Non-compete clause issue: Infosys seeks time till July 13 from Karnataka Labour Dept

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Infosys has sought time till July 13 from the Karnataka Labour Department after it was summoned along with the Nascent Information Technology Employees Senate (NITES) over adding a non-compete clause in its employment agreements. The labour department has agreed to the same.

NITES Founder President Harpreet Saluja said as supporting documents, the employees union has given a Supreme Court verdict and relevant central government proceedings as well. The SC verdict cited is one from 2006 in case between Percept D’Mark (India) Pvt. Ltd. and Zaheer Khan, where the court did not uphold the non-compete clause that prevented the latter from joining another company for a specific time period.

The restrictions imposed on employees during the course of employment via a potential contract of employment are different from restrictions imposed on the said employees after employment. It was held by the Hon'ble court, that a restraint of employment where the employee cannot engage him/herself in another business of similar nature or get employed by any other employer with substantially the same duties, cannot be included as a restraint of trade- unless the restrictive covenant in regard is one-sided or not conscionable.

NITES had approached the Union Labour Ministry and the Ministry of Corporate Affairs in April, seeking the government’s intervention into the non-compete clause in employment agreements for those in IT as well as the BPO arm. For IT employees, it tells them that if any customer they engaged with in the prior to joining the company, they cannot work with them for six months after they leave. The clause also names five competitors — TCS, Accenture, Cognizant, IBM and Wipro — and states they cannot accept an offer from these companies if it requires them to work with a customer they worked with in the 12 months preceding their exit.

Infosys skipped meetings with the Chief Labour Commissioner on three occasions when it was summoned for a meeting along with the union. Infosys HR Department Vice-President Santhosh K Nair submitted a written response to the ministry on May 24, saying that employees handle critical and sensitive customer projects as a part of their regular services. He said that the reason the clause is there is for business and client confidentiality, and that the obligation is applicable for “a very limited period only”. The response added that candidates agree to the clause voluntarily.

Following this, the Chief Labour Commissioner forwarded the grievance regarding the clause to the state labour departments of Karnataka, Haryana and Maharashtra, after which Karnataka summoned the parties for a meeting.

Infosys, had previously said the clause was a standard business practice in many parts of the world and is disclosed before people decide to join the company. It does not “have the effect of preventing employees from joining other organisations for career growth and aspirations," it added.