Negotiating Non-Compete Clauses

A case law every IT professional must read, understand and implement. Varun Tyagi, a skilled software engineer, worked on the POSHAN Tracker project, a high-priority initiative of the Government of India, through his employer, Daffodil Software Pvt. Ltd. Over time, thanks to his dedication and the company’s own training, he was promoted and made a lead developer on the project. After serving his full notice period and resigning properly, Varun received an offer to join Digital India Corporation (DIC), the very agency for which he was already contributing his work. This was a natural next step in his career. He accepted the offer and joined them. But what happened next is something many IT professionals never expect. Varun was dragged to court by his former employer. They claimed he had violated the non-compete clause in his employment agreement. According to the company, Varun couldn’t work with any of their clients or business associates, even after leaving the job, for the next three years. They claimed he could misuse confidential information, even though all intellectual property rights of the project belonged to DIC, not the company. The trial court sided with the employer and passed an order restraining Varun from working with DIC. Imagine leaving your job legally, only to be told by a court that you can’t join your new employer. Varun didn’t give up. He challenged the order before the Delhi High Court, and justice prevailed. On June 25, 2025, the Delhi High Court ruled in Varun’s favour and quashed the injunction. The court made it clear: 1. Any clause that restricts an employee from working elsewhere after resignation is void under Section 27 of the Indian Contract Act, 1872. 2. Companies cannot impose post-employment restrictions on someone’s right to earn a living. 3. Confidentiality concerns cannot be misused to block fair career progression. 4. Non-compete clauses that extend beyond the term of employment have no place under Indian law. Have you ever read the non-compete clause in your employment agreement? Chances are, it’s already there. In fact, almost all IT companies include such clauses in standard offer letters, and most employees, especially freshers and juniors, sign without knowing the legal consequences. This is where exploitation begins. Companies bank on your silence, your fear of legal trouble, and your unawareness. But the law is clear. Your right to earn, to switch jobs, and to grow cannot be curtailed just because you once worked with a client. Employees should read, question, and understand your employment terms. And more importantly, should know that the law is on your side. Your career is yours, not your former employer’s property. #ITEmployees #LabourLaw #NonCompeteClause #EmployeeRights #EmploymentLaw #DelhiHighCourt #RightToWork #KnowYourRights

Noncompetes are now unenforceable! Well, that’s not quite true, despite the headlines. This is what is true, and is something I’m following as a lawyer who drafts/negotiates #noncompete provisions along with litigating them (I have 2 upcoming trials primarily focused on the enforceability of such clauses): On April 23, the Federal Trade Commission (#FTC) issued a final rule to ban many, but not all, #noncompetes across the United States. The rule isn’t effective until 120 days after publication in the Federal Register. So, don’t go to your boss’ office today, stick up your middle finger, and tell him or her to shove the noncompete where the sun doesn’t shine. Furthermore, there is an exception. Existing noncompetes for senior executives can remain in force under the FTC’s final rule, but employers are banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Additionally, there is a possibility that the rule never becomes effective. The expectation is that litigation will soon commence over whether the ban is proper, with a request that the FTC’s rule be stayed in the meantime. Importantly, whether or not the rule withstands challenge, there are mechanisms employers can use to protect their proprietary information, which they should be examining irrespective of the outcome. As the FTC has noted, secret laws and non-disclosure agreements (NDAs) both provide employers with well-established means to protect proprietary and other sensitive information. Some say NDAs aren’t worth the paper they’re printed on; I’m currently in the middle of a multi-million dollar case involving the breach of one, so we shall see! If you have any questions about the above, then feel free to contact me! https://lnkd.in/eihUvXP8

