Is invoking a non-compete clause by Infosys a right move?
Facing record levels of
attrition, India’s second-largest software services firm Infosys is reportedly
invoking the non-compete clause in the employment agreements to curb attrition.
A Pune-based IT union, The
Nascent Information Technology Employees Senate (NITES), has written to the
Union Labour Ministry seeking the removal of the clause, calling it “arbitrary,
unethical and illegal”.
While Infosys has had the clause
for a long time, the union claimed that the company is now enforcing it and
that it has received 65-70 complaints from employees.
The non-compete clause bars
employees from accepting offers from any of the named rival companies for a period of
six months after leaving Infosys, if the new job involves working with a client
with whom the employee had worked during the last 12 months of their stint with
Infosys.
For the said duration, the
employee also cannot accept a job offer from any customer with whom they had
worked in the 12 months immediately preceding the termination of their
employment with Infosys.
According to reports, Infosys has
named five competitors including TCS, Accenture, IBM, Cognizant, and Wipro for
IT services employees and nine companies including Tech
Mahindra, Genpact, WNS, TCS, Accenture, IBM, Cognizant, Wipro and HCL for
business processing management (BPM) staff.
Non-compete clauses are not valid
in India as per Section 27 of the Indian Contract Act, which states that any
agreement that restrains anyone from practising a lawful profession, trade or
business is to that extent void.
The courts have time and again
trashed such clauses and held that post-termination non-compete clauses are not
enforceable.
Infosys, on its part, said that
it is a “standard business practice” for employment contracts to include
“controls of reasonable scope and duration to protect the confidentiality of
information, customer connection and other legitimate business interests”
It denied that the clause
prevents employees from joining other organizations. The attrition rate at Infosys
touched a record high of 27.7% in the March quarter on a last twelve months
basis.
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