Singapore: Ministry of Manpower targets issuing guidelines on restrictive covenants in the second half of 2024
On 6 February 2024, the Minister of Manpower (the “Minister”) announced that the Ministry of Manpower is working together with the tripartite partners (i.e., the National Trades Union Congress and the Singapore National Employers Federation) to develop guidelines on the reasonable use of restrictive employment clauses such as non-compete or restraint of trade clauses that prevent retrenched and other employees from finding new jobs (the “Guidelines”). The Guidelines are currently being finalised and are targeted to be issued in the second half of 2024.
In responding to questions in parliament on retrenchment practices and the use of restrictive employment clauses, the Minister said that he understands that overly restrictive non-compete or restraint of trade clauses can disadvantage retrenched employees and create difficulties for them in finding new employment. The Minister had also highlighted that the Ministry of Manpower does not condone any exploitative employment contracts and that Singapore’s approach to fair employment and retrenchment practices is a balanced one that protects workers.
Hence, the Guidelines aim to help educate employers on the use of such restrictive employment clauses and shape norms. While we do not have much information on the Guidelines at the moment, we would expect that the Guidelines would also guide employers on tailoring restrictive employment clauses in appropriate employees’ employment contracts such that they would likely be deemed reasonable by the Singapore courts and the Ministry of Manpower, resulting in such restrictive employment clauses being likely to be seen as enforceable by the Singapore courts and the Ministry of Manpower.
Currently, the only advisories that are applicable to retrenchment are the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment and the Tripartite Guidelines on Mandatory Retrenchment Notifications. The Guidelines will be issued and used in addition to these existing advisories. There are currently no advisories on restrictive covenants.
It is currently unclear whether there will be any penalties for non-compliance with the Guidelines. However, the Minister mentioned that currently, if employers do not follow the existing advisories, the Tripartite Alliance for Fair and Progressive Employment Practices would step in to engage the employer to adhere to the advisories and that generally most employers are cooperative when approached, showing that the advisories are working well without the need for additional penalties. Hence, while we do not have much information on the Guidelines at the moment, we are of the view that this infers the likelihood that the Guidelines may not provide for any penalties for employers who do not comply with them.
We will provide more information on the Guidelines once they have been released, targeted to be in the second half of 2024.
