MOM: Carefully weigh use of restraint of trade clauses

Employers reminded that restrictive clauses shouldn't be used to 'gain an unfair advantage'

MOM: Carefully weigh use of restraint of trade clauses

Manpower Minister Tan See Leng is advising employers in Singapore to be mindful of enforcing their restraint of trade clauses amid a tight labour market.

"In a tight and competitive labour market, employers would be wise to carefully weigh their use of such clauses, against their ability to attract prospective employees," Tan said.

Restraint of trade clauses are only enforceable if there are legitimate business interests to protect, according to the minister. They should also not be used "simply to stymie business competition or gain an unfair advantage."

Enforcing restraint of trade clauses

Tan extended the advice following questions over the impact of restraint of trade clauses on businesses and whether the Ministry of Manpower (MOM) is expecting stricter enforcements over them.

He said the ministry cannot anticipate the tendency of employers to enforce such clauses, but noted that if they did, the adjudication will fall on Singapore's Courts.

"The enforceability of restraint of trade clauses, also known as non-compete or non-competition clauses, is subject to adjudication by the Courts and dependent on the facts of the case," the minister said.

"The application of these principles by the Courts thus already ensures that restraint of trade clauses do not adversely impact Singapore's labour market flexibility and mobility, and that smaller firms such as start-ups are not unfairly disadvantaged by their competitors' use of restraint of trade clauses."

MOM previously said guidelines on enforcing restrictive clauses are underway and will likely be released on the second half of the year.

Support for employees

Meanwhile, Tan also advised employees subject to unreasonable employment clauses to seek assistance from MOM, their unions, or the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP).

"The tripartite partners are committed to making sure that unreasonable employment contract clauses do not become a norm in our workplaces," the minister said.

So far, the number of complaints received by TAFEP over restraint of trade clauses has "remained low," according to the minister.

Early this year, Shopee attempted to sue a former senior executive for joining ByteDance, the parent company of TikTok. Retrenched employees of Lazada Singapore also called out their former employer's non-compete clause after facing redundancy early this year.

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