JSA Prism | Employment | August 2024

Lock-in period provision in an employment agreement during the term of employment is valid and does not infringe the fundamental rights of an employee; disputes on lock-in period are arbitrable under the Arbitration and Conciliation Act, 1996

In Lily Packers Private Limited vs. Vaishnavi Vijay Umak and Ors.¹ (the "Lily Case"), a Single Judge of the Delhi High Court ("Delhi HC") adjudicated on (a) the validity of the lock-in period provision in the employment agreement(s) of the respondent employees with the petitioner company; and (b) whether the dispute on lock-in period was arbitrable under the Arbitration and Conciliation Act, 1996 ("Arbitration Act"). The Delhi HC held that the lock-in period as a restrictive covenant in the employment agreements was valid, enforceable during the term of employment and did not infringe the fundamental rights of the employees under the Constitution of India ("Constitution"). It also held that the dispute on lock-in period was