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Non-compete clauses - or lack thereof

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brian_singapore
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Non-compete clauses - or lack thereof

Postby brian_singapore » Wed, 24 Sep 2014 11:59 pm

So I've a question on non-compete clauses or lack thereof...

We're hiring someone who is currently employed by one of our vendors. The vendor is a supplier of a software platform we use to run one of our lines of business. We're hiring the individual to help manage the platform from our side of the fence.

The individual applied for a public posting for the role. Before entering into any discussions with the individual, we cleared the potential hire with our in-house counsel and vendor management teams. They reviewed all of our agreements and determined there was nothing in our contracts with the vendor that prevented us from hiring one of their staff.

The individual has now resigned and his employer is aware he will be joining our organization, working in the line of business the vendor's platform supports. The individual's manager has warned him that his employer may sue him and warned him that even if he won, he'd still suffer the costs, hassle and heartache of a lawsuit with his employer. (i.e. FUD) The stated basis for sueing him would either be company policy stating no one may work for a client prior to 1 year after leaving the vendor's employ and/or concerns over the potential for intellectual property to be given to his new employer (us). The company policy is included in the company handbook which the employee wasn't aware of. He has been employed a very long time by the vendor and it's addition may or may not have preceeded his hiring. In case it's relevant, we don't have any need for the individual to supply anything related to the vendors IP and would counsel him (possibly including signed statements to the effect) preventing him from bringing or disclosing any vendor IP.

As per the individual (and I believe him) there is no non-compete clause in his contract. In addition there is no reference in his contract to the employee handbook. Nor has he directly signed or acknowledged any limitation on his ability to work for clients. In addition, there are numerous precedents of our organization hiring the vendors employees over the last 15 years.

In most countries I've worked in, I'm pretty clear what the rules are. But I know that Singapore takes a much more buyer beware to employee/contract law then most places I've worked and I don't know if there are any relevant interpretations in Singapore common law around these types of issues.

So my questions are:
1) Would anyone be able to provide an informed opinion on whether there is any basis for the vendor to sue their employee.
2) Would anyone be able to PM a reference to a well established law-firm with an employment law practice who could provide impartial, professional advice to the employee.

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Postby Strong Eagle » Thu, 25 Sep 2014 12:20 am

I think his former employer is blowing smoke out their collective arses.

a) There must exist a signed non-compete clause, or at the very least, a reference to a document with the non-compete clause, that the employee has agreed to.

b) A non compete clause is generally intended to keep an employee from moving to a competitor and divulging trade secrets. The employer here would be hard pressed to prove any damage.

c) If other employees of the employer have moved to other positions in similar roles, and a non compete has not been enforced, it probably cannot be enforced here.

d) Non compete clauses have been thrown out as restrictive of free trade if it can be show that a simple confidentiality agreement would accomplish the same goal.

e) The employer, if they decided to pursue a lawsuit, would have to prove that the non compete clause is reasonable and justified, and that the non compete is limited in scope, that is, doesn't prevent the employee from taking any kind of job anywhere.

Read this link: http://www.lawgazette.com.sg/2012-02/331.htm

The bar is set fairly high in Singapore to enforce non compete clauses.

I'd tell the employer to f*ck off, that if they continue to persist you will counter sue for costs and aggravation of a frivolous law suit. They're probably trying to extract a cash ransom from you, if they can get away with it

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Postby sundaymorningstaple » Thu, 25 Sep 2014 7:05 am

For the record, if it is a stated policy that cuts across the entire staff of the company, e.g., in the company handbook, then it is not required that said Non-compete clause be a signed document in the contract of employment. In fact, it can just be a company wide memo for it to be valid. Therefore, the proof is now needed that he was never given or pointed to the company handbook. If the company handbook is in a central server folder open to all in the company, it may be a little hard. Makes sure he proceeds with caution.

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Postby brian_singapore » Thu, 25 Sep 2014 8:56 am

Thanks for the article. I just finished reading it. Interesting note at the end re: poaching.

The upshot is the rules governing non-compete are broadly similar to previous countries I've worked in.

@sms - interesting re: handbook and policies. What are the limits around what can and can't be included as 'company policy'? It opens the door to de facto changes to employment contracts.

Re: proceeding with caution - every conversation has closed with 'please obtain independent legal advice' ☺

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Postby PNGMK » Thu, 25 Sep 2014 10:06 am

Bottom line in Singapore is that you can't be restricted from practicing your trade (or profession). Of course trade secrets, client lists, IP is a different matter.

I myself have a non compete / no poach clause in my new contract. First time ever I might add; it has a garden leave clause. If the garden leave is not too excessive maybe just wait that out?

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Postby Strong Eagle » Thu, 25 Sep 2014 11:34 am

sundaymorningstaple wrote:For the record, if it is a stated policy that cuts across the entire staff of the company, e.g., in the company handbook, then it is not required that said Non-compete clause be a signed document in the contract of employment. In fact, it can just be a company wide memo for it to be valid. Therefore, the proof is now needed that he was never given or pointed to the company handbook. If the company handbook is in a central server folder open to all in the company, it may be a little hard. Makes sure he proceeds with caution.


