Impact of Stricter Enforcement of Non-competition Clauses in Employment Contracts on Startups and Talent Mobility and Support Available

15 Mr Yip Hon Weng asked the Minister for Manpower (a) whether the Ministry anticipates stricter enforcement of non-competition clauses in employment contracts across various industries; (b) how will this impact startups and talent mobility within the Singaporean workforce; and (c) what support is available to employees facing potentially unfair non-competition clauses in their employment contracts.

Dr Tan See Leng: 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 Courts have held that restraint of trade clauses are enforceable only if there are legitimate business interests to protect. Restraint of trade clauses must also be reasonable in terms of scope, geographical area and duration – they must balance employers' needs to safeguard their businesses and employees' ability to earn a living and should not be used simply to stymie business competition or gain an unfair advantage. 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 startups, are not unfairly disadvantaged by their competitors' use of restraint of trade clauses.

There are genuine business reasons why employers may need to include restraint of trade clauses in their employment contracts, such as to protect trade secrets and trade connections. The facts of each case are different and it is not possible for the Ministry of Manpower (MOM) to anticipate the future tendency of employers to enforce such clauses. However, 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.

Employees who believe that they have been subject to unreasonable employment clauses may seek assistance from their unions, the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) or the MOM. In recent years, the number of complaints received by TAFEP over restraint of trade clauses has remained low. The tripartite partners are committed to making sure that unreasonable employment contract clauses do not become a norm in our workplaces. We are working together to develop a set of tripartite guidelines to shape norms and provide employers with further guidance on the inclusion of such clauses in employment contracts, especially for jobs where the impact to the worker's livelihood is potentially greater and where the nature of the job is unlikely to have a nexus with legitimate proprietary business interests. These guidelines are currently being finalised and are targeted for release in the second half of this year.