Recent changes to employment regime in Singapore

Tan Choon Leng on September 6, 2024

Introduction

There has been a suite of legislative changes to the Singapore employment landscape that were recently announced. These changes, together with the upcoming workplace discrimination law, mandatory flexible working arrangement guidelines and non-compete guidelines, are further evidence that Singapore is serious about improving the workplace environment and bringing its laws closer to global norms.

The recent changes can be surmised as follows: (1) a new shared parental leave scheme which allows eligible parents to enjoy an additional ten (10) weeks of paid leave when fully implemented; (2) a new SkillsFuture Jobseekers support scheme which grants eligible workers temporary financial assistance of up to S$6,000 over six (6) months; and (3) a new Platform Workers Bill was introduced in the Singapore parliament to provide enhanced rights and protections to platform workers, including representation through a union, financial protection and work safety.

(1) New shared parental leave scheme and mandatory four (4) weeks of paid paternity leave

At present, all working mothers are entitled to twelve (12) or sixteen (16) weeks of paid maternity leave, depending on several factors, including, but not limited to, whether the child is a Singaporean, and whether the mother has worked for an employer for at least three continuous months before the birth of the child, or if the mother is self-employed, whether she have been engaged for at least three continuous months and have lost income during the maternity leave period.

In his inaugural National Day Rally speech on 18 August 2024, the Prime Minister of Singapore Mr. Lawrence Wong announced that from 1 April 2025, eligible working fathers will be entitled to four (4) weeks of paid paternity leave which must be taken within twelve (12) months from the child’s date of birth. This is an increase from the existing two (2) weeks of mandatory paid paternity leave and two (2) weeks of discretionary paternity leave.

Significantly, Mr. Wong also announced that from 1 April 2025, eligible working parents will get an additional six (6) weeks of shared parental leave (“SPL“) which can be freely allocated between the spouses and used within twelve (12) months from the child’s date of birth. Employees are required to give a minimum of four (4) weeks’ notice to their employer before consuming any paid paternity, maternity or share parental leave. Employees are also encouraged to inform their employers as soon as possible when they are expecting a child, and mutually agree on leave plans with their employer. Details to be discussed and agreed on includes:

  • the number of weeks where the SPL is to be taken;
  • whether the leave taken is to be in continuous block or separate blocks; and
  • the start and end dates of the leave period(s).

(2) Support scheme for Jobseekers and Retrenched Workers

Historically, there has been little to no support for unemployed workers with the exception for low-income families that may apply for short to medium term assistance from social service agencies, and the one-off Job Support Scheme to safeguard livelihoods of local workers during the Covid-19 pandemic.

This new support scheme for jobseekers and retrenched workers was announced at the National Day Rally and represents a paradigm shift in the Singapore Government’s approach to unemployment. This scheme is aimed at supporting lower and middle-income individuals who are involuntarily unemployed and will provide them with interim financial support of up to $6,000 over six (6) months so that they can focus on upgrading their skills for a better long-term job. Eligible participants will receive S$1,500 in the first month and subsequently tapering down. Once the applicant successfully secures a new job during the six (6) months period, they will not be eligible for the subsequent monthly payouts.

This support scheme will receive applications starting in April 2025 and it comes with a list of qualifying criteria. For starters, applicants must be a Singapore citizen and aged 21 and above at the time of application (from April 2025) or a Singapore permanent resident and aged 21 and above at the time of application (from first quarter of 2026). The applicant must have earned an average monthly income of S$5,000 or less in the last twelve (12) months, reside in a property with annual value of S$25,000 or less, and became unemployed due to involuntary reasons such as retrenchment, cessation of business, dismissal or termination due to illness, injury or accident. In addition, applicants must show that they have been actively looking for employment through job applications and/or attending career workshops or trainings and have not received a job support payout in the past three (3) years.

There will be safeguards to prevent any abuse for this scheme and more details are expected to be available closer to April 2025.

(3) Upcoming enactment of the Platform Workers Bill

There have been increasing calls to strengthen protections for workers in the gig economy, especially with the surge in platform workers since the Covid-19 pandemic. An advisory committee was convened in September 2021 to look into the issue and the Singapore government accepted all 12 recommendations from the final report of the committee. Platform workers will be treated as a separate class of workers from employees and self-employed, and will include ride-hailing drivers, food delivery workers, on-demand delivery workers or any worker that relies on digital matching platforms that provide income to the worker.

The Platform Workers Bill was read for the first time in Singapore Parliament on 6 August 2024 and it seeks to provide protections and privileges for platform workers in the following areas, (a) platform operators will be expected to make contributions to the Central Provident Fund on behalf of the platform workers, (b) platform operators will be legally obligated to purchase work injury compensation insurance for platform workers which will allow them to make claims under the relevant workplace injury legislation, and (c) platform workers will have greater representation in the form of new union-like bodies to negotiate and advocate for better working conditions.

