Dear Sir,
I am working with an organization based in Delhi/NCR Region. I was asked to sign a bond with the company on A4 size paper which prohibits me from joining their competitors for a period of 1 year after leaving the job. The names of the competitors are also mentioned.
The company asks employees to sign on a stamp paper when they put their resignations else refuse to accept the resignation and don’t give the relieving letter and dues.
On breach of the agreement company also asks employees to pay amount equivalent to 1 year pay.
However the company did not impart any additional or special training and thus did not incur any additional cost on training me.
Please advice.
Kindly also note that most of the interview calls which I get are from the companies which are mentioned by my employer as their competitors.
Regards
Sachin
From India, New Delhi
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I am working with an organization based in Delhi/NCR Region. I was asked to sign a bond with the company on A4 size paper which prohibits me from joining their competitors for a period of 1 year after leaving the job. The names of the competitors are also mentioned.
The company asks employees to sign on a stamp paper when they put their resignations else refuse to accept the resignation and don’t give the relieving letter and dues.
On breach of the agreement company also asks employees to pay amount equivalent to 1 year pay.
However the company did not impart any additional or special training and thus did not incur any additional cost on training me.
Please advice.
Kindly also note that most of the interview calls which I get are from the companies which are mentioned by my employer as their competitors.
Regards
Sachin
From India, New Delhi
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Hello Sachin,
Please note that the situation you mentioned is pretty common among domains/sectors where there are limited players. This is also common for specific positions/functions that, as per the company's view, are critical to their operations and such an employee joining any competitor would be detrimental to their interest.
In short, this is called the Non-Compete Clause.
And this is different from the bond you spoke about, which is usually linked to any training given by the company.
However, there's a difference in what your company is practicing and the generally accepted industry practice of the Non-Compete Clause—this is a part of the Offer/Appointment Letter and not the resignation process. Any person is expected to join any company after going through all the relevant clauses and conditions of employment—of which clauses like this also form a part (another common clause being Non-disclosure).
Legally, being asked to sign the Non-Compete Clause after resigning is untenable.
I suggest you wait for the legal members of this forum to respond—they will be able to give you better suggestions. But I guess you will need to consult an advocate for sure.
All the Best.
Regards,
TS
From India, Hyderabad
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1650Please note that the situation you mentioned is pretty common among domains/sectors where there are limited players. This is also common for specific positions/functions that, as per the company's view, are critical to their operations and such an employee joining any competitor would be detrimental to their interest.
In short, this is called the Non-Compete Clause.
And this is different from the bond you spoke about, which is usually linked to any training given by the company.
However, there's a difference in what your company is practicing and the generally accepted industry practice of the Non-Compete Clause—this is a part of the Offer/Appointment Letter and not the resignation process. Any person is expected to join any company after going through all the relevant clauses and conditions of employment—of which clauses like this also form a part (another common clause being Non-disclosure).
Legally, being asked to sign the Non-Compete Clause after resigning is untenable.
I suggest you wait for the legal members of this forum to respond—they will be able to give you better suggestions. But I guess you will need to consult an advocate for sure.
All the Best.
Regards,
TS
From India, Hyderabad
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Hi Sachin,
Such a bond will not hold good in the Court of law in India. The Supreme Court and other lower courts in India have thrashed down such draconian policies of companies. Currently, such bonds are just a way to terrorize employees into "not resigning."
We have discussed at length in various discussions on the Citehr forum with expert comments, which you can research for your information.
My suggestion is not to worry much about such bonds but be loyal to your ex-company and do not disclose any of their trade secrets to their competitors at any cost. When you resign from such companies, maintain absolute discretion in moving to your new company and job.
Wishing you all the best,
Ukmitra
From Saudi Arabia, Riyadh
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Such a bond will not hold good in the Court of law in India. The Supreme Court and other lower courts in India have thrashed down such draconian policies of companies. Currently, such bonds are just a way to terrorize employees into "not resigning."
We have discussed at length in various discussions on the Citehr forum with expert comments, which you can research for your information.
My suggestion is not to worry much about such bonds but be loyal to your ex-company and do not disclose any of their trade secrets to their competitors at any cost. When you resign from such companies, maintain absolute discretion in moving to your new company and job.
