Protection for Employees from Unfair Retrenchment Practices and Exploitative Employment Contracts

1 Dr Tan Wu Meng asked the Minister for Manpower over the past five years (a) how many unionised firms have carried out a retrenchment exercise without notifying the Ministry; (b) what sectors are these firms in; (c) what policy measures exist to ensure responsible human resource practices and tripartism are maintained when a firm decides to retrench employees, especially at a unionised firm; and (d) what action can be taken against firms and employers who are recalcitrant.

2 Assoc Prof Jamus Jerome Lim asked the Minister for Manpower (a) whether the Ministry tracks the prevalence of restricted stock units (RSUs) that are issued as compensation for mid-level employees in companies; and (b) if so, whether the Ministry condones the forfeiting of unvested RSUs by companies even in the event of a retrenchment, rather than a resignation.

3 Assoc Prof Jamus Jerome Lim asked the Minister for Manpower (a) whether the Ministry tracks the prevalence of non-compete clauses in employment contracts for mid-level employees in companies; (b) if so, whether the Ministry condones the enforcement of such clauses even in the event of a retrenchment rather than a resignation of employees; and (c) what efforts have the Ministry taken to better protect employees from exploitative employment contracts.

The Minister for Manpower (Dr Tan See Leng): Mr Speaker, good morning and thank you for prioritising the balance of my Parliamentary Questions (PQs) to be answered this morning. May I now have your permission to address together three oral PQs for today’s Sitting, Question Nos 1 to 3 in today's Order Paper?

My response will also cover the matters raised in the two written questions by Mr Christopher de Souza scheduled for 7 February 2024.

Mr Speaker: Please go ahead.

Dr Tan See Leng: This builds on my response to retrenchment-related issues at yesterday’s Sitting.

Dr Tan Wu Meng and Mr Christopher de Souza asked about the measures to ensure responsible retrenchment practices and actions that can be taken against recalcitrant employers. Let me first re-emphasise that Singapore’s approach is a balanced one that protects workers, but, contemporaneously, we also want to give businesses the flexibility to adjust to market conditions. This balanced ecosystem ultimately creates more good jobs and sustains them for Singaporeans. And it ensures that even when workers are retrenched, the chances of them finding another good job are high. This is demonstrated by our low long-term unemployment and high labour force participation rates.

On responsible practices, we worked closely with the tripartite partners to formulate clear guidance for employers when undertaking cost-cutting measures. This guidance is contained in the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (TAMEM). TAMEM also guides unionised companies to notify their unions early about an upcoming retrenchment exercise. Where it is provided for in the collective agreement, the norm is one month before notifying the employees.

If an employer does not follow the TAMEM, the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) will engage the employer to adhere to the advisory. Most employers are cooperative when approached by TAFEP or the Ministry of Manpower (MOM). This shows that our tripartite advisories are working well without the need for additional penalties, which may negatively affect the wider business environment in Singapore. Unionised companies, in particular, have an interest to maintain a good working relationship with their unions as it is a long-term partnership and should not need penalties to do so. Let me assure Members of the House that the majority of unionised companies have a good relationship with their unions to secure win-win outcomes.

We also work with tripartite partners to assist the affected workers in a timely manner, after we receive the mandatory retrenchment notifications (MRNs). MOM has not received any cases of unionised companies who have not submitted MRNs after carrying out a retrenchment exercise. More importantly, we continue to help workers upskill, reskill and remain employable. This is so that they can find new and better jobs even when they face disruptions.

Assoc Prof Jamus Lim raised questions on non-compete clauses and restricted stock units (RSUs). To be clear, MOM will not, will never, and does not condone any exploitative employment contracts. On non-compete or restraint of trade clauses in employment contracts, the civil courts have clear established principles on when such clauses are acceptable and can be upheld in court; and when such clauses are unreasonable, unjustified and thus, declared void. The civil courts will assess if there is a genuine business need and whether the company has scoped the clause reasonably based on sector, geographical areas and duration. The courts will also balance employers’ needs to safeguard their businesses and employees’ ability to earn a living and take into account that the clause should not be used to help businesses gain unfair advantages.

Employees who believe that they are affected by unreasonable or unjustified restraint of trade clauses can seek assistance from their unions, TAFEP or MOM.

We understand that overly restrictive restraint of trade clauses can disadvantage retrenched employees and create difficulties in finding employment. MOM and the tripartite partners are, hence, also developing a set of tripartite guidelines to provide guidance on the reasonable use of such clauses. This will help educate employers and shape norms, similar to how TAMEM is used. These guidelines are currently being finalised and we target to release them in the second half of this year.

On RSUs, under the Employment Act, only non-workmen, which means those who are not mainly involved in manual labour, may be paid salary via stock options such as RSUs. Such matters are best discussed between the employer and employee as part of their employment contract negotiations. Employment contracts should clearly indicate the conditions under which unvested RSUs are forfeited. As these RSUs are typically given to employees in senior positions, they would be able to negotiate the terms with their employers. Hence, MOM does not track the prevalence of RSUs issued.

