open-agreements 0.7.5 → 0.7.7

package/skills/non-compete-contract-explainer/content/illinois.md

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+---
+jurisdiction: "Illinois"
+slug: illinois
+countryCode: US
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-03"
+canonicalUrl: https://openagreements.org/legal/non-compete/illinois
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/illinois · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in Illinois[^about]
+
+A question-by-question summary of Illinois non-compete law under the Illinois Freedom to Work Act (820 ILCS 90), including the $75,000/$45,000 earnings thresholds, the codified two-year consideration rule and the Midwest Lending express-delineation trap, the 14-day notice requirement, the Reliable Fire reasonableness test, the construction, broadcaster, nurse-agency, and mental-health carve-outs, judicial reformation limits, tolling-during-breach clauses, trade-secret alternatives, employee fee-shifting and Attorney General enforcement, and the 2026 Workplace Transparency Act limits on out-of-state choice-of-law and venue clauses.
+
+
+## At a glance
+
+| Question | Illinois |
+| --- | --- |
+| **Are non-competes enforceable?** | Allowed above a pay level |
+| **Bottom line** | Illinois enforces employee non-competes only above a $75,000 earnings floor and only if they clear the Freedom to Work Act's consideration and 14-day-notice gates and the Reliable Fire reasonableness test. |
+| **Main law or case** | Illinois Freedom to Work Act, 820 ILCS 90 (Reliable Fire Equipment Co. v. Arredondo) |
+| **Main exceptions** | Construction workers; broadcasters; temp-agency nurses; public-sector CBA; COVID-19 layoffs; certain mental-health professionals; sale of business excluded |
+| **When the ban took effect** | Jan 1, 2022 (Public Act 102-358) |
+| **Can a court narrow it?** | Yes — rewrites to reasonable |
+| **Applies to contractors?** | Unclear |
+| **Restriction extended during a breach?** | Not addressed by statute — open question |
+| **Maximum length set by law** | No statutory maximum (duration judged for reasonableness) |
+
+## Are employee non-compete agreements enforceable in Illinois? {#employee-noncompetes}
+
+**Short answer.** Yes, but only if the covenant clears the statutory gates of the Illinois Freedom to Work Act and then survives the common-law reasonableness test. A covenant not to compete or not to solicit is illegal and void unless the employee received adequate consideration, the restraint is ancillary to a valid employment relationship, it is no greater than necessary to protect a legitimate business interest, it imposes no undue hardship, and it is not injurious to the public [^ifwa-15-enforceability][^reliable-fire-3prong].
+
+Illinois is not a ban state, but it regulates employee non-competes and non-solicits through several statutory gates. Since amendments effective January 1, 2022 (Public Act 102-358), these covenants are governed first by the Illinois Freedom to Work Act, 820 ILCS 90, which layers statutory earnings thresholds, a codified consideration rule, a notice requirement, fee-shifting, and Attorney General enforcement on top of Illinois's long-standing common-law reasonableness analysis. The Act applies to covenants entered on or after its effective date.
+
+"A covenant not to compete or a covenant not to solicit is illegal and void unless (1) the employee receives adequate consideration, (2) the covenant is ancillary to a valid employment relationship, (3) the covenant is no greater than is required for the protection of a legitimate business interest of the employer, (4) the covenant does not impose undue hardship on the employee, and (5) the covenant is not injurious to the public."[^ifwa-15-enforceability]
+
+Clearing the statute is necessary but not sufficient: the covenant must also be reasonable under the three-prong rule of reason the Illinois Supreme Court restated in *Reliable Fire Equipment Co. v. Arredondo* [^reliable-fire-3prong]. So the practical question in Illinois is layered — does the worker earn enough to be bound, was the covenant supported and properly noticed, and is the restraint reasonable on the facts.
+
+This note reflects current enacted law as of the review date. Two bills introduced in the 104th General Assembly would change it — HB 3213 would prohibit covenants not to compete and not to solicit outright, and HB 1642 would raise the non-compete earnings threshold to $300,000 — but as of the review date both remained in committee and neither had been enacted, so they do not yet affect enforceability.
+
+## Who can be bound by a non-compete in Illinois? {#earnings-thresholds}
+
+**Short answer.** Only workers above the statutory earnings floors. A non-compete is void unless the employee's actual or expected annualized earnings exceed $75,000, and a non-solicit is void unless they exceed $45,000; both floors step up over time [^ifwa-10-noncompete-threshold][^ifwa-10-nonsolicit-threshold].
+
+The earnings thresholds are the first and most mechanical filter. They are hard floors: a covenant used below the threshold is void regardless of how reasonable its scope is.
+
+"No employer shall enter into a covenant not to compete with any employee unless the employee's actual or expected annualized rate of earnings exceeds $75,000 per year."[^ifwa-10-noncompete-threshold]
+
+The non-solicit threshold is lower but works the same way [^ifwa-10-nonsolicit-threshold]. Both thresholds escalate on a fixed schedule — the non-compete floor rises to $80,000 on January 1, 2027, then $85,000 in 2032 and $90,000 in 2037, with the non-solicit floor climbing to $47,500, $50,000, and $52,500 on the same dates. The Act also defines *earnings* broadly to include salary, bonuses, commissions, and elective W-2 deferrals such as 401(k) and HSA contributions, so the calculation is not limited to base salary.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not assume a covenant is enforceable just because the worker is salaried. Under 820 ILCS 90/10 a non-compete is void below $75,000 and a non-solicit below $45,000 in annualized earnings, and those floors rise in 2027, so confirm the worker clears the current threshold — counting bonuses, commissions, and elective deferrals — before relying on the covenant [^ifwa-10-noncompete-threshold][^ifwa-10-nonsolicit-threshold].
+
+## What counts as adequate consideration for an Illinois non-compete? {#adequate-consideration}
+
+**Short answer.** Either two years of continued employment after signing, or other professional or financial benefits adequate to support the restraint. Illinois codified the *Fifield* two-year rule, but a financial benefit relied on as consideration must be expressly tied to the covenant — a *Midwest Lending* trap [^ifwa-5-consideration][^fifield-2yr][^midwest-delineation].
+
+The IFWA defines adequate consideration in 820 ILCS 90/5, codifying a rule Illinois courts developed under the common law [^ifwa-5-consideration]. The two-year benchmark traces to *Fifield v. Premier Dealer Services, Inc.*, where the employee resigned about three months after starting and the court held the covenant unsupported.
+
+"Generally, Illinois courts have held that continued employment for two years or more constitutes adequate consideration."[^fifield-2yr]
+
+The statute offers an alternative to the two-year clock — a shorter period of employment plus additional professional or financial benefits, or such benefits standing alone — but the case law makes the drafting mechanics unforgiving. In *Midwest Lending Corp. v. Horton*, the employer pointed to a $25,000 signing bonus mentioned in an offer letter, but the restrictive-covenant document did not state that the bonus was given in exchange for the covenant, and the court refused to treat it as consideration.
+
+"Accordingly, we reject Midwest's argument that the ‘signing bonus’ in the offer letter provided adequate consideration for Horton's later agreement to the nonsolicitation provision."[^midwest-delineation]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> If you rely on a bonus, equity grant, or other benefit as consideration for an Illinois covenant, draft the exchange clearly and tie the benefit to the covenant. In *Midwest Lending Corp. v. Horton*, a signing bonus mentioned only in an offer letter did not support a later, integrated nonsolicitation agreement that never identified the bonus as consideration for the covenant — so do not assume a benefit described elsewhere will carry an integrated covenant [^midwest-delineation].
+
+## Must an Illinois employer give advance notice before a non-compete is signed? {#notice-requirement}
+
+**Short answer.** Yes. The covenant is void unless the employer advises the employee in writing to consult an attorney and either provides a copy of the covenant at least 14 calendar days before employment begins or otherwise gives the employee at least 14 calendar days to review it [^ifwa-20-notice].
