2023 was a notable event in the business world with the unexpected firing of ChatGPT CEO Sam Altman, but the year ended on a positive note with the formation of a new ChatGPT board and the return of leadership. . Parallel development by executives appears to have begun in India, steadily gaining momentum with each passing quarter. However, the root of this enthusiasm is not one large-scale dismissal, but a series of resignations and the people affected by them, which are the subject of debate. Nevertheless, India's IT sector is bearing the brunt of the impact.
India's IT industry is currently grappling with legal complexities, with companies issuing legal notices to competitors and filing lawsuits against former employees who have joined rival companies. Job changes are common in the IT industry, but major companies in the industry are reluctant to accommodate such moves. The issue has come back to the fore after Cognizant CEO Ravi Kumar S. said in an interview with a media company in Davos that employees prefer his company.
The statement comes in the backdrop of a legal battle between tech giant Wipro and its former chief financial officer Jatin Dalal, who recently joined rival Cognizant. Earlier, the organization, founded by Azim Premji, had filed a lawsuit against former Wipro senior vice president Mohammed Haq for joining Cognizant.
While many remain perplexed about Wipro's legal action against Dalal, it has reportedly been found that the tech giant was following a contract that included a non-compete clause. According to this article, if an employee of the company resigns and retires, he or she will not be able to join a direct rival company for at least one year after leaving the company.
What is a non-compete clause?
A non-compete clause is a contractual clause that prohibits an employee from working for a rival employer, starting a similar business, or disclosing confidential information.
The issue was recently raised by Saurabh Govil, Wipro's chief human resources officer, during the company's earnings press conference after the company's Q3 FY24 results. He said: “We fully support individuals in pursuing their career goals. We also recognize and respect their freedom to choose their career path. However, it is important to consider contractual obligations and Legal review is being carried out in such cases.”
In a similar vein, Thierry Delaporte, Chief Executive Officer and Managing Director of Wipro, said, “Over the past few years, we have invested heavily in our leadership and our team is now very strong. “We have also developed a strong pipeline of talented people.” These are people who have important qualities that make them suitable for higher roles. ”
Delaporte further emphasized that the company is ready for individuals who choose to retire. The Wipro chief did not specifically mention the former employee's departure, nor did he discuss the legal dispute.
Although there was no direct disclosure, he hinted that any exit would not destabilize Wipro, saying, “We have a pipeline of talent.” He further added, “Aparna Iyer is our new CFO and is doing an excellent job. This is a strength of our pipeline of talent that we have built over many years.”
Iyer was made CFO of Wipro following Dalal's departure from the company. He took up the role in September 2023.
While this is Wipro's leadership position, Cognizant CEO Kumar S. (reportedly) said at Davos that the company is always looking to strengthen its “employees,” making them an integral part of management. It is our effort to make them a member.
“It's highly unlikely that you'll come across incompetence clauses across companies,” Neelabh Shukla, chief operating officer at Careernet, told BW Businessworld. But when such clauses do exist, it's likely for two main reasons. First, when a company genuinely believes that the departing individual could cause harm to its business. Second, companies may enforce the clause to protect confidentiality.
“However, at the junior level, having early and mid-career employees sign such agreements is not widely practiced,” Shukla added.
Dr. Hemant Tiwari of Hitachi Vantara India said companies are enforcing non-competition regulations as a means of protecting data. “But I believe in the government's efforts to ensure digital security through laws like the Data Protection Act.”
Amid the high-profile legal dispute between Wipro and Cognizant, it is noteworthy that Cognizant's “IT poaching” has been going on since 2022. The company has hired some notable leaders from Infosys in recent years. Interestingly, Cognizant's current CEO mentioned above is Ravi Kumar S was previously a senior employee at Infosys and retired from the company in 2022.
According to recent reports, Infosys is also taking legal action against the American IT multinational over concerns over its dubious poaching practices. The Bangalore-based company immediately issued a legal notice after Cognizant allegedly hired more than 20 senior Infosys employees, including four top executives.