Employees with disputes over RSUs may file a claim with the Tripartite Alliance for Dispute Management (TADM) for mediation, failing which the claim may be referred to the Employment Claims Tribunals for adjudication. For claims that exceed the claims limits of the Tribunals, employees would need to start a civil claim at the Courts.

In conclusion, we understand that for employees, the loss of employment is a much more destructive and disruptive process that goes beyond the loss of wages. We will continue to work with companies to educate them on possible cost-saving measures, so that retrenchment remains a last resort. The Government will also continue to work closely with tripartite partners to protect workers’ interests and ensure at the same time that Singapore remains a competitive global hub that continues to provide good jobs.

Mr Speaker: Dr Tan Wu Meng.

Dr Tan Wu Meng (Jurong): I thank the Minister for his answers to my two PQs yesterday and today. I declare that I have Clementi residents who are affected by the recent Lazada e-commerce retrenchments and that there are sisters and brothers in the Labour Movement who are concerned at the initial reports of what had happened. I have two supplementary questions to the Minister.

Firstly, can I draw the Minister's attention to the MOM statement on its website about the role of MRNs? To summarise the first paragraph, the MOM website basically says that for specified companies, notifying MOM of retrenchment exercises will allow the tripartite partners to help affected employees find alternative employment and/or identify relevant training to enhance employability.

Can I ask the Minister, given that in some cases, the retrenchments may be very substantial and involve large numbers of workers, is there a role for mandating earlier notification to MOM when a firm retrenches a very large number of employees, so that help can be provided to the employees early on, in line with the policy objectives on the MOM website?

Secondly, Mr Speaker, one of the Clementi families who contacted me mentioned that during the retrenchment, the company told the retrenched worker that they could not disclose information on the terms of the retrenchment to anyone. I understand this was a verbal instruction, but verbal instructions do have weight when a worker is worried about what will happen next. Can I ask the Minister, does MOM have a position on such non-disclosure arrangements when it pertains to a worker sharing information with a Government agency such as MOM, or for that matter, with a key tripartite partner such as the union? Because some residents have said they are worried. When they face such clauses, they are worried about whether they feel comfortable to share with MOM about what has happened or with their Member of Parliament, for that matter.

Dr Tan See Leng: I thank the Member for his supplementary questions. I want to reassure the hon Member that MOM takes care of all workers, in addition to his Clementi resident. In terms of TAMEM and TAFEP, we cover every constituency, every division and every Group Representation Constituency (GRC), including from the west to the east, from the south to the north. That includes residents living in Sengkang and Aljunied GRCs.

From 2019 to 2023, MOM received around 16,300 MRNs. The important point to note is that the compliance rate over the years has continued to improve. I do not have the entire spectrum of statistics, but this five-day MRN period strikes a balance between allowing employers sufficient time to finalise their decisions and collate the required information for submission, while still allowing for the prompt provision of career facilitation services and programmes to assist the affected workers.

For the hon Member, when you run a business, most companies do not want to retrench their employees at will. For them, retrenchment is always a last resort. Plans are extremely fluid, and plans can change just before retrenchment. Because employers can and would want to adopt other or alternative cost-cutting measures, perhaps the redeployment of affected employees to other roles; hence, we have to strike that very fine balance.

When you talk about whether there have been late submissions, it is important to note that today, from 2019 to 2023, from our MRN data, nine in 10 eligible employees received retrenchment benefits. For the rest who do not, we continue to work with them. There is TADM, and the unions will continue to represent them, so long as they are unionised.

To the hon Member's resident who was affected, he has also written to me. We have replied. The terms of the settlement are indeed confidential. We respect the tripartite agreement and the conciliation that has been reached. We respect the wishes of all parties. But the Food, Drinks and Allied Workers Union (FDAWU) will be able to represent Dr Tan's resident in this particular instance.

So, I hope that that gives you that reassurance that, indeed, in this retrenchment exercise, MOM has been actively, pre-emptively and proactively working behind the scenes with each of our tripartite partners to ensure a swift resolution to this very unfortunate incident.

Mr Speaker: Assoc Prof Jamus Lim.

Assoc Prof Jamus Jerome Lim (Sengkang): Thank you, Speaker and thank you to the Minister for his extended discourse on protections for retrenchment. I wish to take a step back in the process toward the pre-employment aspects of this.

I accept that Minister has shared about the plans for stronger regulation in this matter that will be announced in due course. If I could enquire about the possibility of, perhaps, even outright prohibitions on non-competes, but specifically for mid-level and lower-level employees? While I understand that there are certainly benefits for the inclusion of these kind of clauses, including non-competes for senior roles, my concern has to do with the danger of this kind of inclusion of such boiler-plate language for mid-level and low-level roles because of the chilling effect it can have for employment in general.

