether it is correct or not ?
Thanks,
Pi
PARDEEP KUMAR
(Expert) 03 March 2012
Obviously, you have signed said agreement/contract in U.S. and now you are joining in India, so governed by entirely different law of the lands concerned. No doubt, respected experts had already given proper advise, and you have sufficient material to defend yourself, if required to, I don't think you would be having any problem on this account.
Guest
(Expert) 03 March 2012
Question arises, whether you signed 2007 contract in US or in India?
Another question arises, if the new organisation is the subsidiary of the same Bank, what real problem is likely to be posed to the said employer in transferring your services officially to the said subsidiary of the bank, if you have not already resigned? You have nowhere stated so far that you have been terminated by the employer or yourself resigned from the said bank.
Deepak Nair
(Expert) 03 March 2012
You are absolutely free to join your new service in India.
Amit Pateria
(Expert) 04 March 2012
Dear Author,
The service contract which put forth a condition imposing three year long restriction for future employment, this restriction must have some definitive arrangements i.e., compensation to the effect for the duration. In the absence of any such condition and to an extent even otherwise as well the position of law is well settled, in the light of the Service Jurisprudence and the Indian Contract Act, 1872, that if any part of a single consideration for one or more objects, or any one or any part of any one of several consideration of a single object, is unlawful, the agreement is void. Moreover the consent given to such contract is anyways hit by the principles of free-consent making it ipso-facto void.
hope this will help.
Jai Karan Nagwan
(Expert) 04 March 2012
Dear All, Expert mention the section 23 and 27 of the contract Act, also mentioned about undue influence as well, but at the same time would suggest that as Mr. Dhingra rightly advised that employer can get injunction against the employee if contarvene the provision of agreement.
in the circumstance, SRA section 42 speaks about the negative covenenat, wherein employer can ask relief of imposing negative covenant. Please note in service matter negative covenant is not so effective sice last few years, but a good ground to take the employee to the court.
Mr. Dingra didnt specficaly mention negative covenant, but his opinion his opinion is in the light of negative covenent.
Generally employer dont want to play with employees but this is un-ethical on the part of employee to breach the condition. If employer want can spoil employees future prospectus, employer also can make party to the new employer also based on the agreement
M V Gupta
(Expert) 08 March 2012
You have stated that the contract of service with ur ex employer was made in the US. Therefore it will have effect only in the US. A covenant in restraint of trade or profession cannot be given effect out side the country where it is made, unless the covenant is agreed to have such extra territorial force. clauses 1 and 2 cited by you are clearly hit by Section 27 of the Indian Contact Act, and hence cannot be enforced in India. Further you have stated that the new company is engaged in a different kind of business and therefore the third clause may not hit your proposal. But the extra legal angle is that since the Indian Company is subsidiary of the US Company it may be influenced by the former and your new assignment may be in trouble.
