Agoda’s severance saga is a warning for tech employers

AGODA’S recent retrenchment of 50 employees in Singapore became a lightning rod for public and regulatory scrutiny. Not because of the layoffs themselves, but because of a single clause buried in the digital travel firm’s severance agreements.

This clause allowed Agoda to claw back severance payments if employees brought any mediation requests, claims, or proceedings against the company. Reporting any issues to government agencies or statutory bodies would also result in the same.

Singapore’s Ministry of Manpower (MOM) and the National Trades Union Congress (NTUC) slammed the clause, saying it went against fair employment practices and workers’ rights. Agoda ended up apologising for the “inappropriate” move.

The firm is no stranger to job cuts: It let go of 1,500 staff globally in 2020 after the Covid-19 pandemic halted tourism. The contrast between how it handled that retrenchment and the most recent one is telling.

Agoda’s misstep shows how even well-meaning companies can stumble when conducting a layoff. It’s a reminder for other tech firms that how you axe employees matters just as much as why.

Wrong call

So why did the online travel agency use such a controversial clause?

The NTUC later confirmed that Agoda offered retrenchment benefits consistent with industry guidelines, and MOM clarified that severance agreements are permissible. Still, the public backlash was unprecedented.

The sweeping restrictions seem designed to protect Agoda from claims by employees. Essentially, the company was seeking to end its relationship with these workers once and for all and to shield itself from future disputes.

Requiring staff to sign waivers in exchange for severance pay is common among tech firms. The goal is to protect the company from ongoing liability for perceived breaches of employment obligations.

However, Agoda’s approach was a textbook example of overreaching.

Trying to stop employees from filing workplace grievances or reporting to government agencies clearly crossed a line that triggered a strong public response.

In addition, naming government agencies and statutory bodies in the severance clause forced them to respond. NTUC and MOM took a tough stance because the clause went against the Singaporean principle of tripartism and the spirit of fair and responsible employment practices.

Lessons for tech firms

Regrettably, cutting jobs has become part of running most companies these days, particularly in the tech sector. So what can Agoda’s peers learn from its mistakes when executing a difficult but necessary layoff?

Avoid sweeping bans

Agoda’s biggest error was its attempt to ban staff from reporting to authorities. Such provisions are very unusual and go against the public interest.

While it’s fair for companies to ask departing employees to sign a release in exchange for extra severance pay, they must tread carefully. Clauses that go too far can draw fire from regulators and hurt the company’s reputation.

Know the law

The law protects certain employee rights that cannot be waived – not even by mutual agreement. Firms need to know which rights this applies to.

For example, under the Employment Claims Act 2016, workers have the right to bring claims or mediation requests before the Employment Claims Tribunal regardless of any severance agreement. Trying to take away these rights via a severance agreement does not work and may get the company into legal trouble.

Be transparent

Restructuring is always going to be painful, but staying transparent throughout the process maintains trust between employer and employee.

Tech firms should clearly explain why a layoff is happening and how they chose employees for redundancy. A lack of openness can spark suspicion and mistrust among employees and the wider public. Worse, it can cause long-term damage to a firm’s reputation.

Bring in the union early

Some may think of Singapore’s unions as like their Western counterparts – militant, obstructionist, and unreasonable. But nothing could be further from the truth.

The NTUC is collaborative and eager to help in the retrenchment process. It has even assisted companies with running job fairs and provided outplacement support.

For unionised firms, it’s best practice to notify the union before any layoffs take place and to involve it in the process early on.

Beyond money

Financial compensation is not the only thing that firms need to offer during a retrenchment.

While tech companies are known for paying well, giving terminated staff extra support such as career counselling and job placement assistance goes a long way.

Case in point: Agoda launched a talent directory in 2020 to help retrenched employees find their next gig.

Making such an effort helps affected employees transition more smoothly and shows that the company cares about their well-being.

Public opinion matters

In the digital age, a mishandled layoff can quickly spiral into a public relations crisis. The reputational risks are huge, with negative publicity hurting an employer’s brand and its ability to attract talent.

Companies must be aware of how their actions will be seen by current and prospective employees as well as the broader community. Assume that your severance agreement and whatever it says will be read widely.

As part of its job cuts in 2020, Agoda announced that the salary of senior leadership team members would be slashed by 20 per cent. While that was a unique move during an unprecedented crisis, the gesture of collective belt-tightening reflected the right spirit amid a global pandemic.

Even if such measures cannot always be implemented, the principle behind them still matters.

No pressure

Firms should not pressure employees into signing severance agreements on the spot.

Giving them time to review the terms, seek advice, and consult with their union or legal representatives is not only fair but also reduces the risk of claims that they signed under duress. A rushed process can be seen as coercive and may even make the agreement invalid.

When silence isn’t golden

Ultimately, a company is free to organise its affairs in the way it feels most appropriate, with an eye on its bottom line. However, those carrying out layoffs owe it to themselves and their employees to do it in a manner that is fair, compassionate, and dignified.

If the Agoda episode has shown us anything, it is that employees are not powerless. A leaked severance agreement can do wonders for employees in swinging the weight of public opinion behind them. TECH IN ASIA

Clarence Ding is a partner and the Asia head of employment at Ashurst LLP.