SINGAPORE intends to release tripartite guidelines on non-compete clauses in the second half of 2024, said Manpower Minister Tan See Leng in Parliament on Tuesday (Feb 6).

The Manpower Ministry (MOM) announced last year that it is working with tripartite partners to develop such guidelines for the reasonable use of non-compete or restraint of trade clauses in employment contracts.

Such clauses generally prevent employees from joining an industry competitor shortly after leaving their job.

Dr Tan’s response built on earlier replies to Members of Parliament on Monday, on employment-related issues such as retrenchments, collective agreements and non-compete clauses.

On Tuesday, he said: “We understand that overly restrictive restraint of trade clauses can disadvantage retrenched employees and create difficulties in finding employment.”

This is why the tripartite guidelines are being developed, he explained, adding that this will help educate employers and shape norms. “These guidelines are currently being finalised and we target to release them in the second half of this year.”

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Dr Tan noted that civil courts already have established principles on when such clauses are acceptable and can be upheld, versus when they are unreasonable, unjustified and thus void.

“The civil courts will assess if there is a genuine business need and whether the company has scoped the clause reasonably based on sector, geographical areas and duration,” he said.

“The courts will also balance employers’ needs to safeguard their businesses and employees’ ability to earn a living, and take into account that the clause should not be used to help businesses gain unfair advantages.”

Seek help from unions

Employees who believe that they are affected by unreasonable or unjustified non-compete clauses in their employment contracts can seek help from their unions, the Tripartite Alliance for Fair and Progressive Employment Practices (Tafep) or MOM.

Returning to the issue of retrenchment, which he had addressed on Monday, Dr Tan fielded questions from MPs about how to ensure responsible practices and what can be done about recalcitrant employers.

He said that the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment sets out clear guidelines for employers when undertaking cost-cutting measures. This includes notifying unions early about upcoming retrenchments, with the norm being a month before employees are notified.

If an employer does not follow the tripartite advisory, Tafep will approach them about adhering to it, said Dr Tan.

Most employers are cooperative when approached by Tafep or MOM, he added. “This shows that our tripartite advisories are working well without the need for additional penalties, which may negatively affect the wider business environment in Singapore.”

Unionised companies have an interest to maintain good relations with their unions and should not need penalties to do so, he added.

It is mandatory for employers to notify MOM within five days of a retrenchment exercise, with Dr Tan noting that MOM has not seen cases of unionised companies failing to do so.

Jurong GRC MP Tan Wu Meng asked if employers could be required to inform MOM earlier in the case of “substantial retrenchments”, so help can be given to affected workers sooner.

The minister replied that the current five-day period “strikes a balance” between giving employers time to finalise decisions and submit required information, and allowing for career facilitation programmes for affected workers.

“When you run a business, most companies do not want to retrench their employees at will. For them, retrenchment is always a last resort and plans are extremely fluid and plans can change,” he said.

From 2019 to 2023, MOM received around 16,300 mandatory retrenchment notifications, he noted. He added that the number of employers who have complied with this over the years “has continued to improve”.