Non competition clause
Guest
(Querist) 02 August 2016
This query is : Resolved
Dear Sir ,
I worked in Europe based companies branch office in delhi for 6 and half years and all of sudden, company decided to close the branch office on 31st of july 2016, this information was given to me on 18 july along with letter that you will be offered same position in new company on same terms and when i asked them for draft of new terms they said its same as it was in the branch office and refused to show it to me before i sign the settlement letter for closed branch office. now on 1st august they have added the non competition clause in new appointment letter and asking me to accept it. clause says that after termination i can not work in any organisation who is having same business for 12 months worldwide. in case of breach , i shall be liable to pay 6 times my gross salary or higher depending on the damages caused. my question to experts is that i work in this company as a sales manager who is not having any say in decision making or access to any sensitive information, does company can force me to sign this and is one sided clause is accepted. please guide me thank you.
Kumar Doab
(Expert) 02 August 2016
You have posted that:
---" when i asked them for draft of new terms they said its same as it was in the branch office and refused to show it to me before i sign the settlement letter for closed branch office.'
Asking, saying, telling, hearing, listening are all verbal modes and difficult to prove.
The company has notified you on closure by letter and you have signed the settlement letter.
Since you have not narrated your nature of duties nothing is possible on settlement was in accordance with enactments ( not just service rules) that apply in your case or not!
Designation ( Sales Manger) alone is not sufficient.
---"all of sudden, company decided to close the branch office on 31st of july 2016, this information was given to me on 18 july along with letter that you will be offered same position in new company on same terms "
You have a reason to write under proper acknowledgment and ask to delete the 'non competition clause'.
You may write, of course under proper acknowledgment ( assign some unique reference number to it and attach the copy of said letter).
---"clause says that after termination i can not work in any organisation who is having same business for 12 months worldwide."
Had it been India alone, it might have been palatable to an extent.
Indian court have consistently been declining to enforce 'Non Compete clauses/agreements' as it hits right to earn livelihood and provisions of Indian Contracts Act.
Outside India it is as per law of the land.
---"in case of breach , i shall be liable to pay 6 times my gross salary or higher depending on the damages caused."
Who will determine the damages and how?
It is not palatable, at all.
---"my question to experts is that i work in this company as a sales manager who is not having any say in decision making or access to any sensitive information,"
Don't teach and preach to attorney's of employer in Line Management/HR/Admin/Legal cells new words e.g. sensitive information
---"does company can force me to sign this and is one sided clause is accepted."
No one can force you.
" this information was given to me on 18 july along with letter that you will be offered same position in new company on same terms'
As already suggested 'You may write, of course under proper acknowledgment.'
If you accept mention on new appointment letter, the date and reference number of your communication above your signatures on dotted line, and attach the copies.
Obtain the acceptance/acknowledgment on photocopy of document signed by you from the company.
Rest is upto you.
Rajendra K Goyal
(Expert) 02 August 2016
You can be benefited from the advice of the expert.
Guest
(Querist) 02 August 2016
Sir
Thank you very much for your advice. my company is manufacturer of capital machinery and my responsibilities are to promote this machinery in India,nepal,srilanka,bangladesh and bhutan.there are 3 business divisions in company and am responsible for 2 business divisions.
Wording of the clause they have added is given below:
you agree neither to perform any employment or self employed activites in related to line of business worldwide for duration of 12 months after termination of this employment,not to perform contract work directly or indirectlyduring said period of time for any natural person or legal entity that, at the moment of termination, is a competitior or customer with interest in companies competing with XYZ .you also agree that you shall not have interest direct or indirect, in a company engaged in same line of business as ZYZ company.
in case you violate the stipulated non - competition clause you agree to pay a minimum plenty to XYZ in the amount of six times to the monthly gross renumaration and may extend to higher amount based on the amount of damage caused by your actions.in doing so the employee explicitly acknowledge the appropriateness of the agreed contract penelty regarding non competition clause mentioned in above.
Kumar Doab
(Expert) 02 August 2016
It has already been addressed above.
Guest
(Querist) 02 August 2016
Thank you sir again for your expert advice.
Kumar Doab
(Expert) 02 August 2016
You are welcome.
If you have powers to sanction (not just recommend) then you may not be covered by the def. of 'Workman' as in ID Act.
Your div/dept/office might still be registered under Delhi Shops & Estbs Act and you might be covered by the def. of 'Employee' as in the Act.
Once you accept the new appointment letter the employer may claim that new one has superseded the old letter.
Once you accept the company may claim it has the logic by agreement signed by you to proceed against you.
Therefore you need to defend your interest and build irrefutable ground for use at appropriate time in future, if the need be.
It shall be certainly appropriate to show all relevant docs to a very counsel specializing in such/service matters.
Kumar Doab
(Expert) 02 August 2016
Member has deleted the a/c.
Devajyoti Barman
(Expert) 03 August 2016
The Non-competition clause is one of the most grey area in law of contract and there is a very fine line between it and the bar imposed by section 27 of the Indian Contract Act.
In your case I find no reason that the con competition clause is fit enough to get applied. Each and every employee unless they are in clear knowledge of secrets of company suffers from the restrictions imposed by this non-compete clause.
So rest assured.