Conclusion

With the upcoming changes, it would be incumbent on companies to prepare, review and put in place appropriate measures and processes to comply with the legislative requirements and to handle the anticipated increase in employment inquiries at the workplace.

If you are concerned about how to prepare for the upcoming changes or would simply like to have a deeper conversation about the changes, please contact our Singapore-based colleagues Tan Choon Leng, Vincent Tan and Prashaanth Rajandran, working in the offices of JurisAsia LLC with whom Gowling WLG has an exclusive association.

Future of non-compete clauses in Singapore – through the lens of employers

Tan Choon Leng on August 2, 2024

Imagine the scene – a small but growing company, say Company A, secures a promising candidate (Employee Z) after several rounds of interviews. Employee Z steadily rises through the ranks to become a senior executive of Company A with access to important clients and even confidential information relating to its growth strategy. Employee Z eventually attracts the attention of a larger company, Company B who makes an enticing offer to lead the creation of a new business line which will offer the same products as Company A. Through the grapevine, the management of Company A finds out that Employee Z is about to join Company B and decided that they will try to stop Employee Z from joining Company B in order to protect its business and prevent the potential loss of clients and trade secrets to a competing firm. However, after consulting with several lawyers, they then realise to their dismay that the non-compete clauses in Employee Z’s contract were drafted in a vague manner and may not be enforceable.

A delicate balance – a need for legislative intervention?

The construct in the paragraph above is entirely fictional but many companies have faced similar situations when a key employee leaves the organisation. Companies have devised several ways to retain talent and protect their business interests, and a common method is using non-compete and non-solicitation clauses in employment contracts. Such restrictions could include the prohibition to join competing companies in the same industry, or a prohibition to entice their ex-colleagues or ex-clients to the new company, which may give the new company an unfair advantage.

However, non-compete clauses are also problematic as it may impede upon the ability of an individual such as Employee Z from making a living. If Employee Z is trained in a specialised field and is prevented from joining any competing company for a long period of time, the possible employment options would be narrowed significantly. Other criticisms of the implications of such clauses include disadvantaging retrenched employees who are looking for new jobs, suppressing innovation and keeping wages low.

Given the need to balance the protection of the business of companies against the protection of the livelihood of workers, some jurisdictions have introduced legislation to reform the use of non-compete clauses in employment contracts. For example, in the United States of America, the Federal Trade Commission has enacted a ban against all non-compete clauses for workers, though it must be noted that the legality of this ban is currently challenged in court. Whereas in the United Kingdom, the Government has announced that they will be introducing a new rule that limits non-compete clauses in employment contracts to a maximum of three months, aiming to boost competition and innovation. In Asia, countries such as Malaysia and India have legislated against the use of non-compete clauses, though non-solicitation and confidentiality clauses remain enforceable.

Singapore’s position on non-compete clauses and recent developments in case law

In Singapore, non-compete clauses can be enforceable in certain situations (see paragraphs below). The Singapore government has also announced that the Minister of Manpower (“MOM”) and its tripartite partners are developing guidelines to assist employers in integrating non-compete clauses into their employment contracts. In the meantime, the enforceability of these clauses remains subject to the courts’ discretion.

Singapore’s position on this debate, as mentioned by the MOM’s written answer to MP Mr. Desmond Choo’s question in Parliament on 5 February 2024 on non-compete clauses in employment contracts is neatly summarised as follows:

“The tripartite partners’ position is that employers should only include restraint of trade clauses (also known as non-compete clauses) in their employees’ employment contracts if there is a genuine need for such clauses to protect legitimate business interests. Restraint of trade clauses must be reasonable in terms of scope, geographical area, and duration – they must balance employers’ needs to safeguard their businesses and employees’ ability to earn a living and should not be used to provide an unfair advantage. The courts have established clear principles on when such clauses are unreasonable, unjustified, and unenforceable.”

The Singapore Court of Appeal in the case of Man Financial (S) Pte Ltd (formerly known as E D & F International (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR(R) 663 (“Man Financial”) sets out a two-step test for determining whether a restraint of trade clause (which includes a non-compete clause) is enforceable. The test comprises the following:

  • the court will first consider whether the restraint of trade clause protects a legitimate interest of the employer, AND
  • if the answer to (a) is yes, then the restraint of trade clause will be enforceable if it is reasonable in the interests of the parties, and reasonable in the public interest.

To satisfy the test as enumerated, both limbs must be satisfied. Further, where the protection of confidential information or trade secrets is already covered by another contractual clause (such as a confidentiality clause), the covenantee will have to demonstrate that the restraint of trade clause covers a legitimate proprietary interest over and above the protection of confidential information or trade secrets.

