Most of the companies include ‘non-compete’ provisions in contracts of employment. It restricts an employee from competing with the employer or joining a competitor during the term of the employment and for a period thereafter.
Employers use such agreements to prevent unfair competition and solicitation of their employees .
Non-compete provisions for the term of employment are not regarded ‘restrictive covenants’ under Indian law. However, having such provisions applicable after a person leaves the organisation is against the Indian Contract Act, and, therefore, not enforceable. Enforce ability of non-compete obligations on consultants is debatable. The expression ‘lawful professional’ used in Section 27 has been interpreted to include both consultants and employees. Therefore, a consultant who agrees to provide services to a single client on a full-time basis could be subject to non-compete obligations.