+
+This is a procedural gate with teeth: failing either step makes the covenant void, no matter how reasonable its terms.
+
+"A covenant not to compete or a covenant not to solicit is illegal and void unless (1) the employer advises the employee in writing to consult with an attorney before entering into the covenant and (2) the employer provides the employee with a copy of the covenant at least 14 calendar days before the commencement of the employee's employment or the employer provides the employee with at least 14 calendar days to review the covenant."[^ifwa-20-notice]
+
+The statute gives two ways to satisfy the timing prong — a copy at least 14 days before the start date, or at least 14 days to review the covenant — but the written attorney-consultation advisement is mandatory either way. The employee may choose to sign early, but the employer must still extend the full 14-day window.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Build a 14-day review window and a written instruction to consult counsel into your Illinois onboarding workflow. Under 820 ILCS 90/20 a covenant is void if either step is missing, so give the employee the covenant with the written advisement and at least 14 calendar days to review it, and document both — an employee's early signature does not excuse offering the full period [^ifwa-20-notice].
+
+## How do Illinois courts judge whether a non-compete is reasonable? {#reasonableness}
+
+**Short answer.** By the totality of the circumstances, not a rigid formula. A legitimate business interest exists based on all the facts of the case, and the same restraint can be reasonable in one situation and unreasonable in another [^ifwa-7-lbi][^reliable-fire-totality].
+
+Even a covenant that clears the earnings, consideration, and notice gates must still be reasonable. The IFWA codifies the legitimate-business-interest inquiry as a totality test in 820 ILCS 90/7.
+
+"In determining the legitimate business interest of the employer, the totality of the facts and circumstances of the individual case shall be considered."[^ifwa-7-lbi]
+
+That codification tracks *Reliable Fire*, where the Illinois Supreme Court rejected rigid appellate tests for a protectable interest in favor of a fact-driven inquiry.
+
+"Rather, we adopt the position of Justice Hudson's special concurrence, which is: whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case."[^reliable-fire-totality]
+
+The statutory factors include the employee's exposure to customer relationships, the near-permanence of those relationships, access to confidential information, and the time, place, and scope of the restriction — but no factor is decisive, and reasonableness is gauged by all of the circumstances together.
+
+## Which Illinois workers are categorically off-limits for non-competes? {#industry-bans}
+
+**Short answer.** Several, though they differ in kind. Construction workers, broadcasters, and temporary agency nurses face flat bans; covenants against public-sector collective-bargaining-covered employees, COVID-19-related layoffs, and mental-health professionals treating veterans and first responders are voided or unenforceable on narrower, conditional terms [^ifwa-10-construction][^broadcast-ban][^nurse-ban].
+
+Beyond the earnings thresholds, the IFWA and related statutes carve out categories of workers regardless of reasonableness. Construction is a flat ban, subject to a role-based carve-out.
+
+"A covenant not to compete or a covenant not to solicit is void and illegal with respect to individuals employed in construction, regardless of whether an individual is covered by a collective bargaining agreement."[^ifwa-10-construction]
+
+That construction ban does not reach employees who primarily perform management, engineering, architectural, design, or sales functions, or who are owners [^ifwa-10-construction]. The IFWA adds three narrower, conditional limits. It voids *non-competes* (not non-solicits) against public-sector employees covered by a collective bargaining agreement under the Illinois Public Labor Relations Act or the Illinois Educational Labor Relations Act [^ifwa-10-cba]. It bars enforcement against employees laid off due to COVID-19 or similar circumstances unless the employer pays base salary, minus subsequent earnings, through the restricted period [^ifwa-10-covid]. And a 2025 amendment makes a covenant unenforceable as to a mental-health professional treating veterans and first responders where enforcement would likely increase the cost or difficulty of obtaining those services [^ifwa-10-mentalhealth].
+
+Two industry-specific statutes outside the IFWA add their own bans. The Broadcast Industry Free Market Act bars *post-employment* non-competes for broadcasters, though it still allows enforcement during the contract term or against an employee who breaches [^broadcast-ban], and the Nurse Agency Licensing Act voids non-competes against agency nurses and certified nurse aides placed on a temporary basis [^nurse-ban].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Check the worker's industry and role before relying on an Illinois covenant. Construction workers (outside the management/sales/owner carve-out), broadcasters, and temporary agency nurses face flat statutory voids that no reasonable drafting will cure, and covenants against public-sector union employees, COVID-era layoffs, and mental-health professionals serving veterans and first responders face their own conditional bars [^ifwa-10-construction][^ifwa-10-cba][^ifwa-10-covid][^ifwa-10-mentalhealth][^broadcast-ban][^nurse-ban].
+
+## Will an Illinois court rewrite an overbroad non-compete instead of voiding it? {#reformation}
+
+**Short answer.** Sometimes, but it is discretionary and far from guaranteed. The IFWA permits reformation yet warns that extensive judicial rewriting may be against public policy, and Illinois courts have refused to rescue patently overbroad covenants [^ifwa-35-reformation][^assured-overbroad].
+
+Illinois gives courts a discretionary, policy-limited blue-pencil power rather than a guarantee of reformation.
+
+"Extensive judicial reformation of a covenant not to compete or a covenant not to solicit may be against the public policy of this State and a court may refrain from wholly rewriting contracts."[^ifwa-35-reformation]
+
+Courts weigh factors such as the fairness of the restraints as originally written, whether the original draft was a good-faith effort to protect a legitimate interest, the extent of reformation required, and whether the agreement authorized modification. When a covenant is drafted far broader than necessary, Illinois courts have declined to fix it.
+
+"We decline to rescue a draftor from the risks of crafting a restrictive covenant that is patently overbroad."[^assured-overbroad]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not treat Illinois reformation as a safety net for an aggressive covenant. Section 35 lets a court reform or sever in its discretion but warns that extensive rewriting may violate public policy, and *AssuredPartners, Inc. v. Schmitt* refused to rescue a patently overbroad restraint — so draft to the narrowest defensible scope rather than relying on a judge to cut it down [^ifwa-35-reformation][^assured-overbroad].
+
+## Does a tolling or extension-during-breach clause extend an Illinois non-compete? {#tolling-during-breach}
+
+**Short answer.** Illinois law does not squarely answer this. No IFWA provision addresses a clause that pauses or extends the restricted period during breach or litigation, and an extension that pushes the effective restraint past a reasonable duration is exposed under the statute's reasonableness requirement and its limits on reformation [^q8-ifwa-15][^q8-ifwa-35].
+
+Many non-compete forms add a tolling or extension clause so the employer gets the full restricted period even if the former employee competes during it. The IFWA neither authorizes nor prohibits such clauses, and no Illinois decision under the Act has squarely ruled on one, so this is an open question that calls for caution rather than confidence.
+
+The statutory framework still constrains it. Duration is part of the reasonableness analysis, and a covenant is void unless it is no greater than required to protect a legitimate business interest [^q8-ifwa-15]. A tolling clause that adds the period of breach plus the time spent in litigation can stretch the effective restraint well beyond what the parties wrote, raising a duration-reasonableness problem. And because Illinois warns against extensive judicial reformation, an employer cannot assume a court will trim an open-ended extension back to a reasonable term rather than decline to enforce it [^q8-ifwa-35].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Treat an open-ended tolling-during-breach clause in an Illinois covenant as unsettled and risky. No IFWA provision or decision under the Act endorses one, duration bears on reasonableness under Section 15, and Section 35 cautions against extensive judicial rewriting — so a defined, reasonable fixed term is the safer choice than relying on a clause that extends the period during breach or litigation [^q8-ifwa-15][^q8-ifwa-35].