The Federal Trade Commission voted 3-2 to ban corporate non-compete clauses. How is this not MUCH BIGGER news in business circles? There are some details/implications worth discussing: First...let's take a binary look at the two main camps: 👩🍳 Labor advocates are clearly happy about this. Robert Reich said, "Non-competes trap workers in their jobs and prevent them from using their skills to earn higher pay. It's estimated that the ban could increase wages by $300 billion a year and impact nearly 30 million Americans." 🏦 On the flip side, business groups are already suing to stop the ban, claiming that the FTC does not even have the authority to prohibit companies from requiring non-competes. Some details: The rule states that, 120 days after the FTC publishes this ruling in the Federal Register, there will be NO NEW non-competes. Existing non-competes for "senior executives," can remain in place. A senior exec in this context is defined by their salary (+$151,164/year)...AND...the vague descriptor of being involved in a "policy-making position." According to the FTC, this will apply to "fewer than 1%" of workers. If you're not a Sr. Exec...your non-compete is kiboshed on the effective date. In looking at the image below...it's clear the FTC believes this is going to have a huge impact. In the rule summary, it also says: Reduced health care costs:  "$74-194 billion in reduced spending on physician services over the next decade." New business formation:  "2.7% increase in the rate of new firm formation, resulting in an additional 8,500 new businesses created each year." Rise in innovation:  "An average of 17,000-29,000 more patents each year," representing an est. increase of 11-19% annually over the next decade. Higher worker earnings: "$400-$488 billion in increased wages for workers over the next decade." Something tells me this news will ramp as the various implications and nuances start to percolate...which of course will be followed by full-throated debate. So...is this a win for labor...and does that mean that it's a loss for business? Is it possible the W applies universally here? Are there meaningful negatives that the FTC is not acknowledging? 🤷♂️ LINK: https://lnkd.in/gTqzc4Da

Recently, the Delhi High Court delivered a landmark ruling: employees cannot be forced to either return to a former employer or remain idle. In the case Varun Tyagi v. Daffodil Software, Justice Tejas Karia struck down non‑compete clauses that restricted post‑employment choices, declaring them void under Section 27 of the Indian Contract Act. If a contract unfairly limits your ability to work elsewhere after leaving a job, it likely won’t hold up in court. Importantly, the Court emphasised that the freedom to take up better employment is a fundamental right, even if you handled confidential info earlier. A huge win for employee mobility and contractual fairness. Employers, take note: restructuring clauses that curb post-employment movement is the way forward. #employment #delhihc #contracts

Your skills are yours. The paperwork says otherwise. Don't lose your IT side hustles to hidden IP clauses. It started after work. A few late nights. A few side projects. Nothing major. Just building. Maybe it’s a tool. Maybe it’s a service. Maybe it’s finally your own thing. That’s how it begins for a lot of people in IT. You start realizing you’re not just skilled, you’re valuable. Not to the logo you work under. But as you. And then the idea hits: What if I took this full-time? But before you sprint out the door... slow down. Because there’s one thing most new founders forget to check: The employment contract they signed on Day 1. That same contract might: • Claim ownership over side projects you build nights/weekends • Lock you into a 90-day notice period, delaying your launch • Try to enforce non-compete clauses (even if they’re often unenforceable in India post-employment) So it's important that you review it. And there's a few points that I suggest that you look at: 1) Intellectual Property (IP) Clauses Does your contract claim ownership of anything you create? Even projects built outside work hours? Are you barred from using company knowledge? Example: If you’re a fintech developer, does your contract restrict you from building payment tools? 2) Notice Periods 30-90-day notice? Negotiate a shorter period or use accrued leave to exit faster. Penalties for early exit? Some contracts deduct salary if you leave before the notice ends. 3) Non-Compete Clauses Post-employment restrictions are often unenforceable (Section 27, Indian Contract Act). But clauses active during employment are valid. Don’t launch a competing business while employed. 4) Confidentiality Terms Are you barred from using industry knowledge? Even general skills learned on the job? Does your side project accidentally rely on company IP? Example: Code snippets, client lists, or proprietary processes. I also recommend these steps. a) Document everything - Try building side projects on personal devices, outside work hours. b) Negotiate upfront. - Before you sign an employment contract, negotiate and exclude personal projects from IP clauses. c) Exit properly - Always use notice periods to finalize your product, onboard clients, or secure funding. Your skills belong to you. But the paperwork might say otherwise. So before you build your company, read the contract that pays your salary. You have to plan your exit. You have to know the rules. And only then do you break free. --- ✍ Question: Have you ever spotted a hidden clause that could’ve killed your side project?

