INFOSYS’ NON-COMPETE CLAUSE FOR EMPLOYEES CREATES A STIR

The IT sector cannot prevent employees from joining a rival firm and a non-compete clause does not stand in court, said recruiters and lawyers. Meanwhile, Infosys Ltd, facing record high attrition, said its non-compete clause is a “standard business practice” to protect client confidentiality and denied that it hampers an employee from joining other firms.

“As per Section 27 of the Indian Contract Act, 1872, any agreement which restrains anyone from practicing a lawful profession or trade is not enforceable in a court of law. Any such non-compete clause in any employment contract is unenforceable and is usually used as a deterrent for the employees from joining rival companies,” said Soubhik Dasgupta, partner, Pioneer Legal.

Typically, these clauses act as a deterrent and are a common practice in the IT sector.

“This is a common practice and a lot of IT companies and also companies from other sectors have such clauses despite being fully aware that their enforceability in any court is highly questionable. To that end, Infosys itself has said that these clauses do not have the effect of preventing employees from joining other organisations,” Dasgupta said.

This follows a Pune-based labour union’s appeal to the Union labour ministry seeking removal of Infosys’ non-compete clause. However, senior executives in Infosys and other IT firms said such non-compete clauses are a standard procedure where a list of competing firms are named, joining whom may lead to breach of client confidentiality.