+
+## What protections can Illinois employers use when a non-compete is risky? {#trade-secret-alternative}
+
+**Short answer.** Confidentiality and trade-secret protections, which sit outside the IFWA. The Act excludes confidentiality, trade-secret, and invention agreements from its definitions, and the Illinois Trade Secrets Act says a duty of secrecy is not void merely for lacking time or geographic limits [^ifwa-5-exclusions][^itsa-8-secrecy].
+
+The IFWA's definitions deliberately leave several common protections untouched. A *covenant not to compete* does not include confidentiality agreements, trade-secret or invention-protection covenants, or sale-of-business covenants, so those tools are not subject to the Act's thresholds and notice rules [^ifwa-5-exclusions].
+
+The Illinois Trade Secrets Act backs up confidentiality drafting by confirming that a secrecy duty does not need the durational and geographic limits a non-compete requires.
+
+"This Act does not affect: (1) contractual remedies, whether or not based upon misappropriation of a trade secret, provided however, that a contractual or other duty to maintain secrecy or limit use of a trade secret shall not be deemed to be void or unenforceable solely for lack of durational or geographical limitation on the duty"[^itsa-8-secrecy]
+
+That makes well-drafted confidentiality and trade-secret protections a durable alternative where an Illinois non-compete is unavailable or risky — though they protect information, not the employer against ordinary competition.
+
+## What does an Illinois employer risk by overreaching on a non-compete? {#remedies-enforcement}
+
+**Short answer.** Paying the employee's legal fees and facing Attorney General penalties. In an employer-filed action or arbitration to enforce a covenant, a prevailing employee recovers costs and reasonable attorney's fees, and the Attorney General can pursue pattern-and-practice violations with civil penalties — and has done so [^ifwa-25-fees][^ifwa-30-ag][^valvoline].
+
+The IFWA shifts litigation economics toward employees. If an employer sues or arbitrates to enforce a covenant and the employee prevails, the employer pays the employee's side of that fight.
+
+"in a civil action or arbitration filed by an employer (including, but not limited to, a complaint or counterclaim), if an employee prevails on a claim to enforce a covenant not to compete or a covenant not to solicit, the employee shall recover from the employer all costs and all reasonable attorney's fees regarding such claim to enforce a covenant not to compete or a covenant not to solicit, and the court or arbitrator may award appropriate relief."[^ifwa-25-fees]
+
+The Act also adds a public-enforcement overlay. The Attorney General may investigate and sue for a pattern and practice of violations, with civil penalties.
+
+"the Attorney General may request and the court may impose a civil penalty not to exceed $5,000 for each violation or $10,000 for each repeat violation within a 5-year period."[^ifwa-30-ag]
+
+This is not a dormant power. In 2024, the Attorney General reached a multistate settlement with Valvoline over non-competes imposed on hourly oil-change workers.
+
+"Raoul and the attorneys general allege Valvoline required its hourly employees to sign non-competition agreements that prohibited them from working in the oil change business at any store within 100 miles of a Valvoline location for one year after leaving Valvoline."[^valvoline]
+
+## Can an out-of-state choice-of-law or venue clause bypass Illinois non-compete law? {#choice-of-law}
+
+**Short answer.** Only in a limited, but important, way. The Workplace Transparency Act, effective 2026, voids a unilateral employment clause that applies non-Illinois law or requires an out-of-state venue to the extent it diminishes an Illinois employee's rights related to an unlawful employment practice — but it is not a general rule that every non-compete choice-of-law clause is void [^wta-choice-of-law].
+
+Multi-state employers often designate Delaware or New York law and venue to escape Illinois's strict limits. Amendments to the Workplace Transparency Act effective January 1, 2026 (Public Act 104-320) constrain that move — but read the provision precisely. The void is tethered to claims, rights, or benefits *related to an unlawful employment practice*, not to non-compete enforcement at large.
+
+"(b) Any agreement, clause, covenant, or waiver that is a unilateral condition of employment or continued employment and requires the employee or prospective employee to waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit related to an unlawful employment practice to which the employee or prospective employee would otherwise be entitled under any provision of State or federal law, including that which purports to shorten the applicable statute of limitation, apply non-Illinois law to an Illinois employee's claim, or require a venue outside of Illinois to adjudicate an Illinois employee's claim, is against public policy, void to the extent it denies an employee or prospective employee a substantive or procedural right or remedy related to alleged unlawful employment practices, and severable from an otherwise valid and enforceable contract under this Act."[^wta-choice-of-law]
+
+The bar also applies only to *unilateral* conditions of employment; a mutual provision can survive if it is in writing, demonstrates actual, knowing, and bargained-for consideration, and preserves the listed employee rights. The practical takeaway is narrower than the headlines suggest: the WTA limits boilerplate forum-shifting where an Illinois employee's statutory employment claims are at stake, but a covenant-holder cannot assume it broadly defeats every out-of-state choice-of-law clause in a non-compete dispute. Where it does not apply, Illinois's ordinary conflict-of-laws and public-policy analysis governs.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not over-read the Workplace Transparency Act as a blanket bar on out-of-state choice-of-law and venue clauses. As of January 1, 2026, it voids a unilateral clause applying non-Illinois law or requiring an out-of-state venue to the extent it diminishes an Illinois employee's rights related to an unlawful employment practice, and a mutual, separately bargained clause can survive — so treat it as a meaningful but bounded check on forum-shifting, not a general non-compete choice-of-law rule [^wta-choice-of-law].
+
+## Are no-poach agreements between employers treated like employee non-competes? {#no-poach}
+
+**Short answer.** No. An agreement between competing employers not to hire each other's workers is analyzed under the Illinois Antitrust Act, not the IFWA, and the Illinois Supreme Court has held such agreements are not exempt from antitrust scrutiny [^elite-nopoach].
+
+It is easy to conflate two different things: a covenant an *employee* signs, and an agreement between *employers* not to poach one another's workers. The IFWA governs the former; the latter is a labor-market restraint reached by state antitrust law. In *State ex rel. Raoul v. Elite Staffing, Inc.*, the Illinois Supreme Court addressed staffing agencies that allegedly agreed to fix wages and not hire each other's employees.
+
+"We hold that the Illinois Antitrust Act does not exempt from antitrust scrutiny all agreements between competitors to hold down wages and to limit employment opportunities for their employees."[^elite-nopoach]
+
+So an inter-employer no-poach or wage-fixing arrangement can draw antitrust exposure independent of the IFWA's rules for employee covenants.
