What is in the news?
The second-largest software company in India is reportedly invoking a non-compete clause in its employment agreements to restrain the record level of attrition.
On April 20, the Indian multinational IT major Infosys has reportedly sued by NITES.
What is in the Clause?
As attrition rates in the IT industry continue to rise, Infosys and some other IT companies are implementing non-compete clauses in job contracts. The new clause in the Infosys contract bars new employees from working on any customer’s project across five competitors or their subsidiaries for six months after leaving.
Who are the five competitors?
The clause includes these companies in their competitor list:
Why is Infosys facing backlash?
NITES, a Pune-based IT union, requested the Union Labour Ministry in a letter to remove the clause, describing it as “arbitrary, unethical, and illegal”.
“For the period of six months after leaving Infosys, employees will not — accept any offer of employment from any customer, (with whom I worked) in the twelve months immediately preceding my termination or accept any offer of employment from a Named Competitor of Infosys, if my employment with such Named Competitor would involve me having to work with a Customer with whom I had worked in the twelve (12) months immediately preceding the termination of my employment with Infosys,…” according to the letter.
The argument did by Infosys
In its defense, Infosys cited several factors. Infosys said this is common practice around the world to protect confidential information. It also says such controls are needed to protect “confidentiality of information, customer connection, and other legitimate business interests.”
Is the non-compete clause right? No, because non-compete clauses are not valid in India, the clause clearly violates Section 27 of the Contract Act.
Moreover, Infosys points out that all job applicants are made aware of the conditions in advance of joining the company and this is all done for protecting the confidential information of the company. Indeed, the policy is right from the point of view of the employer, but not from the employee’s view and law.