🚀 Breaking Boundaries: Why the Tech Industry Must Embrace the FTC’s Move to Ban Non-Competes 🚀 Big news from the tech frontier! The U.S. Federal Trade Commission (FTC) has made a bold move to ban non-compete agreements, an action set to redefine the dynamics of our industry. This decision, championed by FTC Chair Lina Khan, couldn't be more timely. 🔗 Why This Matters: Non-compete agreements have long stifled innovation and mobility within the tech sector. By unnecessarily chaining talented professionals to single companies, we've dampened the spirited competition and rapid innovation synonymous with our industry. 💡 The Potential Impact? The FTC projects that removing these restraints could boost worker earnings by up to $488 billion over the next decade and catalyze the creation of over 8,500 new businesses annually. Imagine the fresh ideas and bold ventures that await when thinkers and builders are free to explore! 👥 Diverse Voices: While the decision has seen pushback from several quarters citing concerns over trade secrets, it’s crucial to remember that protecting intellectual property doesn't necessitate restricting career mobility. Effective nondisclosure and confidentiality agreements can serve this purpose, with less detriment to worker independence and without stifling competition. 🚀 Looking Forward: As tech professionals, we thrive on innovation, agility, and continuous learning. The FTC’s decision is not just a win for individual tech workers, but for the industry as a whole. It encourages a freer exchange of ideas, more start-ups, and a healthier competitive environment that can lead to more significant advancements and more robust growth. 📈 A Call to Action: Let's advocate for policies that support vibrant competition and innovation. Share your thoughts on how we can further enhance freedom and creativity in the tech industry, transforming challenges into opportunities for growth! #TechIndustry #Innovation #NonCompete #FTCRuling #CareerMobility #FutureOfWork https://lnkd.in/gYN-ta4t 

