In response to parliamentary questions in February 2024, the Minister of Manpower shared that the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) is developing guidelines on the reasonable use of non-compete or restraint of trade clauses in employment contracts.
While the Ministry of Manpower, which is part of TAFEP, understands that employers may have legitimate reasons, such as the protection of trade connections and trade secrets, for including non-compete clauses in employee contracts, it also recognises that such clauses can unduly restrict employees from being employed and earning a living. The growth of smaller companies may also be limited by their competitors’ restraint of trade clauses. Accordingly, there is a need to find a balance between the interests of employers and the protection of employees.
The guidelines aim to prevent the normalisation of unjustified restraint of trade clauses by providing employers with guidance on the adoption of reasonable employee non-compete clauses, especially in respect of jobs that are likely to have a higher impact on the livelihood of employees or that are unlikely to affect employers’ legitimate proprietary interests.
The guidelines are expected to be issued by the second half of 2024.
The enforceability of non-compete clauses in employment contracts has been the subject of several court cases. Employers should therefore keep abreast of developments in this area and determine whether, once the TAFEP’s guidelines are issued, changes to any existing non-compete clauses would need to be made.
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Disclaimer: This article is for general information only and does not constitute legal advice.
