Following are the clauses to be included in the offer letter.
- Confidentiality Clause / Non – Disclosure Obligations
A well drafted contract of employment should include a confidentiality clause that gives protection to company’s sensitive information such as trade secrets and client data and obligates the employee to keep such information confidential from the public. This particular clause restricts the employee from disclosing confidential information to any third person without the permission of the employer. A separate agreement commonly referred to as non- disclosure agreement can also be drafted and executed for this purpose as the confidentiality clause overlaps with clauses such as restrictive covenants, non- solicitation clauses etc. In the matter of Diljeet Titus versus Mr. Alfred A. Adebare and Others (2006 (32) PTC 609 (Del)), the High Court of Delhi rejected the contentions of the defendants and restrained them from using the information taken away illegally at the termination of the employment. The Court restrained the defendants from using that information as it was necessary to protect the interests of the plaintiff’s business.
In absence of a clearly written confidentiality clause in the contract of employment, the employer will have to count on the judiciary and the rules provided in common law. The most important issue that has to be taken into consideration while adjudicating a matter in relation to this is the whether the revealed information is a secret which is exclusively available to that particular organization or it is just a general information for the public domain.
- Restrictive Clause
This is one of the key clauses to be included in an employment contract. It is mainly designed to protect the legitimate interest of the business and simply not to avoid competition. This clause restricts an ex employee from using integral information such as business strategy, customer details etc. in relation to his prior employment. Restrictive covenants provide protection both to the business and the employer during the employee’s employment period and even after such period ends. This clause disallows an employee from competing with his ex employer for a certain period of time after he has disassociated himself from the business and stops him from misusing the invaluable information to the competitors those who are seeking to poach upon the market of the business he was associated with.
An employer must be mindful while drafting a restrictive covenant and certain factors such as the extent of geographical area, the time length for imposing such post employment restrictions, type of information that is being protected etc are to be considered in a much substantial way. The extent of restrictive covenants must be in respect to the position of the employee within the business. It is more likely and reasonable to put a restriction on the senior employees as they are more aware of the organization’s sensitive information.
- Non-Compete Covenants
Under a non –compete covenant or contract, it is agreed by an employee not to enter into or start a similar trade or profession in competition against his prior employee. In India, the Contract Act under Section 27 of the Act deals with the legality of non- compete clauses and says that every agreement by which any person is restrained from exercising a lawful profession, trade or business of any kind is void. Whenever a covenant in regard to restraint of trade or profession is call into question, the burden of proof lies on the person who is probing to uphold it and it is the duty of the Court to determine to what extent it establishes a restraint of trade. Non – compete covenants can be effective during the period of employment and can only be challenged on the ground of being onerous. After the termination of employment, restrictive covenants are considered to be void under Section 27 of the Indian Contract Act. Restraining a person from carrying on a trade generally aims at avoiding competition and has monopolistic tendency and this is both against an individual’s interest as well as the interest of the society and on that ground such restrains are discouraged by law. The right to freedom of profession, trade and business is confirmed by the Constitution of India under Article 19(1)(g), so any agreement which interfere this freedom is void.
- Non-Solicitation Covenants
This is often included in a non – compete agreement, non disclosure agreement but can be also be drafted as a separate agreement. Under this, an employee simply agrees not to solicit or give advice to the client of the organization after he leaves the organization. This particular covenant prevents an ex employee from dealing or soliciting the clients or customers of his former employee; regardless of which party has given the proposition. It also prevents the employee from soliciting his colleagues to quit the job for example trying to recruit them away from the organization.