𝗛𝗼𝘄 𝗮 𝗡𝗼𝗻-𝗖𝗼𝗺𝗽𝗲𝘁𝗲 𝗖𝗹𝗮𝘂𝘀𝗲 𝗖𝗮𝗻 𝗖𝗼𝘀𝘁 𝗬𝗼𝘂 𝗛𝗮𝗹𝗳 𝗮 𝗠𝗶𝗹𝗹𝗶𝗼𝗻 𝗗𝗼𝗹𝗹𝗮𝗿 𝗪𝗜𝗣𝗣𝗥𝗢 𝘃𝘀. 𝗖𝗢𝗚𝗡𝗜𝗭𝗔𝗡𝗧 𝗧𝘂𝘀𝘀𝗹𝗲 In the world of corporate drama, the IT sector rarely disappoints. This time, there was a tug-of-war between Wipro and Cognizant—over a non-compete clause. ➤ 𝗧𝗵𝗲 𝗖𝗮𝘀𝗲: ↳ After a 20-year-long career at Wipro, Jatin Dalal moved to Cognizant (Wipro’s IT rival) as their CFO in September 2023. However, this transition wasn’t smooth. ↳ Wipro filed a lawsuit against Dalal for breaching the non-compete clause in his employment contract. ↳ Wipro sought ₹25 crore in damages. ➤ 𝗧𝗵𝗲 𝗦𝗲𝘁𝘁𝗹𝗲𝗺𝗲𝗻𝘁 The Dispute went into arbitration Cognizant announced they would support their new CFO, covering legal fees and paying half a million dollars in settlement. It’s worth noting that this isn’t the first time Wipro has dealt with such issues. Only months before, they had settled another lawsuit with a former executive. This pattern suggests a tightening of Wipro’s contractual enforcement, especially under the leadership of their new CEO, Srinivas Pallia. ➤ 𝗘𝗻𝗳𝗼𝗿𝗰𝗲𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗼𝗳 𝗡𝗼𝗻-𝗖𝗼𝗺𝗽𝗲𝘁𝗲 𝗖𝗹𝗮𝘂𝘀𝗲𝘀 𝗶𝗻 𝗜𝗻𝗱𝗶𝗮: 𝙎𝙚𝙘𝙩𝙞𝙤𝙣 𝟮𝟳 𝙤𝙛 𝙩𝙝𝙚 𝙄𝙣𝙙𝙞𝙖𝙣 𝘾𝙤𝙣𝙩𝙧𝙖𝙘𝙩 𝘼𝙘𝙩, states that agreements restraining anyone from lawful profession, trade, or business are void. This makes non-compete clauses unenforceable post-employment. ➤ 𝗝𝘂𝗱𝗶𝗰𝗶𝗮𝗹 𝘃𝗶𝗲𝘄 In 𝘚𝘶𝘱𝘦𝘳𝘪𝘯𝘵𝘦𝘯𝘥𝘦𝘯𝘤𝘦 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘰𝘧 𝘐𝘯𝘥𝘪𝘢 𝘗𝘳𝘪𝘷𝘢𝘵𝘦 𝘓𝘪𝘮𝘪𝘵𝘦𝘥 𝘷. 𝘒𝘳𝘪𝘴𝘩𝘢𝘯 𝘔𝘶𝘳𝘨𝘢𝘪 (1979), an employee was restricted from working with competitors in Delhi for two years post-employment. The Supreme Court held such a restraint as void and unenforceable. In Dalal’s case, Wipro argued that his new role at Cognizant, a direct competitor, would inevitably involve using sensitive information acquired during his tenure at Wipro. Dalal’s legal team pushed for arbitration, and the parties settled recently. 𝗪𝗵𝗮𝘁 𝗱𝗼𝗲𝘀 𝘁𝗵𝗶𝘀 𝘁𝗲𝗹𝗹 𝘂𝘀 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗲 𝗜𝗧 𝗶𝗻𝗱𝘂𝘀𝘁𝗿𝘆 𝗮𝗻𝗱 𝗰𝗼𝗿𝗽𝗼𝗿𝗮𝘁𝗲 𝗹𝗲𝗴𝗮𝗹 𝗯𝗮𝘁𝘁𝗹𝗲𝘀? ⚫      𝗡𝗼𝗻-𝗰𝗼𝗺𝗽𝗲𝘁𝗲 𝗰𝗹𝗮𝘂𝘀𝗲𝘀 𝗮𝗿𝗲 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗹𝗲𝗴𝗮𝗹 𝗳𝗼𝗿𝗺𝗮𝗹𝗶𝘁𝗶𝗲𝘀; they are fiercely defended, especially at senior levels where sensitive information is at stake. ⚫     𝗧𝗵𝗲 𝘀𝗲𝘁𝘁𝗹𝗲𝗺𝗲𝗻𝘁 𝗮𝗺𝗼𝘂𝗻𝘁—₹𝟰 𝗰𝗿𝗼𝗿𝗲—is a significant sum but is only a fraction of what Wipro initially demanded. This disparity indicates that settlements often reflect practical considerations over theoretical claims. It’s a reminder that such issues are as much about negotiation as it is about law. Next time you switch jobs, double-check that non-compete clause—𝘺𝘰𝘶 𝘸𝘰𝘶𝘭𝘥𝘯’𝘵 𝘸𝘢𝘯𝘵 𝘵𝘰 𝘧𝘪𝘯𝘥 𝘺𝘰𝘶𝘳𝘴𝘦𝘭𝘧 𝘪𝘯 𝘢 𝘳𝘦𝘢𝘭-𝘭𝘪𝘧𝘦 𝘤𝘰𝘶𝘳𝘵𝘳𝘰𝘰𝘮 𝘥𝘳𝘢𝘮𝘢!

