Employment law
The terms of employment with senior executives are largely governed by contract, and therefore it is very important that the employment agreements be detailed with robust confidentiality, intellectual property assignment, termination rights and other relevant restrictive covenants. We have highlighted key areas in this regard below.
i Non-compete covenants
Section 27 of the Indian Contract Act, 1872 (Contract Act) provides that any agreement that restrains a person from exercising a lawful profession, trade or business is void to the extent of such restriction.2 The only exception under Section 27 of the Contract Act is with respect to restrictions on carrying on business of which goodwill is sold. This exception is, however, subject to the restriction being reasonable with respect to (1) the nature of business that the individual is restrained from engaging in; (2) territorial restrictions; and (3) the period of restriction. Since contracts in restraint of trade are prima facie void, the onus is on the party supporting the contract to show that the restraint falls within the exception and is reasonable.
Post employment non-competition covenants have consistently been held to be unenforceable in India. While courts have held non-competition covenants during the term of employment to be enforceable, those applicable post-employment are consistently considered void.3 However, post employment non-competition covenants are commonly included to deter employees...
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