Infosys’s non-compete clause difficult to enforce
BENGALURU: Infosys’s recently introduced non-compete clause that forbids new joinees from working on the same customer’s projects across five named competitors and their subsidiaries for six months after leaving the firm is not only restrictive, but the traceability of a breach of such a clause has practical challenges in India, experts said.
It has named TCS, IBM, Accenture, Wipro and Cognizant as competitors that employees cannot join if they are put on a project of the same customer as the one they were working for at Infosys. Infosys ‘s objective seems to be to restrain employees from divulging confidential information related to customers.
Some feel the enforcement of such a clause at a time when attrition is at an all-time high in the IT industry would dent employee morale. Pune-based IT/ITeS union Nites has filed a complaint with the ministry of labour & employment on ths development.
When TOI contacted Infosys, it said, “It is standard business practice in many parts of the world for employment contracts to include controls of reasonable scope and duration to protect confidentiality of information, customer connection and other legitimate business interests. These are fully disclosed to all job aspirants before they decide to join Infosys, and do not have the effect of preventing employees from joining other organisations for career growth and aspirations.”
Senior advocate V Srinivasa Raghavan said Indian courts view with disfavour non-compete clauses in employment contracts to the extent they operate beyond the terms of employment and view such clauses as agreements in restraint of free trade (prohibited under Section 27 of the Indian Contract Act) and do not enforce them.
“Generally, employers also try to get around this by seeking for a restraint against ex-employees at least from disclosing or using confidential information gained in the course of their employment to their new competitor employers, and restraint to this extent is enforceable under Indian law,” he said.
If there are non-compete clauses in employment contracts with employees and the employment itself is meant to be outside India for business of the employer carried on abroad, then questions would arise as to which is the proper law of contract, whether Indian law or some other foreign law would govern the contract.
“And if it is found that a foreign law governs the contract then the enforceability of such non-compete clauses under the applicable foreign law would have to be considered,” Raghavan said.