Wednesday, May 12, 2010

Some non-compete clauses unenforceable in India

http://publication.samachar.com/pub_article.php?id=8979992&nextids=8980746|8983625|8981065|8982327|8979992&nextIndex=0

The above link points to a news article that describes some of the conditions in which the non-compete clauses are not enforceable in India.

"However, Indian courts have consistently refused to enforce post-termination non-compete clauses in employment contracts, viewing them as 'restraint of trade' impermissible under Section 27 of the Indian Contract Act, 1872 (the Act), and as void and against public policy because of their potential to deprive an individual of his or her fundamental right to earn a livelihood." -- Majority of Indian IT companies make every (mostly senior) employee (who exits the company) sign the non-compete agreement. Some of them make signing this document mandatory at the beginning of employment along with the non-disclosure agreements.

Majority of employers do not enforce this by taking a legal route. So, what's the point in making employees sign these agreements and increase the overhead for the company?

Also, employees do not care much about these agreements too. They join direct competitors and some disclose this future employer at the time of exit. Do these 'switchers' know that these agreements are not enforceable in India?