Wishing you all the best,
Ukmitra
From Saudi Arabia, Riyadh
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This issue was discussed threadbare earlier .This type of bonds are illegal. Varghese Mathew
From India, Thiruvananthapuram
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From India, Thiruvananthapuram
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Dear Sir,
I would like to further add a few more points:
The clause prohibiting employees from joining competitors is present in the appointment letters of all the employees of this company and is not limited to any specific positions/functions. I am in the role of an assistant manager in marketing and, therefore, do not have access to the trade secrets of the company.
The clause prohibits employees from joining competitor companies even in other functions/business areas rather than just the verticals/functions that are in direct competition with my employer.
Thanks,
Sachin
From India, New Delhi
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I would like to further add a few more points:
The clause prohibiting employees from joining competitors is present in the appointment letters of all the employees of this company and is not limited to any specific positions/functions. I am in the role of an assistant manager in marketing and, therefore, do not have access to the trade secrets of the company.
The clause prohibits employees from joining competitor companies even in other functions/business areas rather than just the verticals/functions that are in direct competition with my employer.
Thanks,
Sachin
From India, New Delhi
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Sachin,
As explained by others and also reported in other discussions on this forum, the so-called restrictions are not enforceable, and you can go ahead and join any of the mentioned companies. The company can do nothing to stop you. Even the signature on stamp paper is invalid as it comes under the rule of coercion. If possible, take a copy of the bond you sign.
On the practical side, go ahead and sign any bond they give you upon resignation, obtain the relieving letters, and do what you want after that. If they do file a case, you can hire any decent lawyer to have it dismissed and recover the costs from the employer. But I don't think they will even file a case against you for this. Their lawyers also know it's not tenable.
From India, Mumbai
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As explained by others and also reported in other discussions on this forum, the so-called restrictions are not enforceable, and you can go ahead and join any of the mentioned companies. The company can do nothing to stop you. Even the signature on stamp paper is invalid as it comes under the rule of coercion. If possible, take a copy of the bond you sign.
On the practical side, go ahead and sign any bond they give you upon resignation, obtain the relieving letters, and do what you want after that. If they do file a case, you can hire any decent lawyer to have it dismissed and recover the costs from the employer. But I don't think they will even file a case against you for this. Their lawyers also know it's not tenable.
From India, Mumbai
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Hi Sachin,
Well I would say that there is no need to accept such conditions by employer which is totally unethical and unprofessional and must inform to Labour Inspector /commissioner immediately with written complaint of minimum 10 employees of your company to seek help in this regard.
Second, I totally agree with Ms Saswata that Company has no right to force such condition to employee in any case but if such conditions has applied or introduced in the appointment/employment letter, and employees were agreed to the same by signing bond at the time of joining, can do so.
“Hope there is nothing mentioned in the appointment letters of employee like Employer deserve the right to retain employees and hold/refused their clearance until such bond conditions gets acceptable by employees”. if there is nothing like you and other employees of this organization are advised to not sign any bond while resigning. And when employer refuse to give clearance to their exit even after following the terms of leaving/notice period, needs to file a written complaint as stated above.
However, I buy that due to tough completion, allurements to employees by competitors became a common trend in the market or “How to poach an employee from a Competitor” became a common practice which is one of the big Attrition /High Employee Turnover problems today but still such style, to fight with this problem, is not acceptable.
I’d request you to file a written complaint to Labour Inspector/Commissioner else need to go with the provided suggestions by Mr Ukmitra and Ms Saswata which are practical and valid.
Best of Luck
From India, Gurgaon
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Well I would say that there is no need to accept such conditions by employer which is totally unethical and unprofessional and must inform to Labour Inspector /commissioner immediately with written complaint of minimum 10 employees of your company to seek help in this regard.
Second, I totally agree with Ms Saswata that Company has no right to force such condition to employee in any case but if such conditions has applied or introduced in the appointment/employment letter, and employees were agreed to the same by signing bond at the time of joining, can do so.
