Companies might not always strictly enforce non-compete agreements for rank-and-file employees, but things get serious when C-suite executives are involved.
Wipro has demanded damages of Rs. 25.15 crore along with an annual interest payout at a rate of 18% from its CFO Jatin Dalal for breaching his non-compete agreement. Dalal had worked with Wipro for 21 years, and resigned in September this year, with 30th November serving as his last working day. He had gone on to join Wipro’s rival Cognizant the very next day on 1st December. Wipro says that his action was illegal, given how one of the clauses in his non-compete agreement barred Dalal from joining any other rival company for 12 months from the date of his resignation.
“As per the Agreements, the Defendant is liable to recompense the Plaintiff the total number of RSU granted multiplied by the share price prevailing on the date of the award OR the calculated sum equivalent to the gross remuneration earned by the Defendant during the last 12 (twelve) months of service (as applicable),” Wipro’s complaint said. “However, without prejudice and in good faith the Plaintiff has restricted its claim, which is calculated as INR 25,15,52,875/- (Rupees Twenty Five Crores Fifteen Lakhs Fifty Two Thousand Eight Hundred and Seventy-five) along with interest calculated at 18% (eighteen per cent) per annum until the date of payment.”
At his new job with Cognizant, Dalal has an annual salary of $5.2 million (Rs. 43 crore), and a Rs. 2.4 crore sign on bonus. This was a significant jump from Dalal’s salary at Wipro — in FY22, he’d made Rs. 12.07 crore at Wipro, which had fallen to Rs. 8.92 crore in FY23.
Jatin Dalal isn’t the only high-profile executive that Wipro has taken to court for joining a competitor. Wipro had earlier filed a complaint against a senior executive Mohd Haque, who’d also joined Cognizant. Haque had quit Wipro in June after a 13-year stint at the firm. Wipro had also levelled serious charges against Haque, alleging that he was in possession of its confidential information, having uploaded and emailed “seven files” from his personal Gmail account on 20th June 2023, right before he’d quit the company.
Non-compete agreements are a legal grey area in India. While many companies include non-compete agreements in their contracts, they’re not always enforced, and courts have given judgements based on the merits of specific cases. But with companies now going after former employees with large monetary demands for breaching these contracts, executives everywhere might be made to think twice before jumping ship to a rival.