Big news on noncompetes—from two very different directions. First, the NLRB just quietly backed off its aggressive stance that most noncompetes violate federal labor law. The agency's Acting General Counsel rescinded 2023's memo that took that position, signaling a retreat from treating noncompetes as an unfair labor practice. Meanwhile, Ohio lawmakers are headed in the opposite direction. Last month, they introduced SB 11, a bipartisan bill that would ban nearly all noncompetes in the state. If it passes, it'll be a game-changer, giving employees much more freedom to jump to competitors. The contrast is pretty stark. While the NLRB is easing up, state legislatures are doubling down on efforts to kill noncompetes. And it's not just Ohio—at least a dozen states, both red and blue, have already taken action to limit or ban them. What does this mean for employers? Don't assume noncompetes are going to stick around. Even if the NLRB is slowing its roll, the bigger trend is clear: these agreements are on the chopping block. Now's the time to rethink your approach to restrictive covenants. Here's my suggestion: 📃 If you're worried about protecting confidential information, a non-disclosure agreement (NDA) might be all you need. 📃 If you don't want employees poaching your customers, employees, or vendors, a non-solicit (plus an NDA) should do the trick. 📃 If an employee's role is so unique that their departure to a competitor would cause real damage, then—and only then—should you consider a noncompete (plus an NDA and non-solicit). The key is common sense. Don't overuse noncompetes just because you can. Tailor your agreements to what you actually need to protect. Otherwise, you're just throwing money away trying to enforce a contract that might not hold up in court. And while that's great for lawyers like me, it's terrible for your business.

This is a terrible misconception, and if you’re going to be a serious business person, you need to get this straight. Non-competes are absolutely enforceable in many situations. You just have to understand the difference between employment non-competes and business sale non-competes—and how different states treat them. Let’s break it down. Employment Non-Competes… These are the ones people are usually talking about when they say non-competes aren’t enforceable. And in some states, that’s true. California? Completely banned. California law makes employment non-competes unenforceable under Business and Professions Code Section 16600. If you’re working in California, your employer can’t stop you from taking another job or starting a competing business. No carve-outs, no exceptions (unless you’re selling a business—more on that later). Florida? Totally different story. Florida loves enforcing non-competes—if they’re reasonable. Under Florida law, an employment non-compete has to protect a “legitimate business interest” and be limited in time and geography. Courts usually consider up to two years reasonable, and they’ll strike down anything overly broad. But overall, Florida is very pro-enforcement. Business Sale Non-Competes… Now, this is where people really get it wrong. If you sell a business, the buyer doesn’t want you opening up across the street the next day and taking all your old customers with you. That’s why these non-competes are almost always enforceable. Florida enforces them aggressively. If you sell a business, the law allows you to agree not to compete for a reasonable time and in a reasonable geographic area. Courts routinely uphold these agreements. California, despite its usual anti-non-compete stance, allows them too. Under Business and Professions Code Sections 16601 and 16602, if you sell a business and its goodwill, you can be restricted from competing in that business. California courts recognize that buyers need protection, and they’ll enforce these non-competes when they’re tied to a legitimate sale. The Federal Angle… The FTC recently tried to ban most non-competes nationwide. But in August 2024, a federal judge blocked it. The fight isn’t over, but for now, non-competes are still governed by state law. However, even the FTC didn’t try to eliminate business sale noncompetes. They’re too essential. Bottom Line… If you’re hiring employees, know your state’s rules. If you’re selling a business, expect to be bound by a non-compete. Anyone saying “non-competes aren’t enforceable” is just wrong. They’re enforceable all the time—you just have to know when and where.

