Non-Compete Clauses in Bangladesh Employment Law: Guide

Legal Framework Governing Non-Compete Clauses in Bangladesh

Why Post-Employment Non-Compete Clauses Are Generally Unenforceable

Bangladeshi courts, following the settled interpretation of Section 27 of the Contract Act 1872 (which mirrors Section 27 of the Indian Contract Act 1872 and has been consistently applied by Bangladeshi and pre-partition Indian jurisprudence still persuasive in our courts), treat any restraint operating after termination of employment as void ab initio, regardless of how reasonable the geographic scope, duration or consideration may appear. Unlike English common law or Indian judicial exceptions carved out in Niranjan Shankar Golikari v. Century Spinning, Bangladesh has no codified 'reasonableness test' exception for post-termination restraints — the statutory text admits only the sale-of-goodwill exception. Consequently:

• Clauses barring an ex-employee from joining a competitor for 6, 12 or 24 months after resignation are void and unenforceable in a civil suit for injunction.
• Employers cannot obtain specific performance of a negative covenant compelling an employee to refrain from working elsewhere, per the bar in Section 56(f), Specific Relief Act 1877.
• Only damages — if actual quantifiable loss is proven — may theoretically be pursued, but Bangladeshi courts rarely award damages for void restraints since the underlying covenant itself is unenforceable under Section 27.

What Remains Legally Enforceable: The Three-Tier Distinction

Enforcement Workflow: From Drafting to Litigation

Drafting Guidance for Employers

1. Do not draft blanket post-termination non-compete clauses covering entire industries or nationwide geography — courts will strike them down under Section 27 of the Contract Act 1872 and refuse ancillary injunctive relief under Section 56(f) of the Specific Relief Act 1877.
2. Replace unenforceable non-compete language with narrowly tailored non-solicitation covenants restricting the ex-employee from actively soliciting the employer's named clients or poaching specific staff for a defined period (typically 6-12 months), supported by genuine consideration such as garden leave pay.
3. Insert robust confidentiality and trade secret clauses invoking Section 54 of the Information and Communication Technology Act 2006 and reinforcing criminal exposure under Section 408 of the Penal Code 1860 for misappropriation of proprietary data, client lists or source code.
4. For directors and key managerial personnel, rely on statutory fiduciary duties under Sections 94, 166 and 195 of the Companies Act 1994 rather than contractual non-compete language, since fiduciary duty-based restraints survive judicial scrutiny independent of Section 27.
5. Where the employment relationship involves a 'worker' as defined under Section 2(65) of the Bangladesh Labour Act 2006, ensure that any restrictive covenant does not conflict with statutory termination and notice provisions under Sections 19-27 of that Act, or the clause risks being void for inconsistency with mandatory labour protections.
6. Insert an arbitration clause referencing the Arbitration Act 2001 for confidential, efficient resolution of breach disputes involving senior executives, particularly where cross-border enforcement (e.g., against an employee relocating abroad) is anticipated.
7. Where feasible, structure post-employment restraint as a paid 'garden leave' during the notice period itself (a restraint operative while the employment technically subsists), which falls outside the Section 27 prohibition since the contract has not yet terminated.

Remedies Available to Employers on Breach

Because injunctive enforcement of a void post-termination non-compete is unavailable, employers must pivot their cause of action toward: (a) breach of confidentiality/trade secret obligations (ICT Act 2006, s.54; actionable in the Cyber Tribunal under s.68); (b) breach of enforceable non-solicitation covenants (ordinary civil suit for damages under Section 73, Contract Act 1872); and (c) criminal complaint for criminal breach of trust where the employee unlawfully retained or transmitted confidential business property (Penal Code 1860, s.408). Employers should also consider recovering liquidated damages stipulated under Section 74 of the Contract Act 1872, provided the sum represents a genuine pre-estimate of loss rather than a penalty.