Employers are increasingly inserting non-competition and non-solicitation clauses (commonly referred to as “restrictive agreements” or “trade restraint clauses”) into employment contracts and/or termination agreements in order to continue to exercise control over an employee`s actions or obligations after termination, to protect against unfair competition and to maintain a stable workforce. If such restrictive agreements are to be introduced only upon or after the termination of an employee`s employment, it should be noted that the employee is not obligated to accept such non-compete obligations, non-solicitation clauses and/or confidentiality obligations. If he does so, it is likely that after negotiations on the basis of negotiations, an amount of payment greater than what he is contractually entitled to will be paid for an amount that will compensate him for the damage he suffers as a result. This case illustrates the importance of a legitimate interest in supporting a restrictive agreement. Where a contract provides for the protection of trade secrets, the employer must demonstrate a legitimate interest in restricting its employees that goes beyond the protection of trade secrets. The plaintiff resigned from the defendant and subsequently informed it of its intention to create its own competing company. The defendant objected and reminded them of the restrictive agreements and threatened to sue if they breached. However, the present action was brought by the applicant in order to declare that the restrictive agreements in its contract were void and unenforceable. It should be noted that while courts have upheld increasingly restrictive agreements in various business contexts, this trend does not extend to restrictive agreements in employee contracts.
At CLAAS Medical Center Pte. Ltd. v. Ng Boon Ching, the Court contrasted the liberal approach of restrictive agreements in the context of a sale of business with the underlying approach in the context of an employee contract and concluded that unequal bargaining power requires a stricter approach with respect to restrictive agreements in employment contracts. For the restrictive agreement to be valid, its scope must be proportionate. The courts will consider factors such as: In addition to the “territory” to which the restrictive agreement will apply, the restrictive agreement should also be limited to a specific demographic group. The restrictive agreement cannot prevent competition for customers in the territory and must be limited to the employee`s former customers/customers. In Singapore, restrictive agreements are generally prima facie unenforceable unless the employer can demonstrate: (1) that it has a legitimate interest in the property to be protected by the limited agreement, and (2) that the agreements are reasonable and do not go beyond what is reasonably necessary to protect the interest. It should be noted that the employee`s express acknowledgement of the clause that the clause is appropriate does not preclude the court from concluding that the clause is inappropriate and therefore unenforceable. In addition, restrictive agreements are not respected in the event of termination of the contract by the employer. For example, if an employee is unfairly dismissed, they may terminate the contract and not be bound by the obligations of restrictive agreements.
Thus, a clause in the employment contract stating that the restrictive agreement is enforceable even if the employee is wrongfully dismissed is invalid. It was said in Man Financial that an employer cannot simply blatantly restrict the entrepreneurial freedom of a former employee. Public policy stipulates that a person cannot be prevented from exercising his natural abilities and talents (even if these skills and talents are acquired in the course of his employment). (d) (and in the event of termination of employment in employment matters) the termination indemnity must be consistent with the public policy underlying the avoidance of the party at fault. All restrictive agreements are prima facie void unless the Covenant has been able to demonstrate that they are necessary to protect the legitimate interests of the parties concerned and the public. This article provides a brief introduction to the types of restrictive agreements that could be included in an agreement between employer and employee, as well as some important issues to consider when deciding whether a restrictive agreement is necessary and valid. In the event of a dispute between employer and employee, we strongly recommend that both parties seek advice from a reputable and reliable employment lawyer in Singapore. Given the restrictive nature of these clauses, they are enforceable in certain circumstances. Below we discuss the circumstances under which such clauses may be applied in Singapore.
For a restrictive agreement to be valid, the first question is to determine the legitimate interests that the Covenant seeks to protect. The second question is to determine the scope of the restrictive agreement necessary to protect those interests. This restrictive agreement is intended to prevent the Covenantor from recruiting the company`s employees who work in the same teams as the Covenantor or those over whom it had direct influence. loyal customers). That agreement should be limited only to the activities of the company in which the contractor was previously involved. “Restrictive agreements” are common clauses in an employment contract in which the employee (also known as the “covenanter”) agrees with the company (the “covenantee”) to limit some of the covenantor`s rights upon termination of employment. Restrictive agreements may also be part of the terms agreed in a termination agreement. There are various forms of restrictive agreements that may be included in an agreement between an employer and an employee, such as: (a) the conduct of a preliminary investigation to determine whether or not there is a legitimate interest in property that may be protected by the restrictive agreement; and (b) the application of the two criteria for adequacy: (i) whether the restrictive agreement is appropriate taking into account the interests of the parties; and (ii) whether the restrictive agreement is proportionate to the public interest. A restrictive covenant cannot last forever.
In addition, the absence of a time-limit in the restrictive agreement also renders it inappropriate. Although there is no case law that specifies what a reasonable period of time is, 1-2 years can be considered a reasonable point of reference. However, the reasonable time frame varies from case to case. In addition, the restrictive agreement cannot prevent the clause from pursuing a career in another field related to the company`s activities. The restrictive agreement should be limited only to the specific sector of activity in which the signatory was active when active in the undertaking.
