SINGAPORE – Guidelines on reasonable use of clauses in employment contracts that restrict retrenched and other employees in finding a new job are being developed by the Government together with unions and employers, said Manpower Minister Tan See Leng on Feb 6.
These guidelines – targeted to be released in the second half of 2024 – will be in addition to the existing Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, and the Tripartite Guidelines on Mandatory Retrenchment Notifications.
Fielding questions from MPs in Parliament on retrenchment practices and the use of non-compete clauses and restricted stock units, especially in the light of the recent Lazada retrenchment exercise, Dr Tan said it is understood that overly restrictive employment contracts can disadvantage retrenched employees and create difficulties in finding employment.
Thus, the Ministry of Manpower (MOM) and the tripartite partners are developing a set of guidelines on the reasonable use of such clauses and helping to educate employers and shape norms.
“These guidelines are currently being finalised, and we target to release them in the second half of this year,” Dr Tan said.
“MOM will not, will never, and does not condone any exploitative employment contracts.”
He said the civil courts have clearly established principles on when non-compete clauses – which restrict an employee’s ability to do business with other parties during employment or thereafter – are acceptable and can be upheld in court.
Dr Tan reiterated that Singapore’s approach to fair employment and retrenchment practices is a balanced one that protects workers.
“But, contemporaneously, we want to also give businesses the flexibility to adjust to market conditions. This balanced ecosystem ultimately creates good jobs and sustains them for Singaporeans, and it ensures that even when workers are retrenched, the chances of them finding another good job are high.”
The success of Singapore’s balanced approach is demonstrated by its low long-term unemployment and high labour force participation rates, he noted.
“On responsible practices, we work closely with the tripartite partners to formulate clear guidance for employers when undertaking cost-cutting measures,” he said.
“This guidance is contained in the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, or Tamem, which also guides unionised companies to notify the unions early about an upcoming retrenchment.”
If an employer does not follow the Tamem, the Tripartite Alliance for Fair and Progressive Employment Practices will engage the employer to adhere to the advisory, and most employers are cooperative when approached, Dr Tan said.
“This shows that our tripartite advisories are working well without the need for additional penalties, which may negatively affect the wider business environment in Singapore,” he added.
“Unionised companies, in particular, have an interest to maintain a good working relationship with the unions, as it is a long-term partnership and they should not need penalties to do so.”
In addition, MOM works with tripartite partners to assist the affected workers in a timely manner after the mandatory retrenchment notifications (MRNs).
“MOM has not received any cases of unionised companies that have not submitted MRNs after carrying out a retrenchment exercise. More importantly, we continue to help workers upskill, reskill and to remain employable,” Dr Tan said.
MPs again raised the much-criticised retrenchment exercise carried out by e-commerce company Lazada in January when it let go an undisclosed number of employees without consulting the Food, Drinks and Allied Workers Union (FDAWU).
Dr Tan reiterated that after Lazada’s initial lapse of failing to notify FDAWU, MOM stepped in to facilitate discussions between the company and the union to reach an “amicable and fair resolution”.
