An employee resigns, takes a better offer, and receives a letter from the former employer's lawyer pointing at a clause promising not to work for a competitor for two years anywhere in Pakistan. The letter is usually confident. The clause usually is not enforceable.
The starting point: section 27
Section 27 of the Contract Act, 1872 states that every agreement by which anyone is restrained from exercising a lawful profession, trade or business is, to that extent, void.
That is a wide prohibition and it is the default. Pakistani law does not begin from "is this restraint reasonable?" the way English law does. It begins from "this restraint is void", and then looks for an exception.
The exception written into the section is narrow: it covers the seller of the goodwill of a business agreeing not to carry on a similar business within specified local limits, so long as the limits are reasonable having regard to the nature of the business.
What this means in practice
- A post-employment non-compete — "you will not join a competitor for two years after leaving" — is a restraint on the employee's ability to earn a living, and courts have generally treated such clauses as falling foul of section 27.
- A restraint during employment stands on very different ground. An employee may lawfully be required not to work for a competitor while employed; that is a term of service, not a restraint on future trade.
- A non-compete on the sale of a business is the case the exception was written for and is enforceable within reasonable limits.
- Confidentiality is not a non-compete. An obligation not to disclose or use the employer's confidential information and trade secrets is enforceable, and it survives the end of the employment. This is the protection employers actually have.
What an employer can protect
An employer who wants real protection should stop drafting broad non-competes and draft these instead:
- Confidentiality, defined precisely — client lists, pricing, source code, formulations, strategy — rather than "all information".
- Non-solicitation of clients the employee personally dealt with, for a defined and modest period. A narrow non-solicit is far more defensible than a general non-compete because it protects a specific interest rather than blocking employment.
- Non-solicitation of staff.
- Intellectual property assignment for work created in the course of employment.
- Return of property and data on exit, with a signed acknowledgement.
- A notice period and garden leave — a paid notice period during which the employee does not work is the most reliable way of keeping someone away from a competitor for a while, because the employee is still being paid.
The theme is that a clause protecting a legitimate proprietary interest is defensible; a clause whose only purpose is to stop a former employee competing is not.
If you are the employee
- Read what you actually signed — a non-compete, a non-solicit and a confidentiality clause are different obligations with very different enforceability.
- Do not take anything. No client list, no documents, no code, no data. This is the point on which departing employees genuinely lose cases — not by competing, but by taking. Copying an employer's data can also engage the Prevention of Electronic Crimes Act, 2016, which turns a contract dispute into a criminal complaint.
- Serve your notice and hand back everything, against a receipt.
- Do not solicit your former employer's clients or colleagues while the ink is wet, even if the clause is weak. Restraint here is cheaper than being right in court.
- Take advice before signing anything the new employer's lawyer sends, and before responding to a threatening letter. A confident letter is not a court order.
If you are the employer
An injunction to enforce a restraint requires you to show a legally protectable interest, not just commercial inconvenience. Before writing to a former employee, ask honestly: what confidential information did they take, what evidence do I have, and which specific clients am I saying they solicited? If the answer is "none, but they went to a competitor", the letter is unlikely to survive contact with section 27.
The better investment is upstream: precise confidentiality terms, an enforceable non-solicit, proper exit procedures, and paid notice.
This article describes the general position on restraint of trade under Pakistani law and is not advice on any particular clause or dispute. Enforceability turns on the drafting, the interest protected and the facts. Consult an advocate before signing a restrictive covenant, or before acting on one.