Can company enforce non-poaching in case of severance
1 week ago
I have been asked by my company to resign citing obsolescence of my role. In such a circumstance, can the company enforce its non-poaching agreement on me? This will limit my employment opportunities with a lot of companies - which doesn't seem fare as the company is asking me to leave, and I am not resigning on my own.
Non-poaching agreements are entered by the competitors to restrain from hiring each other employees. These clauses are added to the agreement to protect the employer from lateral hiring of their employees by the competitors. However, according to Section 27 of the Indian Contract Act, if any terms and conditions of an agreement directly or indirectly compel the employee to serve the employer or restrict them from joining the competitor employer is invalid. Further, the company cannot force you to resign from the role. Even in case of terminating you from the role, the company is obligated to follow the mandates under the Industrial Disputes Act. In such a case, you need to prove the resignation as retrenchment or taken under coercion and under undue influence to seek an appropriate remedy. If you are covered under the definition of workmen under Section 2(s) of I D Act, then you can approach the State Labour Commission, after sending the legal notice and escalate the matter to the Labour Court for unfair labour practice and seek reinstatement and compensation. If you are not covered under the said definition, then you can approach the civil court and seek an appropriate remedy. If required, you can consult an advocate for advice and assistance in the matter.
Hope it helps.
Thank you.
A.Dear Sir,
Please approach the following authority or similar authority in a state
The Office Commissioner of Labour
Section 12 in The Industrial Disputes Act, 1947
12. Duties of conciliation officers.- (relevant section 12(2) of ID Act)
(1) Where any industrial dispute exists or is apprehended, the conciliation officer may, or where the dispute relates to a public utility service and a notice under section 22 has been given, shall hold conciliation proceedings in the prescribed manner.
(2) The conciliation officer shall, for the purpose of bringing about a settlement of the dispute, without delay, investigate the dispute and all matters affecting the merits and the right settlement thereof and may do all such things as he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute.
(3) If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings the conciliationofficer shall send a report thereof to the appropriate Government 1 or an officer authorised in this behalf by the appropriate Government] together with a memorandum of the settlement signed by the parties to the dispute.
(4) If no such settlement is arrived at, the conciliation officer shall, as soon as practicable after the close of the investigation, send to the appropriate Government a full report setting forth the steps taken by him for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof, together with a full statement of such facts and circumstances, and the reasons on account of which, in his opinion, a settlement could not be arrived at.
(5) If, on a consideration of the report referred to in sub- section (4), the appropriate Government is satisfied that there is a case for reference to a Board, 2 Labour Court, Tribunal or National Tribunal,] it may make such reference. Where the appropriate Government does not make such a reference it shall record and communicate to the parties concerned its reasons therefor.
(6) A report under this section shall be submitted within fourteen days of the commencement of the conciliation proceedings or within such shorter period as may be fixed by the appropriate Government: 3 Provided that, 4 subject to the approval of the conciliation officer,] the time for the submission of the report may be extended by such period as may be agreed upon in writing by all the parties to the dispute.]
To ensure benefit, from an employer's perspective, in lateral hiring amongst competitors, non-poaching clauses are often added to agreements. Non-poaching agreements are contracts entered amongst employers, consenting not to solicit each other's employees. Section 27 of the Indian Contract Act,1872 prohibits any agreement in restraint of trade and profession. The law states that an agreement (employment bond) will be illegal only if it restrains someone from exercising a lawful profession/ trade/ business. As per the mandate of Section 27 of the Indian Contract Act,1872, any terms and conditions of an agreement that directly or indirectly compels the employee to serve the employer or puts a restriction on them joining the competitor or other employer is not valid. In the case where the employer can prove that the employee is joining the competitor to disclose the trade secret/know-how then the court may issue an injunction order restricting the employee from joining the competitor. In the case of PEPSI FOODS LTD. & ORS. v. BHARAT COCA-COLA HOLDINGS PVT. LTD. & ORS. (1999) IILLJ 1140 DEL, it was held the rights of employees to have better working conditions and open positions somewhere else can't be abridged. Hence, an injunction was not granted by the Court to the defendant company as the agreement was violative of Section 27 of the Indian Contract Act, 1872. Further, a forceful resignation amounts to a retrenchment/termination from service if you can prove the allegation with substantial evidence. Once you succeed in proving your resignation as retrenchment, the adjudicating authority/Labour Court may pass an order for your reinstatement in service even with back wages. Sections 25F and 25N of the ID Act mandate that the employer shall fulfill certain conditions before retrenching/terminating any employee. So, in the prevailing situation, if you are not holding a position of manager or supervisor in the Company, but a workman as defined under Sec.2(s) of the Industrial Dispute Act, 1947. serving a legal notice to the Company reach out to the office of the concerned Labour Commissioner to file a complaint against the company over alleged unfair labour practice for redressal of your grievance, But, if you are holding the position of Manager or Administrative officer in the Company, you have to file a civil suit before the Civil Court for desired relief in the matter.
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