Moreover, just like Dr Tan's residents, many of our mid-level and lower-level resident employees cannot afford legal recourse, unlike senior employees.

Dr Tan See Leng: I thank Assoc Prof Jamus Lim for his supplementary question. First, we do not have intention to introduce more regulations. So, let us be clear on that part of it.

We have, prior to this incident, planned quite extensively and worked on various initiatives with our tripartite partners to come up with guidelines on such clauses. And as I have said, it so happened that the Lazada retrenchment happened at this time. But even before news of this broke out, we were already planning to see how we can establish guidelines to offer higher knowledge, understanding between companies and employers, and also to elevate the level of understanding for these non-compete clauses and restrictive type of covenants for our workers.

That has resulted in a set of new guidelines which is worked out with all of the tripartite partners and which we will be releasing in the second half of this year. So, you can understand that when you set up a new set of guidelines, a lot of pre-work thinking, thought process, engagement and dialogues would have gone on behind the scenes in coming up with this set of guidelines.

We are very clear in terms of RSUs or non-compete clauses that, in general, manual workers, workmen who are not involved in strategic budgets, operations and so on, will be protected against these restrictive clauses. Having said that, it would not be possible for us to regulate every single negotiated contract because the nature of businesses, from financial services, fintech to manufacturing, to all kinds of professional services and so on – if there is a one-size-fits-all solution, I would really like to hear how that could ever be possible.

What we have undertaken is a nuanced approach where any senior-level employee, in terms of the negotiation, can always reach out to TADM and if it exceeds beyond certain claim limits, there is also the civil courts for them to take action. Assoc Prof Lim was saying that this group of mid-level employees may not have the ability to do so. Generally, we will help them but in the negotiation of RSUs, stock options, in lieu of actual wages and so on, I think most of them are at a different level of seniority, maturity and experience when they negotiate and enter into such contracts.

I hope that we should not think of smearing across as a one-size-fits-all policy because I think that would be setting ourselves back.

Mr Speaker: Mr Murali.

Mr Murali Pillai (Bukit Batok): Mr Speaker, Sir, on a point of information, may I convey to the hon member Assoc Prof Jamus Lim, from a civil law perspective, these restraints of trade clauses are prima facie unenforceable, unless they are shown, and the burden is on the employer to be reasonable and there is a legitimate proprietary interest to protect? So, that is the position at law.

Mr Speaker: Assoc Prof Jamus Lim.

Assoc Prof Jamus Jerome Lim: And if I could clarify to the Member Mr Murali that, that is precisely because why I mentioned the dangers of these boiler-plate language – because of the chilling effect. Even if they are unenforceable in a court of law, the danger is that they have a negative effect on employee rights, even before they can be potentially challenged.

Mr Speaker: Mr Yip Hon Weng.

Mr Yip Hon Weng (Yio Chu Kang): Thank you, Mr Speaker. I have a short supplementary question for the Minister. Can the Minister share whether MOM has any of these early warning or intelligence capabilities that can ascertain which unionised companies intend to carry out retrenchment exercises, so that the tripartite partners can do some preparatory or advance work to help workers that are about to be retrenched?

Dr Tan See Leng: I thank Mr Yip for his question. I think, in an ideal world, we would like to have information available to us at our fingertips all the time. But, as I have shared earlier on, retrenchments typically are one of the last resort measures that a company would resort to. And not just retrenchment as an exercise, the number of retrenched employees is also one of those fluctuating numbers; and again, it is something that I believe for the senior management of any particular company, if they should even eventually contemplate going down that route, it would be a very painful measure. So, for MOM or the tripartite partners to have advanced knowledge, I do not think that it is possible.

However, having said that, there are other proxy indicators, for instance, like market disruptions, geopolitical uncertainties, disruptions in terms of transformation, new technology – these are things that we face as an open economy.

Hence, our preventive, pre-emptive and very proactive stance has always been to make sure that all of our workers continue to be equipped to have that resilience to withstand all of these disruptions by upskilling and reskilling.

And we do not just support the workers. We have indeed rolled out significant number of measures to support our businesses as well to help them transform. So, you have the Industry Transformation Maps (ITMs), pari passu with that with the Job Transformation Maps, we have rolled out Career Conversion Programmes to help businesses and employees with conversions in terms of their careers. And we also work very closely with our Labour Movement, our brothers and sisters, in rolling out Company Training Committees, which is spearheaded by the National Trades Union Congress (NTUC). And there are e2i and Workforce Singapore (WSG) to help these workers.

We believe that a very comprehensive holistic solution is much better than trying to understand and pick out which one particular company is going to have retrenchments and and try to stop it. I hope this reassures the Member.

Mr Speaker: I will just say that there are employers, and there are employers. Let us move on. I think I we are only at Question No 3. Next question, please, Dr Tan.