𝗜𝗻 𝘁𝗵𝗲 𝗡𝗲𝘁𝗵𝗲𝗿𝗹𝗮𝗻𝗱𝘀, 𝗮 𝗟𝗶𝗻𝗸𝗲𝗱𝗜𝗻 “𝗰𝗼𝗻𝗴𝗿𝗮𝘁𝘂𝗹𝗮𝘁𝗶𝗼𝗻𝘀” 𝗰𝗼𝘀𝘁 𝗮𝗻 𝗲𝘅-𝗲𝗺𝗽𝗹𝗼𝘆𝗲𝗲 €𝟮,𝟬𝟬𝟬. 𝙃𝙚𝙧𝙚’𝙨 𝙬𝙝𝙖𝙩 𝙝𝙖𝙥𝙥𝙚𝙣𝙚𝙙  - The employer: a Dutch security systems company. - The employee: account manager since 2007, who resigned in 2023 to join another company. - At the exit: the parties negotiated a strict relationship clause (replacing a non-compete) for 12 months, no contact of any kind with the listed relations. 𝙏𝙝𝙚𝙣 𝙘𝙖𝙢𝙚 𝙩𝙝𝙚 𝙩𝙧𝙤𝙪𝙗𝙡𝙚: 1) A private alarm installation from a prior contact 2) Short LinkedIn congrats messages to contacts at the municipality of Haarlem and a construction company, both companies on the employer’s protected list. ⚖️ The Dutch subdistrict court (Rechtbank Noord-Holland, Zaanstad) ruled: - The wording was strict and unambiguous. - Even a LinkedIn “congrats” = contact, and therefore a breach. - Technically: a €20,000 penalty is due. But because the LinkedIn messages were of “very limited scope and nature”, and no damage was proven, the court reduced the penalty. 𝙁𝙞𝙣𝙖𝙡 𝙤𝙪𝙩𝙘𝙤𝙢𝙚: €2,000 penalty still payable by the ex-employee! (Rechtbank Noord-Holland, ECLI:NL:RBNHO:2025:4212) 𝙒𝙝𝙖𝙩'𝙨 𝙩𝙝𝙚 𝙩𝙖𝙠𝙚 𝙖𝙬𝙖𝙮? 𝙀𝙢𝙥𝙡𝙤𝙮𝙚𝙧𝙨 𝙤𝙛𝙩𝙚𝙣 𝙩𝙝𝙞𝙣𝙠 (especially international employers with Dutch employees!): “Even if we include this clause, we can’t really prevent someone from contacting others.” 𝙀𝙢𝙥𝙡𝙤𝙮𝙚𝙚𝙨 𝙤𝙛𝙩𝙚𝙣 𝙩𝙝𝙞𝙣𝙠: “This is ridiculous! A harmless message can’t possibly count!” The reality? It depends on the circumstances (yes, a very lawyerly thing to say, but true!) @Employers: wording and negotiation at exit can make all the difference. @Employees: don’t assume “nothing will happen”, because sometimes, it really does. 𝙒𝙝𝙖𝙩 𝙙𝙤 𝙮𝙤𝙪 𝙩𝙝𝙞𝙣𝙠, 𝙞𝙨 𝙩𝙝𝙞𝙨 𝙧𝙚𝙖𝙡𝙡𝙮 𝙩𝙝𝙚 𝙠𝙞𝙣𝙙 𝙤𝙛 𝙚𝙣𝙛𝙤𝙧𝙘𝙚𝙢𝙚𝙣𝙩 𝙮𝙤𝙪 𝙬𝙖𝙣𝙩, 𝙖𝙣𝙙 𝙬𝙝𝙚𝙧𝙚 𝙨𝙝𝙤𝙪𝙡𝙙 𝙩𝙝𝙚 𝙡𝙞𝙣𝙚 𝙗𝙚 𝙙𝙧𝙖𝙬𝙣? #DutchLaw #EmploymentLaw #RelationshipClause #HR