• Query regarding Non-compete agreement

I work in a reputed Indian IT company. For last 2 years, I am on a deputation in Switzerland for a client  based in Swiss.
I have a following query regarding the 'Not to Compete' covenant signed with my current employer at the time of joining.The agreement mentions the following clause, applicable for 1 year post the date of resigning from the employer (say Company A):

"(b) I will not (1) seek or obtain employment of any kind by any means, directly or indirectly, as either employee, agent or consultant, with any customer of Company A for which I am providing services on behalf of Company A that are competitive with the products and services available to the client from Company A, provided however, that this restriction shall apply only to employment to perform the same or substantially similar services that I am performing for the client as a Company A employee;  This restriction applies to my acceptance of any employment by a customer through general advertising or third party recruitment; "

1. I may join an employer and work as consultant for same client, provided that the new employer is not a competitor of Company A, and not selling products/services that are competitve to those provided by Company A to the same client
OR
2. The  service that I will perform for the same client in my new role on behalf of the new employer should  not be the same as the service provided by me currently as part of Company A. 

For example, if  currently I am representing Company A as an IT Support lead, whereas my future role , as part of another employer is that of a Business /Functional Analyst, where the service/skillset is different , not competing with Company A's current service , is that a valid case ?

Request you to confirm if my interpretation is correct. My current company is raising an objection and threatening to provide roadblock.

Can they enforce the 'liquidation damages' , which according to agreement is my 1 year's salary (In Swiss Franc, that is a huge sum)? Can they legally sue me ?


P.S. I am planning to switch the employer, but work with the same client, on a different role. The new employer is based in Switzerland.

Thanks in advance for your feedback
Asked 3 months ago in Labour from Switzerland
Do note that the agreement is restraint of trade is void u/s 27 of the Contact Act. However non-compete agreement is though in essence a agreement in restraint of trade may be valid if the terms are fair .
In your case the agreement seems unfair , unconscionable and not enforceable.
So you ca join the new employer.
Devajyoti Barman
Advocate, Kolkata
5196 Answers
54 Consultations
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Under provisions of section 27 of contract act Any agreement in restraint of trade is void 

2) once you resign. and serve the notice period you are free to join any other organisation 

3) you can join as business analyst 

4) you are not liable to pay liquidated damages 
Ajay Sethi
Advocate, Mumbai
23230 Answers
1219 Consultations
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The restraint imposed on you is reasonable and not unbridled. Hence, it creates a cause of action in favour of Company A to file a suit for injunction to restrain you from violating the clause and also claiming damages for breach of contract. The courts in India will happily enforce this clause.
Ashish Davessar
Advocate, Jaipur
18102 Answers
448 Consultations
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your joining any employer after resignation would not amount to breach of contract as in india any agreement in restraint of trade is void 

2) the Bombay High Court held that a restraint operating after termination of the contract to secure freedom from competition from a person who no longer worked within the contract, was void. The court refused to enforce the negative covenant and held that, even if such a covenant was valid under German law, it could not be enforced in India. (Taprogge Gesellschaft MBH v. IAEC India Ltd., AIR 1988 Bom 157)
Ajay Sethi
Advocate, Mumbai
23230 Answers
1219 Consultations
5.0 on 5.0
1. This non competition clause imposed by the employing Conpanies have been seriously challenged before the supreme court which has held that such clause infringes in to the constitutional right of choosing livelihood by a citizen of India.

2. However, these matters are dealt and argued in different ways and angles and in your case you are right in interpreting that you will not breach your employment terms since you will not do the same job with your new employer which you have been doing with your present employer,

3. In the instant matter, it can be argued that your present employer will not be affected in any way if you do some other type of job.

4. Liquidation damage can not be imposed on you in the stated circumstances. 



 
Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
230 Consultations
5.0 on 5.0
1.Your act of joining another employer and work for same client but not in the same role and not providing same services competing that of Company A will not be considered as breach of contract after legal scrutiny,

2. No liquidation damage can be claimed from you since there will be no damage expected to be caused by your said employment, to your present employer.
Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
230 Consultations
5.0 on 5.0
If the 'Not to Compete' covenant entered with yor current employer states that 
"provided however, that this restriction shall apply only to employment to perform the same or substantially similar services that I am performing for the client as a Company A employee;  This restriction applies  to my acceptance of any employment by a customer through general advertising or third party recruitment; "

This clearly states that you cannot join the competitor for the same kind of employment that you had been doing with your previous employer.  
So to your question that " if  currently I am representing Company A as an IT Support lead, whereas my future role , as part of another employer is that of a Business /Functional Analyst, where the service/skillset is different , not competing with Company A's current service , is that a valid case ?
The answer is Yes, your interpretation is right.  If the company is threatening with consequences for your acceptance of employment offer by the new company (competitor), let them issue a notice or take any action, you can challenge the same properly. You do not have to worry about the road block they may try to create on your career, you can sue them for slander offence.




Can they enforce the 'liquidation damages' , which according to agreement is my 1 year's salary (In Swiss Franc, that is a huge sum)? Can they legally sue me ?