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-03. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not Illinois. This article synthesizes Illinois primary law and is not legal advice from a Illinois-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^ifwa-15-enforceability]: **820 ILCS 90/15** — "A covenant not to compete or a covenant not to solicit is illegal and void unless (1) the employee receives adequate consideration, (2) the covenant is ancillary to a valid employment relationship, (3) the covenant is no greater than is required for the protection of a legitimate business interest of the employer, (4) the covenant does not impose undue hardship on the employee, and (5) the covenant is not injurious to the public." *820 ILCS 90/15.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K15.htm>
+
+[^reliable-fire-3prong]: **Reliable Fire Equipment Co. v. Arredondo** — "A restrictive covenant, assuming it is ancillary to a valid employment relationship, is reasonable only if the covenant: (1) is no greater than is required for the protection of a legitimate business interest of the employer-promisee; (2) does not impose undue hardship on the employee-promisor, and (3) is not injurious to the public." *Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871.* <https://www.courtlistener.com/opinion/3135645/reliable-fire-equipment-co-v-arredondo/#:~:text=A%20restrictive%20covenant%2C%20assuming%20it,not%20injurious%20to%20the%20public.>
+
+[^ifwa-10-noncompete-threshold]: **820 ILCS 90/10** — "No employer shall enter into a covenant not to compete with any employee unless the employee's actual or expected annualized rate of earnings exceeds $75,000 per year." *820 ILCS 90/10(a).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K10.htm>
+
+[^ifwa-10-nonsolicit-threshold]: **820 ILCS 90/10** — "No employer shall enter into a covenant not to solicit with any employee unless the employee's actual or expected annualized rate of earnings exceeds $45,000 per year." *820 ILCS 90/10(b).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K10.htm>
+
+[^ifwa-5-consideration]: **820 ILCS 90/5** — "‘Adequate consideration’ means (1) the employee worked for the employer for at least 2 years after the employee signed an agreement containing a covenant not to compete or a covenant not to solicit or (2) the employer otherwise provided consideration adequate to support an agreement to not compete or to not solicit, which consideration can consist of a period of employment plus additional professional or financial benefits or merely professional or financial benefits adequate by themselves." *820 ILCS 90/5.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K5.htm>
+
+[^fifield-2yr]: **Fifield v. Premier Dealer Services, Inc.** — "Generally, Illinois courts have held that continued employment for two years or more constitutes adequate consideration." *Fifield v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327.* <https://www.courtlistener.com/opinion/3148347/fifield-v-premier-dealer-services-inc/#:~:text=Generally%2C%20Illinois%20courts%20have%20held,or%20more%20constitutes%20adequate%20consideration.>
+
+[^midwest-delineation]: **Midwest Lending Corp. v. Horton** — "Accordingly, we reject Midwest's argument that the ‘signing bonus’ in the offer letter provided adequate consideration for Horton's later agreement to the nonsolicitation provision." *Midwest Lending Corp. v. Horton, 2023 IL App (3d) 220132.* <https://www.courtlistener.com/opinion/9401053/midwest-lending-corp-v-horton/#:~:text=Accordingly%2C%20we%20reject%20Midwest's%20argument,agreement%20to%20the%20nonsolicitation%20provision.>
+
+[^ifwa-20-notice]: **820 ILCS 90/20** — "A covenant not to compete or a covenant not to solicit is illegal and void unless (1) the employer advises the employee in writing to consult with an attorney before entering into the covenant and (2) the employer provides the employee with a copy of the covenant at least 14 calendar days before the commencement of the employee's employment or the employer provides the employee with at least 14 calendar days to review the covenant." *820 ILCS 90/20.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K20.htm>
+
+[^ifwa-7-lbi]: **820 ILCS 90/7** — "In determining the legitimate business interest of the employer, the totality of the facts and circumstances of the individual case shall be considered." *820 ILCS 90/7.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K7.htm>
+
+[^reliable-fire-totality]: **Reliable Fire Equipment Co. v. Arredondo** — "Rather, we adopt the position of Justice Hudson's special concurrence, which is: whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case." *Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871.* <https://www.courtlistener.com/opinion/3135645/reliable-fire-equipment-co-v-arredondo/#:~:text=Rather%2C%20we%20adopt%20the%20position,circumstances%20of%20the%20individual%20case.>
+
+[^ifwa-10-construction]: **820 ILCS 90/10** — "A covenant not to compete or a covenant not to solicit is void and illegal with respect to individuals employed in construction, regardless of whether an individual is covered by a collective bargaining agreement. This subsection (e) does not apply to construction employees who primarily perform management, engineering or architectural, design, or sales functions for the employer or who are shareholders, partners, or owners in any capacity of the employer." *820 ILCS 90/10(e).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K10.htm>
+
+[^broadcast-ban]: **820 ILCS 17/10** — "No broadcasting industry employer may require in an employment contract that an employee or prospective employee refrain from obtaining employment in a specific geographic area for a specific period of time after termination of employment with that broadcasting industry employer. (b) This Section does not prevent the enforcement of a covenant not to compete during the term of an employment contract or against an employee who breaches an employment contract." *820 ILCS 17/10.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000170K10.htm>
+
+[^nurse-ban]: **225 ILCS 510/14** — "Nurse agencies are prohibited from entering into covenants not to compete with nurses and certified nurse aides if the nurse is employed, assigned, or referred by a nurse agency to a health care facility on a temporary basis or the certified nurse aide is employed, assigned, or referred by a nurse agency to a health care facility on a temporary basis." *225 ILCS 510/14(g).* <https://www.ilga.gov/documents/legislation/ilcs/documents/022505100K14.htm>
+
+[^ifwa-10-cba]: **820 ILCS 90/10** — "A covenant not to compete is void and illegal with respect to individuals covered by a collective bargaining agreement under the Illinois Public Labor Relations Act or the Illinois Educational Labor Relations Act." *820 ILCS 90/10(d).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K10.htm>
+
+[^ifwa-10-covid]: **820 ILCS 90/10** — "No employer shall enter into a covenant not to compete or a covenant not to solicit with any employee who an employer terminates or furloughs or lays off as the result of business circumstances or governmental orders related to the COVID-19 pandemic or under circumstances that are similar to the COVID-19 pandemic, unless enforcement of the covenant not to compete includes compensation equivalent to the employee's base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement." *820 ILCS 90/10(c).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K10.htm>
+
+[^ifwa-10-mentalhealth]: **820 ILCS 90/10** — "Any covenant not to compete or covenant not to solicit entered into after January 1, 2025 (the effective date of Public Act 103-915) shall not be enforceable with respect to the provision of mental health services to veterans and first responders by any licensed mental health professional in this State if the enforcement of the covenant not to compete or covenant not to solicit is likely to result in an increase in cost or difficulty for any veteran or first responder seeking mental health services." *820 ILCS 90/10(f).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K10.htm>
+
+[^ifwa-35-reformation]: **820 ILCS 90/35** — "Extensive judicial reformation of a covenant not to compete or a covenant not to solicit may be against the public policy of this State and a court may refrain from wholly rewriting contracts. (b) In some circumstances, a court may, in its discretion, choose to reform or sever provisions of a covenant not to compete or a covenant not to solicit rather than hold such covenant unenforceable. Factors which may be considered when deciding whether such reformation is appropriate include the fairness of the restraints as originally written, whether the original restriction reflects a good-faith effort to protect a legitimate business interest of the employer, the extent of such reformation, and whether the parties included a clause authorizing such modifications in their agreement." *820 ILCS 90/35.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K35.htm>
+
+[^assured-overbroad]: **AssuredPartners, Inc. v. Schmitt** — "We decline to rescue a draftor from the risks of crafting a restrictive covenant that is patently overbroad." *AssuredPartners, Inc. v. Schmitt, 2015 IL App (1st) 141863.* <https://www.courtlistener.com/opinion/3173530/assuredpartners-inc-v-schmitt/#:~:text=We%20decline%20to%20rescue%20a,covenant%20that%20is%20patently%20overbroad.>
+
+[^q8-ifwa-15]: **820 ILCS 90/15** — "A covenant not to compete or a covenant not to solicit is illegal and void unless (1) the employee receives adequate consideration, (2) the covenant is ancillary to a valid employment relationship, (3) the covenant is no greater than is required for the protection of a legitimate business interest of the employer, (4) the covenant does not impose undue hardship on the employee, and (5) the covenant is not injurious to the public." *820 ILCS 90/15.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K15.htm>