This may well be so, SMS... not one to question a man with the experience and expertise that you have... and... I did a lot of research on non compete clauses in Singapore, and I conclude that unless they are very tightly written and specific to the job/person at hand, they are useless.

Blanket non compete clauses have been shot down multiple times by the Singapore courts. It's necessary to be able to show damage, and a blanket policy doesn't meet the criteria... at least as far as I've researched.

I'd have no qualms about hiring the person that brian_singapore was considering, and I would tell them to f*ck off.

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Postby sundaymorningstaple » Thu, 25 Sep 2014 11:44 am

brian_singapore wrote:
@sms - interesting re: handbook and policies. What are the limits around what can and can't be included as 'company policy'? It opens the door to de facto changes to employment contracts.


Defacto changes to employment contracts here are the norm. As long as a change in policy is company wide in nature and cuts across all employees, then they can do it. However, they cannot restrict it to a single department or employee unless it is by written notice and agree upon in writing/signed by both parties. If it is a company wide change and you find the impact too hard, then you either try to renegotiate your contract or you resign. You will find that in Singapore, unless there is a collective agreement via the union, and you fall outside the purview of The Employment Act, you have little protection in Singapore.

Having said that, PNGMK is correct that it's difficult to enforce a Non-compete clause in Singapore, unless one has/had access to proprietary patents or processes specific to the company that could be valuable in another company's hands.

However, a mailing list of the companies is not considered proprietary information as the can be found in the phone book, as numerous employers have tried to allege in the past to no avail. In order to enforce an non-compete clause the burden of proof is on the Employer and it is damned difficult UNLESS as noted above (and most of that kind of stuff is patented so therefore proveable without too much trouble).

For a much deeper read.......

...the link provided by SE above. (I just posted the link then realized he posted it earlier).
Last edited by sundaymorningstaple on Thu, 25 Sep 2014 11:58 am, edited 1 time in total.

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Postby brian_singapore » Thu, 25 Sep 2014 11:57 am

Thanks. So then the inclusion in a company handbook makes a policy relevant whether there is an explicit reference in an employment contract or not, but still subject to all of the legal interpretations in Singapore.

It means one can't argue that the non-compete doesn't apply simply because its not referred to in their contract. But the non-compete listed in the company hand-book would still be subject to all of the conditions and legal interpretations noted by yourself, Strong Eagle and others in this thread.

Incidently, our answer back to the company is also 'go f*ck yourself'. :)

However the individual in question is naturally apprehensive as its a david and goliath type issue.

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Postby sundaymorningstaple » Thu, 25 Sep 2014 12:00 pm

Basically, yes. If it applies to all across the board so as far as that goes it's legal (with regard to being in a contract or not) but whether it's upholdable in a court of law as to the actual clause itself it subject to Singapore current interpretation of the law, which in all probability is not.

You've got it spot on.

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Postby the lynx » Thu, 25 Sep 2014 1:14 pm

Screw that NC clause. It is abused by some SMEs who think they are hot shots. They put that clause in every employment contract, even to technicians and admin clerks. WTH!

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Postby Mi Amigo » Thu, 25 Sep 2014 4:43 pm

This case sounds like similar experiences I've had in Singapore, where a previous/current employer acts as if the employee is their own property - a toys-out-of-the-pram attitude of "How dare they have the temerity to leave our company." On more than one occasion I found myself having to speak to a person's former boss and basically tell them that we should both be happy and supportive of the employee, who is merely trying to progress in their career.

Notwithstanding all the good advice already given above, If I were in the situation Brian describes, I would also ask the person in my company who is responsible for the relationship with the vendor to have a quiet phone chat with the vendor's account manager along the lines of... "Look, we like your software, we want to continue using it, which is why we are employing person X - namely to further strengthen our understanding of the product and (we hope) our relationship with your company. There is nothing sinister in our intentions; however if your company continues to behave in an unreasonable manner in regard to this hire, then we will have to seriously question your commitment to our success when it next comes to reviewing our options in this area of our business."

If they think there may be $$$ repercussions from their actions further down the road, I would expect any sensible vendor to back off.
Be careful what you wish for

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Postby Strong Eagle » Thu, 25 Sep 2014 8:47 pm

sundaymorningstaple wrote:Basically, yes. If it applies to all across the board so as far as that goes it's legal (with regard to being in a contract or not) but whether it's upholdable in a court of law as to the actual clause itself it subject to Singapore current interpretation of the law, which in all probability is not.

You've got it spot on.


Yes, that's the issue... enforecability... an overly broad clause that prohibits a person from working anywhere will never be enforced by the courts.

And in this case, the person is not going to work for a competitor but rather a client... no damages can be proven and it is an overly broad interpretation of a non compete (compete against what/whom) clause.

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Postby JR8 » Fri, 26 Sep 2014 9:20 am

brian_singapore wrote:So then the inclusion in a company handbook makes a policy relevant whether there is an explicit reference in an employment contract or not, but still subject to all of the legal interpretations in Singapore.


