Thursday, December 3, 2009

On restricting employees from competing or soliciting

It seems a fairly common practice in Singapore for employers to contractually impose post-employment restrictions on their employees to prevent them from working for a competitor or taking fellow employees away.

Because of these restrictions in their employment contracts, many employees worry that they cannot work for companies of their choice after leaving their employers. Further concerns which they have include:
  • They cannot earn a living during the period of restraint, especially if their skills are not easily adaptable to other kinds of work.

  • Their skills may be rendered sterile if not actively used.

  • Their work experience will be adversely affected.
Why do employers impose such restrictions? Well, there are legitimate reasons for doing so if an employer wants to protect certain interests, such as:
  • Preventing unauthorised use of its special trade connections.

  • Preventing unauthorised use of its business secrets.

  • Maintaining the stability of its workforce.
There are two competing principles at stake here: an employee’s freedom to work versus an employer’s right to protect its business interests.

Are these restrictions legal in Singapore? The short answer to this appears to be, it depends – on whether the restrictions are reasonable:
  • First, as mentioned, the employer must have genuine legitimate interests to protect.

  • Second, the extent of the restrictions themselves (such as the types of activity being restrained, the geographical area of restraint, the duration of restraint etc.) should be no more than necessary to protect the employer’s business interests.

  • Third, the restrictions also have to be reasonable from a public policy viewpoint.
If the restrictions fail to meet any of these conditions, they will not be legal in Singapore.

But often, employers in Singapore impose such restrictions unfairly, either (i) simply to deter or “scare” their employees from working for a competitor, even if the employer doesn’t have adequate interests to protect, or (ii) having unreasonable restrictions, such as lengthy non-competition periods or restraining a wider scope of work than necessary or applying blanket restrictions to all their employees (even rank-and-file employees and junior executives) without heed as to whether these restrictions are even relevant to the nature of the jobs involved.

Now, many of these employees are generally helpless to negotiate the terms of their employment, and have very little choice in the matter. They are invariably taken advantage of by unscrupulous employers in these situations and are effectively “scared” or tied down. They usually also lack the financial resources to seek legal counsel of their own.

It would be good if the Singapore government could recognise this issue, and set up a small unit (perhaps at the Ministry of Manpower) to investigate and help mediate complaints in this respect, and also provide general advice to companies about not restraining their employees unduly.


  1. Please lah... since when has the governing party ever for the employees?

    Look at the policies that they churn out.
    Look at the taxes rebates that they formulate.
    All point to an employer centric model.

    I wonder if the day where the employee has more say than the employer will ever come!

  2. The Employment Act protects employers, not employees. This will not change, nor will the power of employers to do as they deem. As employees, before you sign any contract, read the terms and conditions carefully - clarify and negotiate if need be. This is the only way you can protect yourself legally.