As Singapore prepares new guidance on post-employment clauses, an employment lawyer weighs in on how smart employers should prepare
The Ministry of Manpower (MOM) is in ongoing talks with the National Trades Union Congress and the Singapore National Employers Federation about how and when restraint of trade clauses in employment contracts should be used.
These discussions are expected to result in tripartite guidelines, based on legal principles already established by the courts.
This development follows a string of recent cases that spotlight post-employment restrictions. In particular, the Shopee and MoneySmart decisions revealed how Singapore courts are taking a harder look at non-compete clauses that may go too far.
Public scrutiny also intensified after the Lazada retrenchments, during which laid-off employees were reportedly still bound by restrictive terms. The combination of pushback and rising concerns has sparked a broader reassessment of how such clauses are applied.
Khelvin Xu, Director at Covenant Chambers LLC, spoke to HRD Asia to examine what this means for employers, especially in light of growing legal scrutiny and calls for clearer, fairer boundaries around post-employment restraints.
Post-employment clauses such as non-compete, non-solicit, and confidentiality terms restrict a former employee’s actions to protect the employer’s proprietary information, relationships, and market position.
However, clauses drafted a decade or two ago may no longer reflect current legal standards or business realities, exposing employers to risks.
Xu says it’s not just MOM's impending guidelines pushing companies to revisit their contracts. “There’s a definite trend towards relooking at these clauses, especially ones drafted years ago, sometimes hastily or even without legal advice,” he says.
He notes that many employers are moving beyond the question of legal validity. “They’re starting to ask whether the clause actually serves a business purpose. Some are realising they may not even need a non-compete, depending on what gives them their competitive edge.”
“They start to ask: 'What exactly are my commercial goals? What are the circumstances in which I might want to enforce a clause like this, and can I achieve my goals by other means?'” Xu says. “That’s the kind of deeper thinking we’re seeing from better-advised clients.”
Some employers still use catch-all clauses that restrict everything from industry movement to potential ideas. Xu warns that this approach often undermines the employer’s position in court.
“It does more harm than good to draft overly wide clauses. In Singapore, restraint of trade clauses only stand if they’re reasonable,” he says.
“And if a clause is unreasonable, for example, because the time period is too long, you can’t expect the court to trim the time period down to something more acceptable, then allow the employer to enforce based on that shortened term… It doesn’t work that way.”
He also challenges the view that extreme clauses act as effective deterrents. “That assumption is outdated. Employees are more informed now. Many seek legal advice before they take up employment, or before they leave.”
If one employee successfully challenges an unenforceable clause, Xu warns it can spark wider disruption. “If it turns out the company used the same wording across multiple employment contracts, you could end up with a systemic credibility issue and not just a single dispute.”
Clauses that once seemed sufficient can become ineffective when an employee’s role changes. “If someone starts out in a junior role and gets promoted over the years, the clause that was drafted for their earlier role may no longer make sense,” says Xu.
He also sees risks in trying to impose new restraints midway through employment or at the exit stage without proper discussion. “You can’t just impose a new restriction without the employee’s agreement. It requires a negotiation, especially if the employee holds bargaining power.”
That power dynamic shifts even more during exits. “Sometimes, employers offer additional payment in exchange for post-exit restrictions. Such restrictions are generally enforceable, but there are exceptions, and the process must be handled with care.”
While many contracts include multiple types of restraints, including non-solicit, confidentiality, and non-competition, Xu says employers rarely realise how they can undercut one another.
“There are Singapore cases where the courts have said, ‘If your confidentiality clause already protects your interests, why do you need a non-compete?’” he explains.
This logic can frustrate employers who assume more clauses mean more protection. “It’s counterintuitive, but sometimes adding another restriction weakens your position instead of strengthening it.”
Even apparently well-worded clauses can fail in real-world disputes. Xu shares how employers sometimes rush to court seeking urgent injunctions without notifying the employee.
“In some cases, the court initially grants the order. But after the employee has the chance to respond, the court may discharge the order,” he says. “That’s a real risk. You might win the first round but lose the whole match.”
Xu cautions employers to look beyond short-term tactics. “Don’t start legal action unless you’re ready to go the full distance. Hope is not a strategy. Plan for resistance.”
“Some employers may think, ‘I want to make sure he doesn’t show his face in this town again.’ But then the employee turns out to be smarter or better resourced, or backed by their new employer. And after a long-drawn out battle, the employer thinks: should we even have sued in the first place?” Xu adds.
“That kind of regret only surfaces after the damage is done.”
When asked whether employees push back on restraint of trade clauses at the hiring stage, Xu says it’s uncommon, unless they’re in a strong negotiating position.
“Most candidates are focused on salary and job scope. Pushing back on restraints at the point of hiring can feel awkward; it’s as though you’re already planning your exit,” he says.
However, senior or technical hires may challenge those terms.
“Everyone knows no job is forever. If someone has leverage, they might ask for revisions up front. It’s less common, but not unheard of.”
Can restraint of trade clauses build trust? Xu offers a measured answer. “Realistically, if you wanted to show total faith in your people, you wouldn’t use these clauses at all,” he says.
“But if a clause is tailored, proportionate, and well explained, it may tell employees: we care about protecting the business, but we’re not trying to trap you.”
He’s also candid about template contracts. “I get asked all the time to create a standard restraint of trade clause to use across all roles… That kind of one-size-fits-all thinking causes more trouble than it’s worth.”
Xu recalls cases where employers may have regretted pursuing the enforcement of restraint of trade clauses. “They probably thought the employee would back down. But then the employee gets good legal advice, or backing from a new employer, and suddenly they’re in a fight they weren’t prepared for.”
He stresses the importance of strategy. “It’s not about avoiding legal action altogether.”
“But if you’re going to litigate, go in with open eyes. Understand your odds, your limits, and your risks.”
As a final takeaway, Xu highlights a recurring issue: Employers treating the imposition of restraint of trade clauses as checkboxes to be ticked, rather than decisions with long-term consequences.
“Too often, they want a clause to be quickly drafted. But what they really need is to ask the right question: Does this clause reflect our actual goals, and can it withstand challenge?”
Xu notes that employers who take the time to think critically about these clauses are far better equipped to avoid unnecessary disputes.
Taking a cautious, informed approach signals a company that understands not just the legal risks, but what it’s actually trying to protect.
