Non-compete clauses in Singapore: Between the development of guidelines and the debate on a potential ban

The Tripartite partners (Ministry of Manpower (“MOM”), National Trades Union Congress, and Singapore National Employers Federation) are currently crafting guidelines on non-compete clauses in employment contracts, sparking speculation on a potential ban akin to the United States. The Tripartite partners aim to shape norms and offer employer guidance, but an outright ban seems unlikely. Common in Singapore, these clauses, initially meant to safeguard employers’ interests, have drawn criticism for potential exploitation. While prevalent in senior roles, they have infiltrated rank-and-file contracts, raising ethical concerns.

Non-compete durations, ranging from three months to two years, are common, particularly in industries like sales, finance, and technology. Despite criticism, the Tripartite partners stress the need for guidelines limiting non-compete use to genuine business interest protection, including trade secrets and client relationships. However, some lawyers mentioned that an American-style ban is unlikely, citing Singapore’s business-friendly environment and the requirement for legitimate and reasonable clauses.

The forthcoming guidelines lack legal power but are expected to recommend fair payment during non-compete periods and suggest maximum enforceable durations. Recommendations may also include guidance on exempt employee categories and emphasize clear communication of employment terms.

The Tripartite Alliance for Fair and Progressive Employment Practices (“TAFEP”) set up in 2006 by the Tripartite partners, stresses the importance of fair contracts for employer and employee protection, encouraging transparency and trust. Employees and employers are advised to consult TAFEP’s website for fair employment contract information, with unionized workers encouraged to seek union support for unreasonable clauses. 

Sources:  

https://www.mom.gov.sg/newsroom/parliament-questions-and-replies/2023/0421-written-answer-to-pq-on-inclusion-of-restraint-of-trade-clauses-in-labour-contracts

https://www.channelnewsasia.com/singapore/non-compete-clauses-employment-contract-ban-unlikely-3541916

Astrid Cippe | Graciane Paitard-Albin

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