Non Compete Clause – Understanding Non-Competition Clauses in Singapore Employment Contracts

Non-competition clauses, also referred to as non-compete clauses, are a common feature in employment agreements across various industries in Singapore. These provisions typically restrict an employee from joining a competing business or starting a similar enterprise for a defined period after leaving their role. Employers often view such clauses as essential to safeguard proprietary information, trade secrets, and key client relationships.

However, non-compete clauses are not automatically enforceable under Singapore law. Employees reviewing new contracts or involved in disputes over existing ones should understand how the law approaches these restraints.

Are Non-Compete Clauses Enforceable in Singapore?

In Singapore, non-competition clauses are considered restraints of trade and are presumed unenforceable unless the employer can demonstrate that the clause:

1. Protects a legitimate proprietary interest, such as confidential information, trade secrets, or significant client relationships; and
2. Is reasonable in terms of duration, geographical scope, and the activities it restricts—so that it does not unfairly hinder the employee’s ability to earn a livelihood.

This principle has been consistently upheld by the courts and affirmed by the Ministry of Manpower (MOM), which recently reiterated:

“Non-competition clauses are generally not enforceable unless the employer can prove that the clause protects a legitimate business interest and is reasonable in scope, geographical area, and duration.”
— Ministry of Manpower, Parliamentary Reply, 29 February 2024

The courts are unlikely to uphold clauses that are overly broad, vague, or appear to be intended solely to stifle competition rather than protect genuine business interests.

Case Spotlight: Shopee v Lim Teck Yong

A recent high-profile case involving Shopee Singapore has brought renewed attention to the limits of enforceability of Non-compete clauses.

In early 2024, Shopee sought to prevent its former executive director, Lim Teck Yong, from joining ByteDance, the parent company of TikTok, citing breach of non-competition and non-solicitation clauses. Shopee applied for an interim injunction to stop Lim from taking up his new role.

However, the Singapore High Court dismissed Shopee’s application, ruling that the company had not demonstrated a sufficiently strong proprietary interest justifying the restrictions. As a result, Lim was permitted to commence work with ByteDance.

This case highlights the judicial approach in Singapore: non-compete clauses will not be enforced unless they are carefully drafted, commercially justified, and reasonably limited. It also underscores that even senior employees are not automatically bound by such clauses if the employer cannot meet the legal threshold.

How Do Courts Evaluate Non-Compete Clauses?

When determining the enforceability of a non-compete clause in an employment contract, the courts assess several factors:When determining the enforceability of a non-compete clause in an employment contract, the courts assess several factors:

• The nature of the employer’s business and the employee’s role
  A senior employee with access to strategic information may be subject to stricter post-employment restrictions than a junior employee with minimal exposure to confidential matters.
• The reasonableness of the duration and geographic coverage
  A clause that limits competition for six months within a specific region may be enforceable, while one that restricts the employee for multiple years across broad territories is more likely to be struck down.
• The clarity and specificity of the clause
  Vague or ambiguous wording leaves room for interpretation and reduces the likelihood of enforceability.

What Should You Consider Before Signing or Challenging a Non-Compete Clause?

Whether you are reviewing a new employment agreement or navigating a potential dispute, consider the following:

1. Examine the Clause Carefully
   Assess whether the scope, duration, and geographical limits are clearly defined and reasonable.
2. Understand the Employer’s Rationale
   Ask whether the restriction truly serves to protect a legitimate business interest or is unnecessarily restrictive.
3. Seek Legal Advice Early
   Proactive legal guidance can help you understand your rights and options before a disagreement escalates.
4. Negotiate Where Possible
   Non-compete clauses are not fixed in stone. Employers may be open to revising terms—such as shortening the duration or narrowing the scope—or substituting the clause with a less restrictive alternative like a non-solicitation or confidentiality agreement.

RBN Chambers’ Perspective

Non-compete clauses are not inherently unreasonable, but they must be drafted and applied in a manner that is legally defensible and commercially fair. At RBN Chambers LLC, we regularly advise professionals and executives on employment contract issues. Whether you are entering a new role or involved in a dispute over restrictive covenants, we can help you assess your legal position and protect your career interests.

Need Legal Advice on a Non-Compete Clause?
If you’re uncertain about a non-competition clause or are facing enforcement proceedings, reach out to our employment law team for a confidential consultation.