Retaining talented human resources is crucial for every company to grow in its business but to sustain and continue such growth.
With the pandemic, work-from-home culture, moonlighting and so many other factors at play, it is becoming a daunting task for companies to retain their talented resources; some companies (particularly in IT/ITES sectors) are facing unforeseen high attrition rates. Coupled with the fact that these employees mostly join competitors, violating the confidentiality norms and soliciting business from existing clients / vendors / suppliers, it is highly concerning and can hardly be taken lightly.
To contain this high attrition rate, different companies have been using different methods (e.g., offering comprehensive employment package, imposing non-compete restrictions etc.,) – the idea being to keep hold of their key employees from moving out of such companies and joining competitors.
It is common for companies to have non-compete restrictions in their employment agreements – off late, there’s been a lot of noise about Infosys. It is facing the demand for removal of non-compete restrictions on its employees; a Pune based labour union has filed a case before Ministry of Labour demanding removal of non-compete restrictions imposed on employees as part of offer letters issued by Infosys.
Apparently, the following restrictions are part of Infosys engagement letters:
a) An employee shall not accept employment offer from named competitors for a period of six months from the date of employment offer. Such named competitors include five companies (i.e Accenture, Wipro, Cognizant, Tata and IBM) in IT sector and nine companies (i.e (Accenture, Genpact, Wipro, WNS, TCS, HCL Technologies, Tech Mahindra, IBM, and Cognizant) in business process management.
b) An employee shall not undertake a job which involves any association with an Infosys customer provided customer has worked with such employee in the preceding 12 months during such employee engagement with Infosys.
c) Employee shall not agree an employment offer from a customer for a period of six months provided such customer has directly worked with such employee within the preceding 12 months during such employee engagement with Infosys.
In the light of this complaint, the Ministry invited Infosys for a meeting with the Labour Union on April 28, 2022; Infosys did not attend and therefore, the meeting has been postponed to May 16, 2022.
In response to demand for removal of non-compete restrictions, Infosys said that it is a global practice to have certain controls to prevent employees from indulging in non-compete activities to preserve business and economic interest of the company, to sustain customer relationships and to prevent sanctity and confidentiality nature of the business.
It is anticipated that outcome of the meeting scheduled on May 16, 2022 may bring new ruling or approach about imposing non-compete restrictions on employees.
The issue is very complex and affects companies and the employees. On the one hand, companies want to protect their business and customers and on the other, it is a question of livelihood of employees. If a particular employee possesses particular skills, she can get another employment in the same sector, most likely with competitors of ex-employer only. While recruiting a candidate, this is one of the primary considerations – whether the applicant has experience in the same sector. You cannot expect an employee not to seek any employment this way forever or even for a particular duration (unless you agree to pay adequate compensation for this period).
We also cannot turn a blind eye to the employer’s concerns here. Employees are trained for particular skills, possess a lot of confidential and proprietary information (clients, projects, technology, pricing and so on) – if they breach the trust and leak this information to competitors, the ex-employer may suffer significant business and opportunity loss.
I feel both quarters are justified in their expectations to some extent and any extreme view cannot be a happy, win-win situation for both. Therefore, a fine balance has to be struck between these two stakeholders’ concerns. Any restrictions placed on employees have to withstand the test of reasonability and the employees need to be diligent and compliant with their commitments (regarding non-disclosure, non-solicitation etc.). The enforceability of Non-Compete Agreements are always a tricky issue in India.
Entering into a contract, knowing your commitments well and with an intent not to honour it is not ethical, nor legal.
Views are personal, what are your views on the matter?
