While Indian law is clear on the unenforceability of a non-compete clause operating beyond the term of employment, companies still include it in contracts, particularly for senior executives, as it’s seen as a soft deterrent, said Jay Parikh, partner at Luthra and Luthra Law Offices. Employees would rather comply than bear litigation costs and carry the burden of being sued by their previous employer.
“Indian employees are not inherently litigious and therefore they tend to be compliant with their non-compete obligations, especially since the consequence of breach set out under their agreements is generally severe,” said Parikh.
In November 2023, for instance, Wipro filed a lawsuit against former CFO Jatin Dalal, seeking damages of Rs 25.15 crore plus interest for violating the non-compete clause in his employment contract.
Dalal, who joined Cognizant as CFO in December, submitted a counter-application and the matter was referred to arbitration.
In 2022, Nascent Information Technology Employees Senate, an organisation representing IT workers, filed a complaint with the labour ministry against Infosys for including a noncompete clause, calling it illegal under the Indian Contract Act.“Non-compete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once non-competes are banned,” said FTC chair Lina M Khan on April 23. “The FTC’s final rule to ban non-competes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”Khaitan & Co. partner Vinay Joy attributes the inclusion of non-competes to two main reasons. One is the view that some employees may not know their rights, leading to these clauses acting as a curb.
Source link