+
+[^q8-ifwa-35]: **820 ILCS 90/35** — "Extensive judicial reformation of a covenant not to compete or a covenant not to solicit may be against the public policy of this State and a court may refrain from wholly rewriting contracts." *820 ILCS 90/35(a).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K35.htm>
+
+[^ifwa-5-exclusions]: **820 ILCS 90/5** — "‘Covenant not to compete’ does not include (1) a covenant not to solicit, (2) a confidentiality agreement or covenant, (3) a covenant or agreement prohibiting use or disclosure of trade secrets or inventions, (4) invention assignment agreements or covenants, (5) a covenant or agreement entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest" *820 ILCS 90/5.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K5.htm>
+
+[^itsa-8-secrecy]: **765 ILCS 1065/8** — "This Act does not affect: (1) contractual remedies, whether or not based upon misappropriation of a trade secret, provided however, that a contractual or other duty to maintain secrecy or limit use of a trade secret shall not be deemed to be void or unenforceable solely for lack of durational or geographical limitation on the duty" *765 ILCS 1065/8(b)(1).* <https://www.ilga.gov/documents/legislation/ilcs/documents/076510650K8.htm>
+
+[^ifwa-25-fees]: **820 ILCS 90/25** — "in a civil action or arbitration filed by an employer (including, but not limited to, a complaint or counterclaim), if an employee prevails on a claim to enforce a covenant not to compete or a covenant not to solicit, the employee shall recover from the employer all costs and all reasonable attorney's fees regarding such claim to enforce a covenant not to compete or a covenant not to solicit, and the court or arbitrator may award appropriate relief." *820 ILCS 90/25.* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K25.htm>
+
+[^ifwa-30-ag]: **820 ILCS 90/30** — "the Attorney General may request and the court may impose a civil penalty not to exceed $5,000 for each violation or $10,000 for each repeat violation within a 5-year period." *820 ILCS 90/30(d).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000900K30.htm>
+
+[^valvoline]: **Attorney General Raoul Reaches Settlement With Valvoline Over Use of Non-Compete Agreements** — "Raoul and the attorneys general allege Valvoline required its hourly employees to sign non-competition agreements that prohibited them from working in the oil change business at any store within 100 miles of a Valvoline location for one year after leaving Valvoline." *Ill. Att'y Gen., Settlement with Valvoline (Aug. 1, 2024).* <https://illinoisattorneygeneral.gov/news/story/attorney-general-raoul-reaches-settlement-with-valvoline-over-use-of-non-compete-agreements>
+
+[^wta-choice-of-law]: **820 ILCS 96/1-25** — "(b) Any agreement, clause, covenant, or waiver that is a unilateral condition of employment or continued employment and requires the employee or prospective employee to waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit related to an unlawful employment practice to which the employee or prospective employee would otherwise be entitled under any provision of State or federal law, including that which purports to shorten the applicable statute of limitation, apply non-Illinois law to an Illinois employee's claim, or require a venue outside of Illinois to adjudicate an Illinois employee's claim, is against public policy, void to the extent it denies an employee or prospective employee a substantive or procedural right or remedy related to alleged unlawful employment practices, and severable from an otherwise valid and enforceable contract under this Act." *820 ILCS 96/1-25(b).* <https://www.ilga.gov/documents/legislation/ilcs/documents/082000960K1-25.htm>
+
+[^elite-nopoach]: **State ex rel. Raoul v. Elite Staffing, Inc.** — "We hold that the Illinois Antitrust Act does not exempt from antitrust scrutiny all agreements between competitors to hold down wages and to limit employment opportunities for their employees." *State ex rel. Raoul v. Elite Staffing, Inc., 2024 IL 128763.* <https://www.courtlistener.com/opinion/9467526/state-ex-rel-raoul-v-elite-staffing-inc/#:~:text=We%20hold%20that%20the%20Illinois,employment%20opportunities%20for%20their%20employees.>

package/skills/non-compete-contract-explainer/content/india.md

@@ -0,0 +1,269 @@
+---
+jurisdiction: "India"
+slug: india
+countryCode: IN
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-03"
+canonicalUrl: https://openagreements.org/legal/non-compete/india
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/india · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in India[^about]
+
+India voids post-employment non-compete agreements under Section 27 of the Indian Contract Act, 1872 — no matter how reasonable in time, area, or scope — leaving only a narrow sale-of-goodwill exception, in-term covenants, confidentiality, targeted non-solicitation, garden leave during notice, and cost-based employment bonds.
+
+
+## At a glance
+
+| Question | India |
+| --- | --- |
+| **Are non-competes enforceable?** | Banned |
+| **Bottom line** | Post-employment non-competes are void under Section 27 of the Indian Contract Act, 1872 regardless of how reasonable they are, and Indian law offers no reasonableness saving for post-term restraints — leaving only the sale-of-goodwill exception, in-term covenants, confidentiality, non-solicitation, garden leave during the notice period, and cost-based employment bonds. |
+| **Main law or case** | Indian Contract Act, 1872, § 27 |
+| **Main exceptions** | Sale of business goodwill (Exception 1 to § 27); partnership carve-outs (§§ 11(2), 36(2), 54); in-term exclusive-service covenants |
+| **When the ban took effect** | Longstanding — Section 27 has been in force since 1872 |
+| **Can a court narrow it?** | No |
+| **Applies to contractors?** | Yes |
+| **Restriction extended during a breach?** | Not applicable — the post-term covenant is void |
+| **Maximum length set by law** | Not applicable — void |
+
+## Are post-employment non-compete agreements enforceable in India? {#post-employment-noncompetes}
+
+**Short answer.** No. India voids post-employment non-compete agreements by statute. Section 27 of the Indian Contract Act, 1872 makes any agreement that restrains someone from exercising a lawful profession, trade, or business void *to that extent*, and the Supreme Court has held that a service covenant operating after employment ends is void — a position it calls *completely settled* [^stat-s27-void][^krishan-murgai-void][^percept-settled].
+
+This makes India fundamentally different from a *reasonableness* jurisdiction such as England or Singapore. India codified the rule in 1872, so an Indian court does not weigh a post-employment covenant's duration or geography against the employer's interest — a clause that restrains a former employee from competing is simply void under Section 27 [^stat-s27-void].
+
+"Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void."[^stat-s27-void]
+
+The Supreme Court settled the post-employment position decades ago. In *Superintendence Co. of India v. Krishan Murgai*, it held that a covenant extended past the end of the service is void under Section 27 [^krishan-murgai-void].
+
+"Under Section 27 of the Contract Act, a service covenant extended beyond the termination of the service is void."[^krishan-murgai-void]
+
+The Court reaffirmed and generalized that rule in *Percept D'Mark (India) v. Zaheer Khan*, describing the law on post-contractual restraints as fixed [^percept-settled].
+
+"The legal position with regard to post-contractual covenants or restrictions has been consistent, unchanging and completely settled in our country."[^percept-settled]
+
+The narrow things an Indian employer *can* protect — the goodwill it buys in an acquisition, its genuine confidential information, in-term exclusivity, and cost-based training bonds — are each addressed in the questions below.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not paper an Indian employee with a US- or UK-style non-compete form and assume a court will enforce or narrow it because it looks *reasonable*. India treats a post-employment non-compete as void rather than reforming it, so a covenant copied from a reasonableness jurisdiction gives an Indian employer no enforceable restraint at all [^stat-s27-void][^krishan-murgai-void].
+
+## Does it matter if an Indian non-compete is short, narrow, or paid for? {#reasonable-noncompete}
+
+**Short answer.** No. A post-employment non-compete does not become enforceable in India because it is limited to a few months, a small area, or supported by a payment. Unlike England's *reasonableness* doctrine, Section 27 admits no reasonableness or *partial restraint* saving for a post-term covenant unless it fits a statutory exception, and the Delhi High Court reaffirmed in 2025 that a restraint on post-employment work is void [^krishan-murgai-no-reasonableness][^q2-percept-s27][^varun-tyagi-void].
+
+In *Krishan Murgai*, the Supreme Court drew the line that separates Indian law from the English approach: the *reasonableness* test that rescues a narrowly tailored covenant elsewhere does not apply to a Section 27 case at all, except within the sale-of-goodwill exception [^krishan-murgai-no-reasonableness].
+
+"Neither the test of reasonableness nor the principle of that the restraint being partial was reasonable are applicable to a case governed by Section 27 of the Contract Act, unless it falls within Exception 1."[^krishan-murgai-no-reasonableness]
+
+*Percept* states the operative rule directly: a covenant reaching past the term of the contract is void and unenforceable [^q2-percept-s27].
