Question

5. What factors support/oppose the anti-compete clause?

Answer 1

Anti compete clause is generally used in the employment and franchisee agreements, where the employer or company includes an anti compete clause in the contract to protect their interest in the case when an employee or franchisee uses the acquired knowledge and begins a competitive business to gain from competitive advantage.

Supporting facts:

This is required because the confidential information is the property of the organization and any person working in the organization because of the nature of his duty gets access to such information. Such information must not be used to gain a competitive advantage. Let us consider a case where an employee working on an R&D function of a company developing a vaccine of COVID-19 and the employee is a critical team member of the project and he decides to resign from the current company and joins another competitor vaccines manufacturers. In such a case since the employee had access to all the critical information of the project, in the absence of anti compete clause employee is free to such the knowledge acquired in the previous organization in his new organization.

That is when under such scenario anti compete clause prevents the employee to join another company who is a direct or indirect competition to the previous organization. In many countries, this duration of anti compete clause effectiveness is almost a year and the company may pay compensation to follow the anti compete clause.

Opposing fact:

Such clause also prevents the person who is ethical and has got no intention to share the information acquired in previous organizations for any such purpose which can affect the previous organization also need to follow the period defined in the clause. Since this clause is uniformly applicable this is the biggest drawback or opposing fact to the anti compete clause.