IT companies in India prohibit employees from working with competetion right after their stint at the company ends. 
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IT companies in India prohibit employees from working with competetion right after their stint at the company ends. Multinational IT company IBM filed a breach-of-contract lawsuit against Patama Chantaruck, a former employee of the company’s Thailand subsidiary, in the New York Southern District Court after she joined the company’s rival Accenture.
As per the details of the suit, which was filed on Monday, IBM demands that Chantaruck return the company's equity rewards because she joined their competition Accenture. The amount is a little over $ 470,000 as per the court documents.
The court filing says that Chantaruck worked at IBM from 2018 to 2022, and when she left the company, they awarded her monetary compensation in exchange of safeguarding confidential company information and not engaging in competitive conduct.
The lawyers argued that her move to Accenture, which is a direct competition of IBM, just a month after her stint at the company, is enough cause for her to return the monetary compensation.
The lawyers explained in their complaint that IBM and Accenture were direct competitors in various areas, “ particularly in the information, digitalization, and consulting spaces, both globally and within the Asia-Pacific region.”
DO NON-COMPETE CLAUSES HOLD UP IN INDIA?
IT companies in India also have various provisions in their employment contracts that prohibit employees from working with competition right after their stint at the company ends. However, the enforceability of non-compete clauses in courts is debated by employment lawyers.
Varsha Kripalani, Partner at SNG and Partners told Business Today that a restrictive covenant, a clause that stops someone from being employed at a place, in the case of employment is not enforceable in a court.
She said, “A negative covenant that restricts the employment of an employee after the cessation of employment contract with a competitor would fall within the periphery of Section 27 of the Indian Contract Act.”
The Indian Contract Act’ Section 27 reads, “Every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void.”
On the other hand, Amit Kumar Pathak, Director at Nangia Andersen LLP highlights that Indian courts may interpret these clauses depending on the context of the case.
Pathak explains that in cases where the court might find the clauses “too restrictive, negative, and arbitrary in nature,” they might declare those particular clauses void and unenforceable.
On the other hand, if the court finds that the clauses are important to protect the confidentiality and trade secrets of a company, they may uphold them.
“However, if courts observe that the clauses are preventive in nature, up to an extent that, employers need to restrain employees from sharing any sensitive and confidential information e.g. trade secrets, then the court may declare such clauses valid, up to such extent only,” he concluded.
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