+
+"Under Section 27 of the Contract Act (a) a restrictive covenant extending beyond the term of the contract is void and not enforceable."[^q2-percept-s27]
+
+This is not a fading doctrine. In *Varun Tyagi v. Daffodil Software*, decided in June 2025, the Delhi High Court held that an employment-contract term restricting a worker's right to take up employment after the contract ends is void under Section 27 [^varun-tyagi-void].
+
+"In view of the above, it is clear that any terms of the employment contract that imposes a restriction on right of the employee to get employed post-termination of the contract of employment shall be void being contrary to Section 27 of the ICA."[^varun-tyagi-void]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not try to save a post-employment non-compete by trimming its duration, shrinking its territory, or attaching a payment. None of those moves brings an Indian covenant within Section 27, because the statute has no reasonableness gateway for post-term restraints — the covenant is void either way [^krishan-murgai-no-reasonableness][^q2-percept-s27].
+
+## Can an Indian employer restrict competition during employment? {#during-employment}
+
+**Short answer.** Yes. A negative covenant that binds an employee to serve the employer exclusively *during* the employment is not treated as a restraint of trade and does not fall under Section 27, and a court may, in its discretion, enjoin breach of that negative promise under Section 42 of the Specific Relief Act, 1963 [^golikari-in-term][^sra-s42].
+
+The Supreme Court drew the during- versus post-employment line in *Niranjan Shankar Golikari v. Century Spinning & Mfg. Co.*, holding that an in-term exclusive-service covenant is outside Section 27 [^golikari-in-term].
+
+"Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall under section 27 of the Contract Act."[^golikari-in-term]
+
+The Court was explicit that timing is what changes the analysis — the objections that defeat a covenant after employment ends do not apply while the contract is still running [^q3-golikari-distinction].
+
+"The result of the above discussion is that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract than those in cases where it is to operate during the period of the contract."[^q3-golikari-distinction]
+
+The same distinction reaches beyond employment. In *Gujarat Bottling Co. v. Coca Cola Co.*, the Supreme Court upheld an in-term exclusive-dealing covenant in a commercial franchise, reasoning that a restriction confined to the life of the contract is not a restraint of trade — and *Percept* confirms the doctrine is not limited to employment contracts [^gujarat-in-term][^q3-percept-not-confined].
+
+"As held by this Court in Gujarat Bottling vs. Coca Cola (supra), this doctrine is not confined only to contracts of employment, but is also applicable to all other contracts."[^q3-percept-not-confined]
+
+The procedural mechanism is Section 42 of the Specific Relief Act, which lets a court enjoin breach of a negative covenant even though it cannot order the affirmative service to be performed — though that relief is discretionary and conditioned on the plaintiff's own performance of the contract [^sra-s42].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> An in-term exclusivity or *whole-time service* covenant is enforceable, but it must be confined to the period the employment or contract is actually running — the moment it purports to operate after the relationship ends, it crosses into Section 27 and is void. Draft the obligation to expire with the contract, and rely on Section 42 of the Specific Relief Act for an injunction during the term [^golikari-in-term][^sra-s42].
+
+## Are customer and employee non-solicitation clauses enforceable in India? {#non-solicitation}
+
+**Short answer.** Sometimes — a targeted non-solicitation clause is more defensible than a non-compete, but the outcome is fact-sensitive. Indian courts have upheld a non-solicitation-of-employees clause as a restriction on the contracting *parties* rather than on the employees, and have granted only narrow injunctions against soliciting a former employer's customers — but they will not let a *confidentiality* or non-solicitation theory become a monopoly over the departing worker's clients [^wipro-not-hit][^desiccant-injunction][^amex-monopoly].
+
+On employee non-solicitation, the Delhi High Court in *Wipro Ltd. v. Beckman Coulter International* treated a clause barring one company from soliciting the other's staff as a restriction on the companies, not on the employees, so it fell outside Section 27 [^wipro-parties][^wipro-not-hit].
+
+"In my view, therefore, the non-solicitation clause does not amount to a restraint of trade, business or profession and would not be hit by Section 27 of the Indian Contract Act, 1872 as being void."[^wipro-not-hit]
+
+Critically, the remedy is a claim against the contracting party, not an order preventing the employees themselves from being hired [^wipro-remedy].
+
+"The remedy lies in the claim for damages and an injunction against solicitation in future."[^wipro-remedy]
+
+The setting matters: *Wipro* arose between two contracting *companies*, so it most directly supports a business-to-business non-solicitation clause. An employer's clause aimed at its *own* departing employee is on weaker ground and is read against the right-to-livelihood limit below.
+
+On customer non-solicitation, the relief Indian courts will grant is narrow. In *Desiccant Rotors International v. Bappaditya Sarkar*, the Delhi High Court refused to bar a former employee from working for a competitor at all; the only restraint it imposed was an injunction against approaching the plaintiff's own suppliers and customers [^desiccant-injunction], and even then it stressed that the employee's right to livelihood prevails over the employer's wish to be free of competition [^desiccant-livelihood].
+
+"It is this attempt to protect themselves from competition which clashes with the right of the employees to seek employment where so ever they choose and in a clash like this, it is clear that the right of livelihood of the latter must prevail."[^desiccant-livelihood]
+
+The outer limit is set by *American Express Bank v. Priya Puri*, where the Delhi High Court rejected the idea that an employer can lock up its customer base through a former employee [^amex-monopoly].
+
+"In my opinion no Bank should be allowed to create monopolies on the ground that they have developed exhaustive data of their clients/customers."[^amex-monopoly]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> A *narrowly drawn* non-solicitation clause is the more defensible cousin of a non-compete in India, but do not over-read it. An employee non-solicitation clause is enforced against the contracting party as damages or an anti-solicitation injunction, never as a no-hire bar on the workers; and a customer non-solicitation clause cannot be stretched into a *de facto* non-compete that fences off the former employee's livelihood [^wipro-remedy][^desiccant-livelihood].
+
+## Is garden leave enforceable in India? {#garden-leave}
+
+**Short answer.** Only during the notice period, while the employee is still on the rolls. Garden leave inside the notice period works as an *in-term* exclusive-service covenant, which Section 27 does not reach [^q5-golikari-in-term]; but a *garden leave* clause that operates after the employee has ceased employment is prima facie in restraint of trade and hit by Section 27 — even though the employer keeps paying — because it stops the former employee from working elsewhere [^vfs-garden-leave][^vfs-obstruct].
+
+In *VFS Global Services v. Suprit Roy*, the Bombay High Court considered a clause requiring a departed employee to sit out a period after leaving, with pay, and held it to be a post-cessation restraint that Section 27 voids [^vfs-garden-leave].
+
+"The Garden Leave Clause is therefore, prima facie in restraint of trade and is hit by Section 27 of the Contract Act."[^vfs-garden-leave]
+
+The court's reasoning was that paying a former employee to stay idle is still an obstruction of their ability to earn a living elsewhere [^vfs-obstruct].
+
+"To obstruct on employee who has left service from obtaining gainful employment elsewhere is not fair or proper."[^vfs-obstruct]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Structure garden leave as part of the *notice period* — the employee remains employed, on payroll, and bound by in-term duties — rather than as a sit-out that begins after employment ends. A garden-leave obligation that runs after cessation functions as a post-term non-compete and is void under Section 27, and adding a salary does not cure it [^vfs-garden-leave][^vfs-obstruct].
+
+## Are employment bonds and minimum-service clauses enforceable in India? {#employment-bonds}
+
+**Short answer.** Yes, when they recover a genuine cost rather than penalize departure. A minimum-service clause backed by liquidated damages is not a restraint of trade under Section 27 — the Supreme Court held in 2025 that such a clause furthers the employment relationship instead of restraining future work — and any recovery is capped at *reasonable compensation* under Section 74 of the Contract Act [^vijaya-furtherance][^stat-s74].
