📜 What you need to know about non-compete clauses

• Find out more and sign up for Thrive at bt.sg/thrive

It’s in the contract:

Imagine someone leaving Irvins to join Pringles, then designing a new line of #DangerouslyAddictive (and stackable!) fish skin snacks for the moustachioed mascot. (No, we’re not sponsored, just huge fans 🤤) Companies don’t want their ideas and expertise to end up in the hands of their competitors, so they use the dreaded non-compete clause to protect their trade secrets.

Take a look at your employment contract and you may see language like:

“You shall not, for a period of three months from the termination date, directly or indirectly engage in any business activity that is competitive with the company.”

The contract may also state that your employer is entitled to take you to court if you breach the agreement. They may, among other actions, apply for the court to block you from violating the non-compete or sue you for compensation. Scary, isn’t it?

In January, the US moved to ban non-competes from employment contracts, with President Joe Biden saying such clauses restrict millions of workers from taking a better job and pay in the same field.

In Singapore, such clauses can range from three months to two years. They’ve become increasingly common too, says Clarence Ding, partner and head of the Singapore employment practice at international law firm Simmons & Simmons.

Some employers are even deliberately inserting non-competes into contracts to deter their employees from leaving to join a competitor, Ding wrote in a commentary.

The good news:

Just because you’ve signed a contract that has a non-compete clause doesn’t necessarily mean you have to follow it to the letter. So, there’s still hope if you unwittingly signed your contract as a bright-eyed, bushy-tailed young adult desperate for a job.

The Singapore courts tend to side with the employees when asked to uphold such clauses. The onus is on the employer to prove that it has a legitimate interest to protect and the scope of the clause is not excessive, Elaine Low, associate director at Peter Low Chambers, told The Business Times in January.

Examples of employers’ legitimate proprietary interests include advantages or assets regarded as the employer’s property, as well as client and trade connections. However, this doesn’t include the skills or know-how that the employee acquires as part of their job.

If a court finds that the non-compete is unenforceable, it may strike out part of – or the entire – clause.

To determine whether the clause is reasonable, the court will look at factors such as the scope of activity (such as the industry and job scope), geographical scope and the duration of the term. 

What this means is that when you’re jumping ship to a rival company, you’re likely safe to disregard the non-compete clause if:

• You’re in a junior position with no access to confidential information or trade secrets
• Your contract has a non-disclosure clause restricting you from sharing confidential information
• Your new role doesn’t give you many touchpoints with clients
• The non-compete clause has no geographic limits, specified length of time or entirely prevents you from working for a rival regardless of role
• The clause covers all employees regardless of the nature of their work

That said, special circumstances may apply if you had negotiated the non-compete clause with your employer before signing the contract. 

If, say, you had brought down the duration from six months to three months, the courts may be more likely to find that the clause is reasonable to enforce since it’s something you suggested and negotiated for.

In 2019, former member of parliament and labour movement leader Zainal Sapari flagged excessive non-competes as an example of unfair and unethical behaviour by employers. But even as the US considers a ban on such clauses, employment lawyers generally do not think Singapore will follow suit. 

Regardless of their enforceability, you should still keep your eyes peeled for non-competes when signing an employment contract. If you’re planning to leave for a competitor, read the terms of your existing contract carefully or ask your peers what the industry practice is. 

If you feel like you have been the subject of an unreasonable employment clause in your contract, consider seeking legal advice. Alternatively, you could approach your industry’s union, the Tripartite Alliance for Fair and Progressive Employment Practices or the Ministry of Manpower for assistance. 

The last thing you want is to be dragged through a painful legal dispute or be unfairly penalised for something deemed unreasonable by the courts.

TL;DR

• Non-compete clauses in your contract may not be enforceable
• You may not need to follow them if you don’t have access to trade secrets or confidential information…
• Or if your contract already has a non-disclosure clause
• Check that the terms in your contract are not unreasonably wide in scope