“Hope there is nothing mentioned in the appointment letters of employee like Employer deserve the right to retain employees and hold/refused their clearance until such bond conditions gets acceptable by employees”. if there is nothing like you and other employees of this organization are advised to not sign any bond while resigning. And when employer refuse to give clearance to their exit even after following the terms of leaving/notice period, needs to file a written complaint as stated above.
However, I buy that due to tough completion, allurements to employees by competitors became a common trend in the market or “How to poach an employee from a Competitor” became a common practice which is one of the big Attrition /High Employee Turnover problems today but still such style, to fight with this problem, is not acceptable.
I’d request you to file a written complaint to Labour Inspector/Commissioner else need to go with the provided suggestions by Mr Ukmitra and Ms Saswata which are practical and valid.
Best of Luck
From India, Gurgaon
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Hi there,
As rightly pointed out by other members, these kinds of bonds and declarations have no legal sanctity and hence cannot be executed by your employer. This means that they cannot force you or obtain a court decree forcing you to pay up any money as agreed in the bond or otherwise. It is simply a psychological deterrent. While not every employee may be affected, at least a few will be intimidated by a paper tiger. As an employer, this is a slightly better situation than having none to bother with! They are attempting to instill fear, which is neither uncommon nor significantly draconian.
Cheers
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As rightly pointed out by other members, these kinds of bonds and declarations have no legal sanctity and hence cannot be executed by your employer. This means that they cannot force you or obtain a court decree forcing you to pay up any money as agreed in the bond or otherwise. It is simply a psychological deterrent. While not every employee may be affected, at least a few will be intimidated by a paper tiger. As an employer, this is a slightly better situation than having none to bother with! They are attempting to instill fear, which is neither uncommon nor significantly draconian.
Cheers
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Employment is a contract between the employer and employee for some consideration for both. An employer cannot force their employees to sign any kind of bond that is detrimental to the interests of the employee. An employee is free to join any company by leaving the present company they are working in after legally getting relieved. Note that any agreement in restraint of employment is void under the Indian Contract Act.
D. Phani Kumar
DGM- HR
Vasavadatta Cement
(A Unit of B.K. Birla Group of Companies)
Sedam, Gulbarga Dist.
Karnataka.
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D. Phani Kumar
DGM- HR
Vasavadatta Cement
(A Unit of B.K. Birla Group of Companies)
Sedam, Gulbarga Dist.
Karnataka.
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Well, Mr. Sachin!
You are in big trouble now, isn't it?
What my other friends wrote is absolutely correct. These kinds of bonds are not legal. So what?
What they could not visualize is how to go ahead with this. You sign the bond with closed eyes and grab this opportunity to take a hike from the prospective employer as well. Tell them - "Sir, I am very much interested to work with you only and you only. I will never go to any of your competitors, including those whose name is not there in the list... but kindly consider my prospect as well... do give me a little more hike or a better position, etc." Try to encash this in your favor. This is a good opportunity for you; grab it.
To be very honest, they will not go to court since this will not be sustainable before the court of law. As per the Constitution of India, all Indian citizens are free to opt for their trade and profession. Unless you do something illegal (it is not illegal to join their competitor within 1 year), you can join anywhere of your choice.
Please contact in case you face any further problems.
From India, Calcutta
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You are in big trouble now, isn't it?
What my other friends wrote is absolutely correct. These kinds of bonds are not legal. So what?
What they could not visualize is how to go ahead with this. You sign the bond with closed eyes and grab this opportunity to take a hike from the prospective employer as well. Tell them - "Sir, I am very much interested to work with you only and you only. I will never go to any of your competitors, including those whose name is not there in the list... but kindly consider my prospect as well... do give me a little more hike or a better position, etc." Try to encash this in your favor. This is a good opportunity for you; grab it.
To be very honest, they will not go to court since this will not be sustainable before the court of law. As per the Constitution of India, all Indian citizens are free to opt for their trade and profession. Unless you do something illegal (it is not illegal to join their competitor within 1 year), you can join anywhere of your choice.
Please contact in case you face any further problems.
From India, Calcutta
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Dear All,
Appreciate your suggestions to Sachin and other members of the forum.
