Restricting Future Employment of Employee / Duty of Fidelity

August 12, 2014

Can an employee – who had decided to leave his employment – secretly plan and take preparatory steps to compete with his employer while still under his current employment ?

In a recent case in Singapore, the Court said yes unless there is a provision in his employment contract preventing him from doing so. This case serves as a reminder to employers that any non-competition obligations, including the obligation to disclose any information on conflict of interest, should be duly incorporated into the employment contract so that the employer may be sufficiently protected against the above scenario.

Other provisions which ought to be included are confidentiality obligations as well as restrictions against the employee’s collection, usage and disclosure of personal data otherwise than in accordance with the prevailing legislation.

What about an employer’s attempt to restrict the employee from resigning and joining a competitor?

Generally, such provisions are enforceable only if the restrictions are reasonable. The threshold condition is that the restrictive covenant must protect a legitimate interest of the employer, not its head office or any other entities by which the employee is not employed.

If it does protect a legitimate interest, the restrictive covenant will be enforceable if in addition: (i) it is reasonable in the interests of the parties; and (ii) it is reasonable in the public interest.

For a restrictive covenant to work, Singapore employers ought to apply their minds and tailor the restrictive covenant to specifically suit the particular employee’s circumstances. Employers therefore should not adopt a standard clause in drafting a restrictive covenant.

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While the information in this note is correct to the best of the author’s knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as legal advice or a substitute for specific professional advice for any particular course of action. Should you intend to rely on the contents of this note, please seek legal advice applicable to your specific situation.

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