Shopee lawsuit loss sparks debate on non-competition clauses

SHOPEE’S recent lawsuit against a former senior employee in its Singapore and Brazil offices has trained the spotlight on noncompetition clauses.

The Singapore-based e-commerce major’s case against Lim Teck Yong was dismissed by a judge last week.

The company sued Lim, who was executive director of operations position at Shopee Brazil, for joining ByteDance in 2023 – a move that allegedly breached non-competition and non-solicitation restrictions in his employment contract.

Shopee sought injunctions to stop Lim from working for the Chinese tech giant and to prevent him from soliciting Shopee clients and employees.

Since the judgement on the lawsuit was handed down, Singapore’s Manpower Minister Tan See Leng announced that legal guidelines on restraint of trade clauses should be finalised in the second half of this year.

Tech in Asia spoke to experts from the human resources, public relations, and legal fields to get their reactions to the case. Here are their edited views.

Leigh McKiernon, founder/president director at StratEx:

“Without getting into the specifics of this case, I’ll say I’m not a fan of non-competition clauses. They’re the corporate world’s version of ‘If I can’t have you, no one can.’

Why do companies include these clauses? One reason companies give is that they’re pumping valuable resources into training employees. By resources, they mean two-hour seminars on how to leverage synergistic paradigms to streamline workflow. In layman’s terms, that means how to make pointless meetings shorter by talking faster.

Then there’s also the idea that an employee who leaves will take ‘trade secrets’ with them and cause harm to the firm. This is often pretty far-fetched and highlights the fantasy that these companies have something worth stealing – most don’t.

As for the ethics of noncompete clauses, I think it’s pretty simple. When you limit where someone can work after they quit your company, you’re not just tampering with their LinkedIn profile; you’re manipulating the very DNA of social mobility.

To be clear, I do think there is a place for non-competition clauses. They just need to exist on fairer legal terms and have strong legal basis. Putting them in contracts purely as a scare tactic isn’t the solution.

There is a need to highlight that the malice aspect of an employee’s behaviour is addressed by existing laws. In addition, companies can use the garden leave concept if they don’t want someone to have active knowledge.

If a company is developing the next amazing galactic innovation for NASA (National Aeronautics and Space Administration) and there’s a competitor, then it makes sense to limit that knowledge transfer. But we already have things around patent law to cover that.

However, companies are using non-competion clauses for sales or marketing people who are two years out of university. It doesn’t make sense.”

Cho Pei Lin, managing director at APRW:

“When Shopee commenced the suit against its former employee, the company must have sought legal advice but did not think much about the impact of a litigation matter on its reputation and brand. Shopee is not the only company that acts like this.

At the start of a litigation process, most organisations focus only on wanting to enforce their rights under the law. At best, Shopee must have thought the case would have little impact on the public. But it has been proven wrong – not just in the courtroom but in the court of public opinion as well.

As of the afternoon of Feb 8, CNA’s LinkedIn post on the story had 270 reactions, 22 reposts, and 16 comments while the Telegram post had 745 reactions and more than 106,000 views.

In these posts, many people viewed Shopee as a bully and applauded the judgment.

Generally, big corporate organisations that sue individuals will be in a David vs Goliath situation, and they need to carefully manage communications with key stakeholders to ensure the correct narrative is communicated.

When matters are before the court, it is necessary to align communication objectives with the legal team as media often quote directly from the judgment, legal submissions, and/or what was said in open court.”

Max Ng, senior director at Gateway Law Corporation:

“In Shopee Singapore vs Lim Teck Yong, the High Court was asked to grant an interim injunction restraining the defendant from soliciting Shopee’s clients and employees, and in the alternative, from working with any of Shopee’s competitors.

In such cases, a court would have to consider a variety of factors.

First, the court considers whether there is a ‘serious question to be tried’. After extensive analysis of the arguments and evidence presented to it, the court found that Shopee had failed to do so.

The judge said the company’s ‘prospects of success are so small that they lack substance and reality’. Ouch.

Another factor that a court examines is something called the ‘balance of convenience’. This means that the court will take whichever course appears to carry the lower risk of injustice, should that course turn out to be ultimately ‘wrong’.

Where the balance of convenience is even, a court will also then not disturb the current status quo. In this case, the status quo is that Lim, the defendant, had already started work with his new employers.

The court further held that even if there were serious questions to be tried, it would not have granted the interim injunction sought in this case on the balance of convenience.

The results of this judgement once again demonstrate the difficulties in enforcing restrictive covenants in Singapore.

However, I am sure employers will continue to have such clauses in their employment contracts.” TECH IN ASIA