Non-compete clause: Karnataka govt summons Infosys CEO

In continuation to a complaint filed by Pune-based employee association NITES (Nascent Information Technology Employees Senate) against Infosys’ non-compete agreement for its IT and BPO employees, the Karnataka labour department has now sent a legal notice to the tech services giant.

The NITES complaint, which was previously sent to the union labour ministry, had termed the company's non-compete clause as "illegal" and "arbitrary". The government of Karnataka's labour department in its letter has asked Infosys CEO Salil Parekh to appear before it on July 4, 2022, to "examine and verify the contents of the complaint filed" by the association.

Parekh has been asked to appear in person, without fail. "In this connection, you are hereby directed to appear in person on the above-said date with necessary original documents to answer the petition in 5 sets without fail. Failure to attend the said joint petition shall be decided ex-party," says the department letter.

Salil Parekh has been the chief executive and managing director of Infosys since January 2018. He has been reappointed as MD & CEO of the software services giant from July 1, 2022, to March 31, 2027.

On the latest notice issued by the Karanataka government, NITES chief Harpreet Singh Saluja says the company wouldn't be able to escape the provisions of the Indian Contract Act on jurisdiction grounds. "The Central government after the intervention had earlier forwarded the case to State Government Labour Departments of Haryana, Maharashtra and Karnataka. In pursuance of this now Karnataka state government's Labour Ministry has issued a notice. We believe that now the company wouldn't be able to escape the provisions of the Indian Contract Act on jurisdiction grounds and the exploitation of employees will be stopped.”

Taking cognizance of a complaint filed by the Pune-based employee association, the union ministry of labour and employment in April had also issued a notice to Infosys seeking a joint discussion regarding the so-called “non-compete agreement”. Infosys, on its part, termed it a "standard business practice", which is not new and is crucial to protect the confidentiality of business interests. It also added these conditions are explained to employees before they decide to join the company.

Terming the clause as "unethical and illegal", NITES had filed a complaint against the management of Infosys for invoking the “non-compete agreement clause”, whereby it was said that the Infosys employees terminated from employment for any reason are restricted to joining a few ‘named competitors’ and customers with whom (s)he worked in a professional capacity in the past 12 months before the termination. The ‘named competitors’ included TCS, Accenture, IBM, Cognizant Tech, and Wipro.

NITES had also said the restraint being put on employees is "unduly harsh and oppressive". It sought necessary orders to be issued against Infosys for removing such an "illegal, unethical and arbitrary" clause from the employment letter. It said the restrictions in the employment letter are "clearly in restraint of trade and therefore illegal under section 27 of the Contract Act".