Unlock the Power of Online Signature Legality for Non-Compete Agreements in India

How to eSign a document: online signature legality for Non-Compete Agreement in India

can an employer prevent an employee from working with a competing company that is the topic for our discussion today generally what happens is that when an employee joins a company the company invests in the employee by giving him some form of training they so they go through a period of training where the employees start a few special skills for example in the software industry if you know depending on whatever the latest update or whatever software language is in vogue you know employers make the employee undergo a specific training program and after the training program let's say the employer says okay ramana you have received training from me therefore you cannot work with a competing company is that legal is that legally acceptable in india so i want you to just to simplify this take an example let's say for example i ramana reddy join a company in 2022 and my employment term is for five years so from 2022 to 2027. now the legal position in india is that during this period during the five-year period i cannot work with a competitor because the thinking is that look you are drawing a salary from the company you know and it is therefore your job it is your duty to work for the welfare com for the welfare of the company only and not work for some of the business and you need to put in all your efforts or your best efforts to growing the company this is for the five-year period let's say after the five-year period after the five-year period has expired in that scenario there is let us say for example i'll you know let me make it worse let me let's say that i have signed and the employment agreement in the employment agreement says that ramana reddy after five years you cannot work with a computing business even in that scenario courts in india have held that that is not legal that if there is a employment contract that prevents ramana from working with another company after the five-year term then even then that is not legal no court in india will uphold that kind of a clause in an employment contract now you know this is based on several several policy considerations but before we get there is one small exception which is let's say that i worked on a deal for the company and i know specifically how much money was paid to that company under that deal and there is some confidential information that is in my possession that only i am aware of or i or i am within the inner circle of the company and i am aware of that and i join a competing company in that kind of a scenario to that limited extent of those confidential information that is in my knowledge that competence that confidential information quotes will uphold quotes will say look if you have learned something with a job if you've learned java c plus plus or whatever i have no idea as a lawyer but whatever skills that you have learned that is for you but if you are in possession of confidential information even after the five-year term even after the expiry of your employment contract you cannot go and disclose confidential information to your competitor and put your old company at a disadvantage now these uh the you know this legal position is is tempered by policy by policy considerations so one is that generally speaking when an employee applies for the job you know he wants the job and there is unequal bargaining power between the employer and the employee the employer has more bargaining power the employee has lesser bargaining power and therefore uh even if the employee signs an agreement saying i will not work for a competing company after the five-year term courts will refuse to uphold it now just going by by bargaining power now i want you to consider a different scenario say for example there i let's say that my company buys haldi rams as a company right they make mixtures moong dal you know whatever if after buying the company haldiram goes out and starts a competing company and you know puts me at laws because i have bought the goodwill of the company i'm literally i've bought the same business now using their expert information they go start a competing company courts say that that is not legal because that is goodwill and you know you cannot go start a competing company and moreover you know if you think about in terms of bargaining power whether we agree with the theory or not but if you think about it in the terms of bargaining power a company to company generally you know they're free to do the dealer or not do the deal that applies to employees also but anyway but but the thinking is employees have lesser bargaining power so let's say that i am free or healthy rams is free to sell the business to me you're not free to sell the business to me and and after selling the business to me they you know they are not free to go start a competing business or let's say for example that i am subway i have franchises all across the country and one of one of the conditions in the franchise agreement is that if you take a subway franchise you should not go and start a competing franchise with subway in that scenario again most likely the court will uphold those things because these are b2b these are business to business kind of contracts and therefore you know this kind of this this whole bargaining power thinking it's it's that that's hard to be in these situations so just to summarize as far as the employees are concerned let's just to simplify again let's just take the example if there are if you enter into an employment contract for five years and off during the five year period you cannot work for a competing company after the expiry of the five years you can work for the competing company provided you don't leak confidential information which belonged to the old company i hope that was helpful thank you for watching