Navigating Non-Compete Clauses: India’s Framework And A Cross-Jurisdictional Enforceability Analysis
- IJLLR Journal
- 10 hours ago
- 1 min read
Ashay Anil Gote, LLM, Symbiosis Law School, Pune
Dr. Isha Saluja, Prof., Symbiosis Law School, Pune
Prof. Tarini Rao, Prof., Symbiosis Law School, Pune
ABSTRACT
This paper examines the trajectory of non-compete clauses (NCCs) in India, from the initial restriction of trade prohibition in Section 27 of the Indian Contract Act from the colonial era, to post-independence restrictive interpretations, and more recently, modern judicial relaxation in the interpretation of in-term restrictions. The study also closely examines the current legal regime allowing for reasonable in-term restraints on employment to protect trade secrets and customer relationships, whilst invalidating generally post-employment restraints except on limited grounds concerning goodwill, or sale-of-business. The article also examines the effects of economic liberalization, the rise of multinational employers, the gig economy, and start-up culture, but at the same time grapples with the challenges posed by remote work and the upheaval of workforce planning arising from the pandemic situation. It provides comparative perspectives from other jurisdictions with different approaches - either flexible, reasonableness-based on NCCs, or a codified statutory approach with mandatory compensation. The article concludes with a series of recommendations for India's approach to NCCs: codifying time limits along with geographic limits for enforceable NCCs, making any compensation subject to reasonableness/ proportionality, encouraging the exploration of just using other kinds of covenants (NDAs, non-solicitations), and establishing reporting mechanisms so that codified practice can balance employer rights with labour mobility and innovation.
Keywords: Non-compete clauses, Indian Contract Act, Labor mobility, Alternative covenant.
