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08. Restrictive Covenants
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08. Restrictive Covenants

Definition and Types of Restrictive Covenants

Restrictive covenants are used by employers to protect their business interests, by restricting certain  activities of an employee for a period of time after the employee’s employment with the employer has been terminated.

Types of Restrictive Covenants

Non-compete clauses

Under Singapore law, non-compete restrictions are generally prima facie unenforceable, unless they are reasonably required for the protection of the legitimate proprietary rights of the company. The restrictions must also be (1) reasonable in scope, geographical area and duration; and (2) not against public interest.

Generally, such clauses would have to be specifically tailored, taking into account, inter alia, the nature of the company’s business, the position/job scope/seniority of the employee and the extent of his access to and influence over customers, etc. in order to be considered reasonable. Whether the restraint sought is reasonable under the circumstances is a question of fact, and would depend on a case-by-case basis.

Non-solicitation of customers/employees

Similar to non-competition clauses, non-solicitation clauses are generally unenforceable, unless the employer is able to prove that it has a legitimate proprietary interest to be protected by the non-solicitation clause.

Enforcement of Restrictive Covenants – Process and Remedies

To enforce the restrictive covenants, the employer would first need to bear the burden to prove that the non-compete restriction is reasonable.

In the event that the court/tribunal has found the restrictive covenants to be reasonable and enforceable, and that the former employee has breached the restrictive covenants, the employer may be able to file for an injunction to put a stop to the former employee’s breach. The employer may also sue the former employee for damages cause by the breach of the restrictive covenants.

Use and Limitations of Garden Leave

It is common for employment contracts to include garden leave provisions in Singapore. Where there is no express garden leave clause in the employment contract, an employer may request for an employee to go on garden leave.

Any questions

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