In India, Non-compete Clauses for IT Freshers are Unenforceable

By Consultants Review Team Tuesday, 09 January 2024

Non-compete provisions range from 6 to 12 months in contracts for junior employees at Indian IT behemoths such as TCS, Infosys, Wipro, HCLTech, and Tech Mahindra. According to The Times of India (TOI), legal experts believe that these clauses are often unenforceable and often amount to nothing more than serving a court notice.

A non-compete provision is a legally binding commitment in employment contracts that prohibits current and/or former employees from disclosing any trade secrets learned while working for a company. It is normally binding for the duration of the employment and a specified term afterward. They can also forbid an employee from working with a competitor or in a specific geographical place or market for a set period of time.

While these restrictions may prohibit new employees from joining competitors or customers for a set period of time, experts stress that under the Indian Contract Act, any agreement that restricts trade beyond the employment term is void and unenforceable. Non-compete agreements, according to experts, are only applicable during employment and cannot prevent a person from joining a competitor after leaving.

Infosys implemented a non-compete clause last year that prohibits employees from working on the same customer's projects across five competitors for six months after leaving the company. A comparable language is also included in Wipro's employment contracts.

According to Nasscom, the Indian IT sector will have a reduced recruiting climate in 2023-24, with a projected addition of 250,000-270,000 freshers, down from 370,000-380,000 in the previous fiscal year. Non-compete clauses in contracts are considered as measures to reduce turnover by discouraging employees from joining competitors.

Employers are experimenting with creative techniques to incentivize compliance with post-employment non-compete agreements, such as staggered conditional payments. This is especially crucial given the IT sector's recent high layoffs and hiring freeze. 


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