Restriction in the Service contract against taking employment with the competitiors raises no Competition issue

A clause in service contract restricting an employee from taking employment with the competitors, after he leaves the employment, for a particular period, raises no competition issue.

A clause in service contract restricting an employee from taking employment with the competitors, after he leaves the employment, for a particular period, raises no competition issue. Whether an employment agreement containing non-compete clause falls under the ambit of Competition Act, 2002 whereby any restrain in taking up employment with any of the competitor of previous employee would be deemed as abuse of dominance? Informant, an American citizen, was working as an expatriate with Pangea3 (P), an Indian Legal Process Outsourcing industry, owned and controlled by Thomson Reuters. In Management’s reply to resignation notice of the Informant, it was stated that the informant as per the employment contract and the non-compete clause contained therein cannot join any of its competitor firm for such period as mentioned from the date of termination of agreement. The informant moved a complaint alleging violation of the provisions of Competition Act claiming ‘P’ as a dominant player in the market of high quality outsourced legal solutions, providing outsourced legal solutions to most reputed companies and law firms. Accordingly ‘P’ was accused of abusing its position of dominance. It was held by the Commission that an employment contract has nothing to do with the market of providing outsourced legal solutions. The contract of providing service by an ‘expert’ to an employer is a contract of an individual with an enterprise or a firm and there is no relevant service market involved in this. Accordingly, there arises no issue of dominance in the relevant market. It would arise only where there is a service provider providing service to one and all who pays for the service. A person who seeks employment with an enterprise aims to get the best salary for the services to be provided by him. Once he enters into contract of employment with the enterprise, he is not a service provider to one and all, nor can his service be purchased by other competitors of the enterprise, so long as he is in employment of that enterprise. All consultants/experts negotiate the terms of employment in the very beginning. If an expert is unique kind of expert and is much sought after, he is able to dictate his terms at the time of employment and reverse is also possible where the kind of employee the company is seeking is easily available and there are lot many people seeking job, than the company is able to dictate its terms. In such contracts, no issue of competition arises. The employee who enters into such contract negotiates his salary/pay package accordingly and takes into calculations even the period for which he would not be able to provide his expertise to competitors. The matter was accordingly closed for there being no prima facie case involved for intervention of the Commission. Larry Lee Mccallister vs. M/s Pangea3 Legal Database Systems Pvt. Ltd. and Ors. [06.11.2013, CCI]