Appointment letter related
Rahul
(Querist) 05 April 2016
This query is : Resolved
I am currently working in X company. Client of X company asked me to join his Y company. But my appointment letter says " You will not seek any full time or part time job or be involved in any way with competitor's business activities either directly or indirectly during your employment with the company and for a period of six months in the event of cessation of your employment with the company. " If I join Y company after completing proper formalities of company X then will this statement applicable to me. Because I am not joining competitor but directly joining client. Please let me know if this is applicable to me.
Adv. Yogen Kakade
(Expert) 05 April 2016
Even if you are joining the client of your company directly on your own and not by the directions given to you by the company then this statement might cause problem for you.
Rahul
(Querist) 05 April 2016
Thanks for your quick reply. So I should wait for six months after leaving X company or take approval from company X. Right?
Kumar Doab
(Expert) 05 April 2016
The clause is apparently 'Non Compete Clause'.
Indian courts have consistently been declining to enforce 'Non Compete Clauses/agreements' as it hits right to earn livelihood and clauses of Indian Contracts Act.
Based on limited information that you have posted such clause may be void.
It shall be appropriate to show all docs pertaining to employment to an able counsel expert in labor/Service matters.
If the company issues any stinker/communique/notice for joining another establishment (even if it is so called client) your counsel may opine that you are well within your rights to caution the company not to initiate harassment resulting into litigation and announce to sue for damages.
Consult an able counsel.
Devajyoti Barman
(Expert) 05 April 2016
Though the contract in restraint of trade is void in terms of Section 27 of the contract Act , if the terms of restraint are reasonable like yours then the said terms are enforceable.
So you better wait till expiry of six months.
Kumar Doab
(Expert) 05 April 2016
This is an interesting thread.
The inputs from experts shall moderate and lead to sharing the finer nuances of the matter.
The purpose of this post is not to argue, or contradict but to gain from the good discussion.
The concern here is enforceability of a contractual non-compete clause which restricted the employee from
seeking employment with a competitor of the employer for a period of 6 moths................OR one year.............OR 1 month............but.............. AFTER TERMINATION OF EMPLOYMENT.
The posts are only based upon extract posted by author/querist and for only ' Non Compete Clause'.
It is also believed that you had not signed any service agreement/bond and are not leaving before expiry of term of said service agreement/bond.
If this is the case then consistent approach of Indian courts on refusing to enforce post termination non compete clauses in employment contracts as restraint of trade, is impermissible under section 27 of the Indian Contract Act-1872, and have held them as void and against the public policy because of their potential to deprive an individual of his or her fundamental right to earn a living.
Then Article 21 of the Constitution of India guarantees the right to livelihood and since it is a fundamental right it is held to be inviolable.
Cue is also taken from Competition Act.
A non-compete clause in an employment contract between an employee and a company does not contravene Sections 3
and 4 of the Competition Act, 2002.The
competition cases does not impact upon the position under the Indian
Contract Act
It has been observed and decided that the relevant dominant position enjoyed by the company is with
respect to its competitors, not its employees, and that an employment contract has nothing to do with the market of the
company........................and that, a clause in a service contract restricting an employee from taking employment
with its competitors does not raise any competition issue
Rajendra K Goyal
(Expert) 05 April 2016
If the company X is asking you in writing to join their associate company Y, the clause would not be applicable.
Kumar Doab
(Expert) 05 April 2016
The author has posted in the query that he is employee of company X and a Y is a client of X, and Y has asked author to join it. Y is not associate of X. X is not asking author to join Y.
The author has not clarified that :He is seeking advise for ' Non Compete Clause' only or some other clauses are also inserted in appointment letter, and whether he has signed any service agreement/bond and whether he is leaving before expiry of term of said service agreement/bond?