+
+In *Vijaya Bank v. Prashant B. Narnaware*, decided in May 2025, the Supreme Court upheld a clause requiring an employee either to serve a minimum term or pay a fixed sum, reasoning that the obligation operated within the employment rather than restricting later employment [^vijaya-furtherance].
+
+"The object of the restrictive covenant was in furtherance of the employment contract and not to restrain future employment."[^vijaya-furtherance]
+
+The Court concluded that the bond was neither a restraint of trade nor contrary to public policy [^vijaya-holding].
+
+"In light of the aforesaid discussion, we are of the view the restrictive covenant in clause 11(k) of the appointment letter does not amount to restraint of trade nor is it opposed to public policy."[^vijaya-holding]
+
+The clause in *Vijaya Bank* arose in a public-sector bank and required either a three-year minimum service or payment of a fixed sum; the Court treated that sum as reasonable compensation for the employer's retention interest and the real cost and burden of fresh recruitment, not as a penalty calibrated to deter resignation.
+
+A bond is a damages mechanism, not a penalty, and Section 74 limits what the employer can actually recover to reasonable compensation not exceeding the stipulated sum [^stat-s74].
+
+"the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for."[^stat-s74]
+
+> [!NOTE]
+> **Practice note.**
+>
+> Tie an employment bond to a legitimate, documented interest — recruitment, replacement, or training expense the employer actually incurred — and keep the stipulated sum proportionate and amortized over the service period, so that leaving early is not made illusory. A bond pegged to a real pre-estimated expense recovers reasonable compensation under Section 74; a round-number *penalty* set only to deter resignation, untethered from any cost, is liable to be cut down or struck as unreasonable. Because *Vijaya Bank* arose in a public-sector setting, a private employer should be ready to evidence the cost or operational loss its bond recovers [^vijaya-furtherance][^stat-s74].
+
+## Is there a sale-of-business or goodwill exception to India's non-compete ban? {#sale-of-business}
+
+**Short answer.** Yes, but it is narrow. Exception 1 to Section 27 lets someone who sells the *goodwill* of a business agree not to compete within reasonable local limits while the buyer carries on a like business, and the Indian Partnership Act, 1932 adds express *notwithstanding Section 27* carve-outs for partners — covering both an outgoing partner's restraint and restraints made on dissolution. A purely financial or minority-investor exit, with no goodwill transferred, does not qualify [^stat-s27-exception1][^partnership-s36][^partnership-s54].
+
+Exception 1 is the one statutory escape from the Section 27 ban, and it exists so a buyer can protect the goodwill it pays for [^stat-s27-exception1].
+
+"One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business."[^stat-s27-exception1]
+
+Parliament added parallel exceptions for partnerships, which underscores how the rule works: a restraint is valid only where the statute expressly says so. The Partnership Act validates a restraint on an *outgoing* partner — the closest analogue to a departing stakeholder — where the limits are reasonable [^partnership-s36], and a like restraint among partners on dissolution [^partnership-s54].
+
+"Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or within specified local limits; and notwithstanding anything contained in section 27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable."[^partnership-s54]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Tie a sale-of-business non-compete to the goodwill actually sold, keep it within reasonable local limits, and place it in the purchase agreement — not the seller's employment contract. A covenant bootstrapped onto continued employment, or imposed on a founder who keeps only a minority financial stake without transferring goodwill, falls outside Exception 1 and is void under Section 27 [^stat-s27-exception1][^partnership-s54].
+
+## What can an Indian employer protect instead of a non-compete? {#what-to-protect}
+
+**Short answer.** Genuine confidential information, targeted non-solicitation, in-term exclusivity, garden leave during notice, and cost-based bonds — applied to employees and to independent contractors alike, because Section 27 reaches non-employment contracts too. A confidentiality clause that protects real trade secrets is enforceable, but it cannot be written so broadly that it bars the former employee from working in their field [^vfs-confidentiality][^amex-freedom].
+
+India has no standalone trade-secrets statute, so protection is built from contract and the equitable action for breach of confidence. The Bombay High Court confirmed in *VFS Global* that a clause protecting genuine commercial or trade secrets is not a restraint of trade [^vfs-confidentiality].
+
+"A clause prohibiting an employee from disclosing commercial or trade secrets is not in restraint of trade."[^vfs-confidentiality]
+
+The boundary is that confidentiality cannot be used as a back-door non-compete. *American Express Bank v. Priya Puri* held that an employee's freedom to move for a better position is a vital right that an employer cannot curtail by labelling ordinary customer information *confidential* [^amex-freedom].
+
+"Freedom of changing employment for improving service conditions is a vital and important right of an employee which cannot be restricted or curtailed on the ground that the employee has employer's data and confidential information of customers which is capable of ascertainment on behalf of defendant or any one else, by an independent canvass at a small expense and in a very limited period of time."[^amex-freedom]
+
+Because Section 27 applies to all contracts, not just employment, an employer cannot escape the ban by engaging a worker as a consultant or independent contractor — the same rules govern, as Section 27's reach in *Percept* (an agency contract) and *Gujarat Bottling* (a franchise) confirms [^q8-percept-not-confined]. These freedoms are reinforced by the constitutional right to practise any profession or carry on any trade or business [^const-art19].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Build the protection program around what Indian law actually enforces: a confidentiality clause tied to identifiable trade secrets, a narrow non-solicitation clause, in-term exclusivity, garden leave inside the notice period, and a cost-based bond — used consistently for employees and contractors. Do not define *confidential information* so broadly that it sweeps in the worker's general skill and experience, which would make the clause a *de facto* non-compete and void under Section 27 [^vfs-confidentiality][^amex-freedom].
