Singapore's High Court looks into employer's non-compete clause
In a decision that delved into the enforceability of restrictive covenants in employment contracts, Singapore's High Court recently dealt with a case involving a former employee of MoneySmart Singapore Pte Ltd and his new employer, a subsidiary of MoneyHero Limited, a rival firm.
The case centred on the validity and enforceability of a non-compete clause and a confidentiality clause in the employment agreement between MoneySmart and the worker.
MoneySmart, a company providing online financial product comparison services, sought interim injunctions to restrain the worker from working for MoneyHero's subsidiary, alleging that he had breached these clauses.
The court had to determine whether there was a good arguable case that the clauses were valid and enforceable and if the worker had breached them.
The non-compete clause
The court first examined the non-compete clause, which prohibited the worker from "directly or indirectly engaging with any business or organisation in South-East Asia or any other country where MoneySmart (or its associated companies) operates which provides online financial product comparison services" for a period of 3 to 12 months from the termination of his employment.
The court assessed whether the clause protected MoneySmart's legitimate proprietary interests and if its scope, geographical coverage, and duration were reasonable.
The court found that the non-compete clause did not protect any legitimate proprietary interest over and above the confidentiality clause in the employment agreement.
The court noted that "where the protection of confidential information or trade secrets is already covered by another clause in the contract (ie, the employment agreement), the covenantee (ie, the claimant) will have to demonstrate that the restraint of trade clause in question (ie, the Non-Compete Clause) covers a legitimate proprietary interest over and above the protection of confidential information or trade secrets."
Furthermore, the court determined that the non-compete clause was unreasonable in its scope of prohibited activities, geographical area, and duration.
The court observed that "the clause has indeed been drafted in a cascading manner which appears to be calculated to accommodate, or even invite, the court to apply the doctrine of severance and arrive at the longest permissible restraint period."
The court said that "it is vital that trade restraint clauses are drafted precisely, clearly and unequivocally with respect to the scope of the work of each employee" and that "the practice of imposing wide and general restrictive clauses in employment contracts … should be discouraged as it is unfair and inequitable to the employee."
Worker’s alleged contract breaches
Turning to the confidentiality clause, the court examined whether the information the worker allegedly had access to was indeed confidential.
The clause prohibited the worker from using or disclosing "all information about the [employer] … to the extent known to the [worker]" without MoneySmart's consent.
The court found that much of the information had been shared publicly by MoneySmart and that the company had not treated the information as confidential until the legal proceedings began.
The court noted, "There is no evidence that the [employer] had taken precautions to maintain the confidentiality of the information such as labelling the information as 'confidential' or informing its staff that the information shared with employees in the course of business (such as at the company-wide meetings known as 'All-Hands meetings') was confidential."
The court also said the worker's role as the Head of Technology for MoneySmart's digital insurance platform, stating that "the [worker] would not have been concerned about the business opportunities, strategy, or commercial and financial prospects of [the employer]. These business and strategic aspects of the insurance industry would have been the responsibility of a separate person.”
Non-compete clause not valid
Ultimately, the court concluded that there was no good arguable case that the non-compete clause was valid and enforceable or that the worker had breached the confidentiality clause.
The balance of convenience also laid in favour of the worker, as damages would not be an adequate remedy for either party, and the worker faced the risk of losing his job and stagnation in his skills and knowledge.
The court discharged both interim injunctions against the worker, emphasizing the importance of carefully drafting restrictive covenants in employment agreements and the need for employers to treat confidential information as such from the outset.