They cannot do so since the conditions are in your favor and they know that they cannot succeed in it.
T Kalaiselvan
Advocate, Vellore
14006 Answers
127 Consultations
5.0 on 5.0
 However the clause clearly states following.. however, that this restriction shall apply only to employment to perform the same or substantially similar services that I am performing for the client as a Company A employee. If I join another employer and work for same client but not in the same role and not providing same services competing that of Company A, how can it lead to breach of contract? the SOW for both the roles are different.

There is no question of breach of contract in this. 
 English common law originally held any such constraint to be unenforceable under the public policy doctrine.[1] Contemporary case law permits exceptions, but generally will only enforce CNCs to the extent necessary to protect the employer. Most jurisdictions in which such contracts have been examined by the courts have deemed CNCs to be legally binding so long as the clause contains reasonable limitations as to the geographical area and time period in which an employee of a company may not compete.
There must be money (otherwise known as "consideration") paid to the Noncompeting Party for the Noncompete Agreement to be enforceable. You may choose a lump sum payment.  Did the company A pay you anything that way ?
What this exactly translates into a specific situation, is subject to judicial interpretation. 
A perpetual and global non-compete is unlikely to survive judicial scrutiny. 
Its usually the blatantly violative provisions that are easy to spot, other than that there is usually a lot of nuance at play.
T Kalaiselvan
Advocate, Vellore
14006 Answers
127 Consultations
5.0 on 5.0
according to the terms of the agreement you cannot provide same service to the competitor company. but you can provide or give another service which is not similar to the service which have been providing, to the competitor company.  and also you can give same service to the non competitor company. 
Shivendra Pratap Singh
Advocate, Lucknow
2737 Answers
41 Consultations
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according to section 27 of the Indian contract act, which is applicable on your agreement because it is made with a Indian citizen, your company cannot impose complete ban on profession. ban must be reasonable and have common prevalence in respected trade, profession or business. 

it is general practice that due to protection of business tactic an employee cannot work in competitor firm for stipulated time period. and also such period must be reasonable. 

Shivendra Pratap Singh
Advocate, Lucknow
2737 Answers
41 Consultations
4.9 on 5.0
1) company cannot impose any restrictions on you after you resign from the company 

2) draw attention of company ti section 27 of Indian contract act 

3) any agreement in restraint of trade is void 
Ajay Sethi
Advocate, Mumbai
23230 Answers
1219 Consultations
5.0 on 5.0
1. This is not a correct assessment of your role in your new company.

2. The fact that your new role in your next company can be performed by any associate of your old company is not the the pertinent question at all.

3. It appears that your company is confused in this regard.

4. You further send a letter to them (for the last time) stating how liquiadated damage is not attracted on you and take your next step tp join your new Company.
Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
230 Consultations
5.0 on 5.0
Since you yourself feel that this a vague reply by the company, you need not worry about the legal action they may propose t initiate since they can be challenged and the chance of  maintainability of the case will be  very less.

Their contents are actually agaisnt their own case.
The following contents of the company makes no sense and is against the rights of employee as well as violation of human rights.

'The new role you are going to perform is a regular business analyst role which can be performed by any associate of our company. Hence this is a clear breach of contract." Joining another company and working for same customer to perform any role in a SOFTWARE DEVELOPMENT LIFECYCLE, will be a breach of contract.'


You can challenge the same when it converts into case with the help of a skilled lawyer.
T Kalaiselvan
Advocate, Vellore
14006 Answers
127 Consultations
5.0 on 5.0
1) serve your notice period 

2) obtain relieving letter from the company 

3) your new employer need not bow down to pressure tactics . 

4) consent of ex employer is not necessary for your employment 

5) as mentioned by you there is no such contract between your ex employer and the new employer 

6) dont address any communication to your current employer . just serve the notice period 
Ajay Sethi
Advocate, Mumbai
23230 Answers
1219 Consultations
5.0 on 5.0
1. Your current problem is arising out of some illegal and unrecorded out of the way step taken by your present employer.

2.  Your present employer is just blackmailing your next employer with the threat of not to have business relationship with them if they recruit you.

3.Finding you absolutely logical, your present Company has resorted to unethical practice which can not be recorded and legal action taken against.

4. You shall have to convince your new employer now about there benefit in employing you.

5. The ball has now in the Court of your new employer and you have no legal recourse against your existing employer if your would be employer now back out from therir commitment in recruiting you. 


Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
230 Consultations
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The latest development of ugly scenes by the manager is between him and the new company.
The new company should give a fitting reply to the manager for raising this irrelevant issue with them.
In fact the new company can issue a legal notice to the manager to restrain himself from passing any such instructions or else appropriate legal action can be initiated against the manager.
The matter can be escalated to the top management of the manage's company to control the manager who is acting out of his ambit or authority by such activities.  
This is in contrary to the law of land and the actions of the manager are to be condemned as well as he should be reminded of his place and limits. 
Since this is involving your career too, you may also issue legal notice to the manager from your side on the same lines. 
T Kalaiselvan
Advocate, Vellore
14006 Answers
127 Consultations
5.0 on 5.0

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