Would like to share my practical experience in such a case wherein I was the HR manager of the company. The company had a policy of having all employees sign an NDA (Non-Disclosure Agreement), binding them to not join any competitors for 18 months after leaving the company. This policy is entirely legal. However, a few employees did not take it seriously and joined a competitor. I took action against these employees, representing the company in court for many hearings. Eventually, the company won the case and recovered money from those three employees.
My advice to all of you is to be very cautious before signing any such documents with your employers. If the company has a robust legal department, they will likely take action. If the company lacks a legal department, they may not pursue legal action unless the employee possesses critical trade secrets.
Regards,
From India, Delhi
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Appreciate your suggestions to Sachin and other members of the forum.
Would like to share my practical experience in such a case wherein I was the HR manager of the company. The company had a policy of having all employees sign an NDA (Non-Disclosure Agreement), binding them to not join any competitors for 18 months after leaving the company. This policy is entirely legal. However, a few employees did not take it seriously and joined a competitor. I took action against these employees, representing the company in court for many hearings. Eventually, the company won the case and recovered money from those three employees.
My advice to all of you is to be very cautious before signing any such documents with your employers. If the company has a robust legal department, they will likely take action. If the company lacks a legal department, they may not pursue legal action unless the employee possesses critical trade secrets.
Regards,
From India, Delhi
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Hi All,
Thanks for your valuable comments.
I would like to request your input on the practical aspect of this practice being adopted by my employer - let's say Company A.
Not signing the non-compete clause is generally not an option for the employee, as such agreements are forced upon the employee by Company A at the time of joining the company, not during the interview or when the offer letter is given. Therefore, employees are left with little choice.
To enforce this bond/non-compete agreement of not joining a competitor, Company A takes about 4 months to provide a relieving letter to employees, despite the policy stating that relieving letters should be given within 45 days of the last working day. This delay is due to the company checking if the employee has joined any competitors, such as Company B.
Additionally, the new employer may disclose its name/identity during background checks.
In such cases, my current employer, Company A, may create issues in providing a relieving letter.
Please suggest what approach an employee should take when moving to a competitor and the difficulties they may face if they do not receive the relieving letter, especially if Company A discovers that the employee has joined a competitor, like Company B.
Thanks,
Sachin
From India, New Delhi
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Thanks for your valuable comments.
I would like to request your input on the practical aspect of this practice being adopted by my employer - let's say Company A.
Not signing the non-compete clause is generally not an option for the employee, as such agreements are forced upon the employee by Company A at the time of joining the company, not during the interview or when the offer letter is given. Therefore, employees are left with little choice.
To enforce this bond/non-compete agreement of not joining a competitor, Company A takes about 4 months to provide a relieving letter to employees, despite the policy stating that relieving letters should be given within 45 days of the last working day. This delay is due to the company checking if the employee has joined any competitors, such as Company B.
Additionally, the new employer may disclose its name/identity during background checks.
In such cases, my current employer, Company A, may create issues in providing a relieving letter.
Please suggest what approach an employee should take when moving to a competitor and the difficulties they may face if they do not receive the relieving letter, especially if Company A discovers that the employee has joined a competitor, like Company B.
Thanks,
Sachin
From India, New Delhi
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Some companies have contracts or bonds that employees are required to sign for a certain period of time. During this specified period, employees are obligated to stay with the organization to help retain talent and reduce the attrition rate.
From India, Lucknow
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From India, Lucknow
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Dear Sachin,
My suggestion to you would be that if you truly wish to join a competitor for whom you have signed a contract with your current company that you will not join them, you should share the contract with your new employer. After reviewing your existing contract, if the new company decides to hire you, they may take responsibility for any legal proceedings in this case. They may also allow you to join without the experience letter. No other approach seems viable for an employee in this situation.
Regards,
From India, Delhi
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My suggestion to you would be that if you truly wish to join a competitor for whom you have signed a contract with your current company that you will not join them, you should share the contract with your new employer. After reviewing your existing contract, if the new company decides to hire you, they may take responsibility for any legal proceedings in this case. They may also allow you to join without the experience letter. No other approach seems viable for an employee in this situation.
Regards,
From India, Delhi
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