I'm surprised by this. In my experience a contract of employment would be tailored to the employee, pay/leave/expected hours etc, but then it would make specific reference to, and state that the terms of the 'Corporate Handbook' were incorporated within the contract.

Furthermore when I've signed employment contracts, I've had to sign-off that I've read and understood the Corporate Handbook, and agree to it's terms.

So there seems to be a disconnect from that and simply having a Corporate Handbook available, maybe on a server, revising/updating the handbook as and when, and assuming your employees read it, and consent to any revisions... :???:

Corporate Handbook:
'From next year your annual leave is being halved'
Employee:
'Well if it says so in the Corporate Handbook that must be legally binding right???'

If you see what I mean...

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Postby sundaymorningstaple » Fri, 26 Sep 2014 10:24 am

No, I don't see what you mean. We are in Singapore. Not the UK. And, while the laws here are 'very' loosely based on UK law, the interpretations of same are purely local in context.

A number of years ago, during the '97 Asian Financial Meltdown, before the days of Variable Wage Percentages. Lots of companies had to reduce salaries or let people go. So, instead of trying to renegotiate all those contracts, a memo was sent to all staff and I cut everybody's salaries by 10%. Those who were not happy were/are welcome to submit their letters of resignation while the rest would be reinstated as and when it could. In order to facilitate this unpleasant task, while not necessary, I took a 15% chop, voluntarily and publicly so that the rest would feel obligated to do so (being the only Ang Mo in the company). We didn't lose anybody. But I didn't need to do so. We weathered the Financial Crises and eventually reinstated everybody's salaries (who where still working with us - our industry has a notorious turnover rate anyway). The memo or inclusion into the company policy if permanent and across the board is sufficient in Singapore law.

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Postby sundaymorningstaple » Fri, 26 Sep 2014 10:55 am

Taken from the NTUC Workplace Advisory

http://members.ntuc.org.sg/auntiris/vie ... ategory=11

Wage Restructuring


Question Posted On: 29/01/2009 22:30:32

Question: Dear Aunt Iris,

Today our office issued a memo stating that they will cut our salary by 15% and will be take effect immediately on our salary this month. I have joined the company last 07 January 2009. That means my first salary will be affected by the wage cut. My questions are:

1. Can they apply wage cut immediately without notice of a month or so?
2. They mentioned about MVC which is quite new to me. Please see part of the memo below:

-Across the board salary cut of 15%.
Your amended salary advice will be distributed individually by Monday. February 2, 2009.

- Monthly Variable Component (MVC) of 10% from the new salary rate.
If the situation worsen, MVC allows the company to further adjust wages or to commensurate this with the employees performance. There is also a possibility whereby payment of MVC is deferred to for example a 3-months basis. In any case, the company will seek agreement from the staffs prior to implementing the necessary measures.

3. I am working almost everyday on overtime (OT) without pay. I even worked on Saturday and Holidays (during the Chinese New year). Is it right for me ask for some compensation for my overtime even if my contract does not state anything about overtime pay? My contract only states that Office hours is 9 - 6 (Mon to fri).

Please give me some advice on this.

Respectfully,

Nino

Answer: Ref: PC

Hi Nino

Thank you for your email.

With the current economic downturn, some companies may implement various measures, such as shorter work week, temporary layoffs or wage adjustments in order to reduce operating costs. Companies must inform the employees if they decide to implement any of these measures. Monthly Variable Component (MVC) is part of a wage component, which can be used by employers to bring down wage costs in sudden and severe business downturns to survive and save jobs. In bad times, company may make adjustments to the employee’s salary through the MVC.

If you are non workmen earning a basic monthly salary of $2000 or less or if you are under a category of workmen, who earns a basic monthly salary of $4,500 and below, you are covered under Part IV of the Employment Act. Thus, you are entitled to claim overtime payment for working more than your contractual hours of work. You may wish to discuss this issue with your employer.

Hope this clarifies.

Regards


Breach of Contract

Question Posted On: 29/09/2008 10:44:34

Question: Hi,
My friend had just resigned from her job after working for 3 days without give the company prior notice. As such the company is demanding her to pay 2 weeks of her gross salary as compensation. There was no terms stated on period of notice in the contract, but there was a clause in fine prints stating that all other terms in the employees' handbook shall also apply. The 2 weeks notice was stated in the handbook, but my friend felt unjustified to compensate as there was no verbal agreement on the notice period and there was no mentioning of this employees' handbook prior to the contract signing? Please advise if she is still liable for the compensation as the contract contained hidden clauses not made known to the employees beforehand. Thanks

Answer: Ref: SL


Dear Wen Bin,


Thank you for your email.

In general, the clauses/benefits stated in the employees’ handbook will apply for a general group of employees as it is an extension to the employment letter.

On the other hand, a contract or employment letter signed is legal binding between the both parties. However, without the benefit of reading the employment letter that your friend has signed, it is difficult for us to comment on this.

You may advice your friend to contact NTUC @ 6213 8008 if she is a union member or the ministry of manpower @ 6438 5122 for further assistance.


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