Infosys noncompete clause sparks complaint from labor rights org
- Reference: 1650367807
- News link: https://www.theregister.co.uk/2022/04/19/infosys_noncompete_clause_complaints/
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Within the contracts for onboarding employees is a stipulation, according to Nascent Information Technology Employees Senate (NITES), that staff may not accept employment from any Infosys customer they worked with while at Infosys for six months after terminating employment.
Employees are also barred from working for an Infosys competitor if it means they would work with a customer they worked with at Infosys during the 12 months prior to leaving Infosys.
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These stipulations apply to leaving for any reason – whether it be quitting, redundancy, or a firing, NITES says.
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Infosys competitors named in the noncompete clause include Tata Consultancy Services (TCS), Accenture, IBM, Cognizant, and Wipro.
NITES lodged the complaint with the labor ministry after being contacted by several employees of Infosys.
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The complaint, dated April 18 and signed by NITES president Harpreet Singh Saluja, was seen by The Register . It alleges that the noncompete clause is in violation of Section 27 of India's Contract Act. Section 27 essentially states that any agreement restraining a person from engaging in their profession or trade is invalid.
The complaint reasons that enforcement of the noncompete clause in India is only enforceable if the employee is still working for Infosys. According to Section 27 of India's Contract Act, once an employee is terminated, the company has no right to prevent them from engaging in their profession or trade.
The complaint also cites inequality in power between the employer and employee as a reason why the clause should not exist. When a new employee is presented a standard form, they would feel powerless to negotiate against it, argues NITES.
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"At the time of the employment agreement, the employee may have given little thought to the restriction because of his eagerness for a job," said the NITES complaint. It referred to the employment contract as a way to "tempt improvident persons, for the sake of present gain, to deprive [employees] of the power to make future acquisitions and expose them to imposition and oppression."
[6]Infosys quits Russia, ending UK political and tax scandal … maybe
[7]Capgemini wins £30m deal to work on UK customs
[8]Indian IT services biz HCL sees boom in business – and staff attrition
[9]India's tech manufacturing growth stalled as COVID raged
The Register asked Infosys to comment but had not received any response at the time of publication.
The noncompete policy has been in place at Infosys since 2007.
At the time it was instated, Infosys's head of HR, Bikramjit Maitra, told [10]The Economic Times that the reason it name-checked companies was to not restrict employment opportunities available to individuals. "This is a very common noncompete clause in most firms internationally," he said.
Saluja told The Register that although the policy may have been around for 15 years or so, employee complaints to NITES over the clause had begun rolling in last week.
Also last week, Infosys revealed in its Q4 [11]earnings report [PDF] that its voluntary attrition rate had hit 27.7 per cent, translating to the loss of around 87,000 employees.
[12]High attrition in India's IT services sector was attributed by some to industry poaching, which would make it an opportune time to start enforcing any noncompete clauses in employee contracts.
Any details of Infosys actually enforcing the noncompete clause through financial penalties or other means have not yet emerged. However, Saluja told The Reg that an employee who receives an offer contingent on background verification could become "stuck."
"I see [Infosys] trying to protect intellectual property rights and also set an example to retain talent... but this rhetoric might not build a positive reputation for the company," Saluja told The Reg .
"The company has made this explicit as part of their hiring process, the worrying part is about the number of careless employees who may sign this and wake up someday to realize this is a thing after being pointed out during a confrontation, that is going to be a lot of chaos to deal with." ®
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[6] https://www.theregister.com/2022/04/14/infosys_q4_2022/
[7] https://www.theregister.com/2022/03/07/capgemini_uk_customs/
[8] https://www.theregister.com/2022/01/18/hcl_q3fy22/
[9] https://www.theregister.com/2022/04/07/india_tech_manufacturing_stalls/
[10] https://economictimes.indiatimes.com/news/company/corporate-trends/infy-asks-staffs-to-sign-pact-against-joining-rivals/articleshow/2101866.cms?from=mdr
[11] https://www.infosys.com/investors/reports-filings/quarterly-results/2021-2022/q4/documents/fact-sheet.pdf
[12] https://www.theregister.com/2022/01/18/hcl_q3fy22/
[13] https://whitepapers.theregister.com/
Re: "an illegal noncompete clause"
And knowing that Infosys is looming to sue your prospective new employee won't have a dampening effect on your enthusiasm to hire them instead of one of the hundreds or thousands of other candidates?
Re: "an illegal noncompete clause"
The issue is that individual ex-employees can't usually afford the legal fees to prove their point one after another.
So the Infosys lawyer saying no has no importance ?
What I'm saying is that this is never going to get to court in the first place.
Not if laywers are doing their job.
Re: "an illegal noncompete clause"
Because the non compete is with the employee, not with the employer. And not everyone has pockets as deep as Akshata Murthy.
What? Too soon? :-)
Most agency's in UK are also doing this
Similar rule in UK that stops contractor from taking up a position with end client or end client's client.
This is even if the Agency has been shown the door, I have rejected a number of contracts with agency's.
As I had previous contracts with the end client already, house phone and a gov department.
These are just illegal anti competition rules, but a small one-man company cannot compete when you need the work.
My first job had a clause like this. After I left, my last payslip included a copy of the contract (that I never signed) with the relevant part highlighted in neon yellow. I could not do any work in the same sector for a period of three years.
I responded by sending her a bill for three years of wages and a rather shirty letter pointing out that if my contact is to be considered still in force, then I expect the appropriate remuneration. Three rather incoherent nasty letters came back, and finally a post card that said "contact terminated, disregard all, goodbye".
It's depressing what employers think they can get away with in the small print.
When I was working on contract for one of the giants in the printer business, about 20 years ago, my contract had a clause about not working for their customers for a year after I left.
I pointed out to them that pretty much most companies will probably have at least one of their old or current printers around, and that will prevent me from working anywhere pretty much.
There were some embarrased looks given when I pointed this out to them.
I did stay there for a couple of years, and yes, my next job was also a customer of theirs. Was waiting to see if there was anything from them, but nothing happened.
My current employer tried to slip a non-compete clause into an "updated" contract that they sent me to sign. Thankfully, I'm not given to signing things that I haven't read at least twice and spotted the new clause. When I queried it, they tried to explain it away as "standard practice", to which my response was "it's also standard practice to include a golden handshake which covers the loss of salary for the non-compete period, and I can't find that in the contract, so I won't sign it".
In the end, they deleted the clause, but the whole thing left me with a nasty taste in my mouth and even less respect for the HR department than I had before their attempt to pull the wool over my eyes.
(Posted as anonymous coward for obvious reasons.)
"an illegal noncompete clause"
If it's already illegal, then what's the problem ?
The employee leaving goes to a competitor, Infosys sues alledging the non-compete clause, judge throws it out of court. End of story.
Logically, the lawyer Infosys contacts will say so and not take the job.
Why is this an issue ?