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-03. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not India. This article synthesizes India primary law and is not legal advice from a India-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^stat-s27-void]: **Indian Contract Act, 1872, § 27** — "Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void." *Indian Contract Act, 1872, § 27.* <https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf>
+
+[^krishan-murgai-void]: **Superintendence Co. of India (P) Ltd. v. Krishan Murgai** — "Under Section 27 of the Contract Act, a service covenant extended beyond the termination of the service is void." *Superintendence Co. of India (P) Ltd. v. Krishan Murgai, (1981) 2 SCC 246.* <https://indiankanoon.org/doc/1186410/>
+
+[^percept-settled]: **Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan** — "The legal position with regard to post-contractual covenants or restrictions has been consistent, unchanging and completely settled in our country." *Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.* <https://indiankanoon.org/doc/571375/>
+
+[^krishan-murgai-no-reasonableness]: **Superintendence Co. of India (P) Ltd. v. Krishan Murgai** — "Neither the test of reasonableness nor the principle of that the restraint being partial was reasonable are applicable to a case governed by Section 27 of the Contract Act, unless it falls within Exception 1." *Superintendence Co. of India (P) Ltd. v. Krishan Murgai, (1981) 2 SCC 246.* <https://indiankanoon.org/doc/1186410/>
+
+[^q2-percept-s27]: **Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan** — "Under Section 27 of the Contract Act (a) a restrictive covenant extending beyond the term of the contract is void and not enforceable." *Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.* <https://indiankanoon.org/doc/571375/>
+
+[^varun-tyagi-void]: **Varun Tyagi v. Daffodil Software Pvt. Ltd.** — "In view of the above, it is clear that any terms of the employment contract that imposes a restriction on right of the employee to get employed post-termination of the contract of employment shall be void being contrary to Section 27 of the ICA." *Varun Tyagi v. Daffodil Software Pvt. Ltd., FAO 167/2025 (Delhi High Court, June 25, 2025).* <https://indiankanoon.org/doc/187332526/>
+
+[^golikari-in-term]: **Niranjan Shankar Golikari v. Century Spinning & Mfg. Co.** — "Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall under section 27 of the Contract Act." *Niranjan Shankar Golikari v. Century Spinning & Mfg. Co., AIR 1967 SC 1098.* <https://indiankanoon.org/doc/452434/>
+
+[^sra-s42]: **Specific Relief Act, 1963, § 42** — "Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement: Provided that the plaintiff has not failed to perform the contract so far as it is binding on him." *Specific Relief Act, 1963, § 42.* <https://www.indiacode.nic.in/bitstream/123456789/1583/7/A1963-47.pdf>
+
+[^q3-golikari-distinction]: **Niranjan Shankar Golikari v. Century Spinning & Mfg. Co.** — "The result of the above discussion is that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract than those in cases where it is to operate during the period of the contract." *Niranjan Shankar Golikari v. Century Spinning & Mfg. Co., AIR 1967 SC 1098.* <https://indiankanoon.org/doc/452434/>
+
+[^gujarat-in-term]: **Gujarat Bottling Co. Ltd. v. Coca Cola Co.** — "Since the negatice stipulation in paragraph 14 of the 1993 Agreement is confined in its application to the period of subsistence of the agreement and the restriction imposed therein is operative only during the period the 1993 Agreement is subsisting, the said stipulation cannot be held to be in restraint of trade so as to attract the bar of section 27 of the Contract Act." *Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 SCC 545.* <https://indiankanoon.org/doc/104935066/>
+
+[^q3-percept-not-confined]: **Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan** — "As held by this Court in Gujarat Bottling vs. Coca Cola (supra), this doctrine is not confined only to contracts of employment, but is also applicable to all other contracts." *Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.* <https://indiankanoon.org/doc/571375/>
+
+[^wipro-not-hit]: **Wipro Ltd. v. Beckman Coulter International S.A.** — "In my view, therefore, the non-solicitation clause does not amount to a restraint of trade, business or profession and would not be hit by Section 27 of the Indian Contract Act, 1872 as being void." *Wipro Ltd. v. Beckman Coulter International S.A., 131 (2006) DLT 681 (Delhi HC).* <https://indiankanoon.org/doc/647033/>
+
+[^desiccant-injunction]: **Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar** — "The injunction only restrains Defendant No. 1 from approaching the plaintiff‟s suppliers and customers for soliciting business which is in direct competition with the business of the plaintiff." *Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar, CS(OS) No. 337/2008 (Delhi HC, 2009).* <https://indiankanoon.org/doc/175180860/>
+
+[^amex-monopoly]: **American Express Bank Ltd. v. Priya Puri** — "In my opinion no Bank should be allowed to create monopolies on the ground that they have developed exhaustive data of their clients/customers." *American Express Bank Ltd. v. Priya Puri, (2006) III LLJ 540 (Delhi HC).* <https://indiankanoon.org/doc/445135/>
+
+[^wipro-parties]: **Wipro Ltd. v. Beckman Coulter International S.A.** — "It is a restriction cast upon the contracting parties and not on the employees." *Wipro Ltd. v. Beckman Coulter International S.A., 131 (2006) DLT 681 (Delhi HC).* <https://indiankanoon.org/doc/647033/>
+
+[^wipro-remedy]: **Wipro Ltd. v. Beckman Coulter International S.A.** — "The remedy lies in the claim for damages and an injunction against solicitation in future." *Wipro Ltd. v. Beckman Coulter International S.A., 131 (2006) DLT 681 (Delhi HC).* <https://indiankanoon.org/doc/647033/>
+
+[^desiccant-livelihood]: **Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar** — "It is this attempt to protect themselves from competition which clashes with the right of the employees to seek employment where so ever they choose and in a clash like this, it is clear that the right of livelihood of the latter must prevail." *Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar, CS(OS) No. 337/2008 (Delhi HC, 2009).* <https://indiankanoon.org/doc/175180860/>
+
+[^q5-golikari-in-term]: **Niranjan Shankar Golikari v. Century Spinning & Mfg. Co.** — "Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall under section 27 of the Contract Act." *Niranjan Shankar Golikari v. Century Spinning & Mfg. Co., AIR 1967 SC 1098.* <https://indiankanoon.org/doc/452434/>
+
+[^vfs-garden-leave]: **VFS Global Services Pvt. Ltd. v. Suprit Roy** — "The Garden Leave Clause is therefore, prima facie in restraint of trade and is hit by Section 27 of the Contract Act." *VFS Global Services Pvt. Ltd. v. Suprit Roy, 2008 (2) Bom CR 446 (Bombay HC).* <https://indiankanoon.org/doc/1547420/>
+
+[^vfs-obstruct]: **VFS Global Services Pvt. Ltd. v. Suprit Roy** — "To obstruct on employee who has left service from obtaining gainful employment elsewhere is not fair or proper." *VFS Global Services Pvt. Ltd. v. Suprit Roy, 2008 (2) Bom CR 446 (Bombay HC).* <https://indiankanoon.org/doc/1547420/>
+
+[^vijaya-furtherance]: **Vijaya Bank v. Prashant B. Narnaware** — "The object of the restrictive covenant was in furtherance of the employment contract and not to restrain future employment." *Vijaya Bank v. Prashant B. Narnaware, 2025 INSC 691.* <https://indiankanoon.org/doc/42763766/>
+
+[^stat-s74]: **Indian Contract Act, 1872, § 74** — "the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for." *Indian Contract Act, 1872, § 74.* <https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf>
+
+[^vijaya-holding]: **Vijaya Bank v. Prashant B. Narnaware** — "In light of the aforesaid discussion, we are of the view the restrictive covenant in clause 11(k) of the appointment letter does not amount to restraint of trade nor is it opposed to public policy." *Vijaya Bank v. Prashant B. Narnaware, 2025 INSC 691.* <https://indiankanoon.org/doc/42763766/>
+
+[^stat-s27-exception1]: **Indian Contract Act, 1872, § 27 (Exception 1)** — "One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business." *Indian Contract Act, 1872, § 27, Exception 1.* <https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf>
+
+[^partnership-s36]: **Indian Partnership Act, 1932, § 36(2)** — "A partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period or within specified local limits; and, notwithstanding anything contained in section 27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable." *Indian Partnership Act, 1932, § 36(2).* <https://www.indiacode.nic.in/bitstream/123456789/19863/1/indian_partnership_act_1932.pdf>
+
+[^partnership-s54]: **Indian Partnership Act, 1932, § 54** — "Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or within specified local limits; and notwithstanding anything contained in section 27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable." *Indian Partnership Act, 1932, § 54.* <https://www.indiacode.nic.in/bitstream/123456789/19863/1/indian_partnership_act_1932.pdf>
+
+[^vfs-confidentiality]: **VFS Global Services Pvt. Ltd. v. Suprit Roy** — "A clause prohibiting an employee from disclosing commercial or trade secrets is not in restraint of trade." *VFS Global Services Pvt. Ltd. v. Suprit Roy, 2008 (2) Bom CR 446 (Bombay HC).* <https://indiankanoon.org/doc/1547420/>
+
+[^amex-freedom]: **American Express Bank Ltd. v. Priya Puri** — "Freedom of changing employment for improving service conditions is a vital and important right of an employee which cannot be restricted or curtailed on the ground that the employee has employer's data and confidential information of customers which is capable of ascertainment on behalf of defendant or any one else, by an independent canvass at a small expense and in a very limited period of time." *American Express Bank Ltd. v. Priya Puri, (2006) III LLJ 540 (Delhi HC).* <https://indiankanoon.org/doc/445135/>
+
+[^q8-percept-not-confined]: **Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan** — "As held by this Court in Gujarat Bottling vs. Coca Cola (supra), this doctrine is not confined only to contracts of employment, but is also applicable to all other contracts." *Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.* <https://indiankanoon.org/doc/571375/>
+
+[^const-art19]: **Constitution of India, art. 19(1)(g)** — "All citizens shall have the right— (g) to practise any profession, or to carry on any occupation, trade or business." *Constitution of India, art. 19(1)(g).* <https://www.indiacode.nic.in/bitstream/123456789/16124/1/the_constitution_of_india.pdf>