In two recent judgements released in 2024, namely Shopee Singapore Private Limited v Lim Teck Yong [2024] SGHC 29 (“Shopee”) and MoneySmart Singapore Pte Ltd v Artem Musienko [2024] SGHC 94 (“MoneySmart”), the Singapore courts found that the employer in each case had failed to show that there was a legitimate proprietary interest to be protected. In Shopee’s case, the court held that the confidential information was set out along generic categories and was already protected by a confidentiality clause. Also, the employer failed to prove its assertion that there was a risk that the ex-employee would breach the confidentiality and non-solicitation restrictions. Similarly, in MoneySmart, the employer failed to prove that the non-compete clause was meant to protect a legitimate proprietary interest that is over and above the protections afforded by the confidentiality clause. The court also rejected the employer’s assertion that the industry is a small and specialised one and that the employee had received training in this specialised field which would bring this case within the legitimate proprietary interest of maintaining a stable and trained workforce, as espoused by the court in PH Hydraulics & Engineering Pte Ltd v Intrepid Offshore Construction Pte Ltd and another [2012] 4 SLR 36.

Relevance of restraint of trade clauses after Shopee and MoneySmart

From an employer’s perspective, it may be slightly disconcerting to read the facts and outcome of the case in Shopee and MoneySmart. From a simple overview of the facts, both employees in those cases were senior executives, had access to confidential information belonging to the employers, and are joining direct competitors to their former employers, and yet the courts declined to recognise that there was a legitimate proprietary interest of the employer to be protected. If the business interests of the company cannot be protected through non-compete clauses, does it mean that employers are powerless to prevent competition from swooping in to gain an advantage by enticing its staff?

However, the devil is always in the detail, and it should be noted that the courts in Shopee and MoneySmart declined to recognise a legitimate proprietary interest in relation to the non-compete restrictions only. In relation to the non-solicitation restrictions, the court in Shopee commented that it was not disputed that the employer has a legitimate proprietary interest, but there was no evidence that the non-solicitation restrictions were breached or that there was a risk of breach.

As shown in Shopee and MoneySmart, it is insufficient for an employer to make a general assertion that the ex-employee has access to trade secrets and confidential information and if there is also a confidentiality clause in the employment contract that protects the trade secrets and confidential information, the employer will also need to demonstrate that the clause covers a legitimate proprietary interest that is over and above the protection provided by a confidentiality clause.

In practice, we observed that non-compete clauses are often inserted into employment contracts as a default, and it is not unusual that only the time period of restrictions and the applicable jurisdictions are adjusted each time a new employee is onboarded. In the case of an employer who experiences a large volume of employee turnover, it would be impractical for the internal human resources or the legal team to revisit and tailor the template clauses to suit the individual circumstances for each new employee. A further difficulty is that unless the non-compete clauses are regularly updated to account for a change in job scope and responsibilities, there may be a risk that what was previously drafted may not be deemed reasonable later. In the absence of clearly defined proprietary interests in the employment contracts, the question is whether non-compete clauses are still relevant in employment contracts.

Takeaways

While non-compete clauses still have a deterrent effect on employees, it may be less relevant as a tool to prevent potential breaches. However, it may be advisable for employers to wait for the MOM guidelines which are expected in the latter part of 2024 before making changes to their template contracts. In the meantime, employers should ensure that detailed and contemporaneous employment records should be maintained, and confidential information and documents should be clearly marked. There are other mechanisms which may be helpful to protect the company and give the company some time to adjust in case their employees leave the company, such as garden leave and conducting exit interviews.

For the termination of a senior executive, it may also be prudent to enter into a separation agreement to restate and remind them of their confidentiality and non-solicitation obligations.

If you are considering a change to your template employment contracts or facing a potential issue with the enforcement of a non-compete clause, or would like to have a chat to find out more, please contact our Singapore-based colleagues Tan Choon Leng, Vincent Tan and Prashaanth Rajandran.

Temporary relief for contractual obligations under the COVID-19 (Temporary Measures) Act 2020

Tan Choon Leng on April 23, 2020

Businesses and individuals around the world have been affected by unprecedented and unforeseeable supply chain disruptions, manpower shortages and cashflow issues arising from the COVID-19 pandemic. In his speech on the COVID-19 (Temporary Measures) Bill, Law Minister K. Shanmugam noted the increasing difficulties of businesses and individuals in fulfilling their contractual obligations due to the COVID-19 outbreak. To complement the financial schemes, grants and reliefs announced by the Singapore Government in the Resilience Budget and Solidarity Budget on 26 March 2020 and 6 April 2020, the COVID-19 (Temporary Measures) Act 2020 (“Act”) was passed on 7 April 2020.

Temporary relief from financial distress situations under the COVID-19 (Temporary Measures) Act 2020

Tan Choon Leng on March 24, 2020

Through the three budgets as announced by the Singapore Government, a total of S$9 billion will be disbursed to businesses and individuals in April 2020 to counter the impact that the COVID-19 pandemic has had on the business community in Singapore. Businesses and workers in Singapore will receive reliefs through various measures announced by the Singapore Government in the Solidarity Budget and Reliance Budget, through the enhanced Wage Credit Scheme, Foreign Workers Levy, and the Jobs Support Scheme.