Restrictive Covenants In Employment Contracts: An Indian Perspective

Introduction

Retaining talent and protecting sensitive proprietary information are important considerations for a business. Employers usually incorporate restrictive covenants such as non-compete and non-solicit in employment contracts. On April 23, 2024 the Federal Trade Commission of the United States of America issued a "final rule" "banning non competes nationwide"¹. Indian courts have also been reluctant to uphold non-compete provisions after the termination of employment of an employee, while being more willing to uphold non-solicit clauses in an employment agreement after termination of employment.

Non – compete clauses and their enforcement

A typical non-compete clause has two parts. First, where the non-compete prevents the employee from working for a competing business during the term of employment with the original employer. Second, where post termination of employment the employee is restricted from working with a competitor.