CLR Editorial Note: A case was filed with the Competition Commision of India by an ex-employee working with an organization providing Legal Outsourcing Services. According to the terms of the employment contract with the organization, a clause barred him from accepting employment with a competitor for a year after the resignation. This was challenged by the ex-employee, Larry Lee Mccallister, who alleged that the non-compete clause in his employment contract was actually anti-competitive and hence should be looked into by the CCI.
The CCI examined the case and held:
“The contract of providing service by an ˜expert™ to an employer is a contract of an individual with an enterprise or a firm. No relevant service market is involved in this. The issue of dominance in the relevant market thus would not arise. The issue of relevant service market arises only where there is a service provider who provides service to one and all who pay for the service.
A person who seeks employment with an enterprise tends to seek maximum salary in lieu of his service to be provided to the enterprise. 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 who seek employment 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. 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. 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 case raised no competition issues.”
The full case document is available for download. CCI Case – Pangea3 Vs Larry Lee Mccallister