A LEGAL UPDATE ON LABOUR AND EMPLOYMENT LAW
(1) POSTPOST-TERMINATION RESTRAINTS IN EMPLOYMENT CONTRACT: NOTE ON BUCKMAN LABORATORIES (ASIA) PTE LTD v LEE WEI HOONG, DECISION BY JUDITH PRAKASH J DATED 20 JANUARY 1999 IN SUIT 1476 OF 1998, DIGEST 04/99, ISSUE NO 04/99, PG 9. This case illustrates the principles of Singapore law applicable to contractual restraints of trade and confidentiality undertakings imposed by employers in employment contracts. Such restraints of trade are prima facie unenforceable under Singapore law but they are enforceable if the restriction can be shown to be reasonable in the circumstances both as between the parties and by reference to the interests of the public at large. In order for an employer to enforce a post-termination restraint of trade clause against a former employee, it is necessary for the employer to be able to show that the restraint is necessary to protect a legitimate proprietary interest in the employer’s trade secrets and business connections. In Buckman’s case the employer sought to enforce confidentiality undertakings and posttermination restrictions contained in the employment contract of its former employee by applying for an injunction to restrain the former employee from working with competitors of the company and from disclosing confidential information. Judith Prakash J, applying the principles mentioned above, dismissed the application. The court stated that the approach to be taken in ascertaining the validity of a restraint provision was, first, to determine what the legitimate business interests of the employer were and, second, to consider whether the provision as drafted was no wider than was necessary to protect those interests. The court would not give effect to the provision if its main purpose was to inhibit competition in business. The restraint provision in this case imposed a restriction of one year. The geographical area covered by the restraint was very wide. It applied not only to countries in which the employee had significant customer contact, but also to countries where the employer company was merely trying to establish a permanent presence. The restriction applied to all products and services supplied by the company both at the time of termination of the employee’s employment and for one year thereafter. It was not limited to the pulp and paper industry which the employee’s employment related to. The wideness of the restriction led the court to infer that its main purpose was to inhibit competition by former employees. There was also a suggestion that identical restraint provisions were included in the employment contracts of all the company’s local employees regardless of the kind of work they did, their seniority, or the level of information they had access to. The court expressed the view that if this was true it would be another factor pointing towards the true purpose of the restraint provision being to restrain competition rather than to protect the company’s legitimate business interests. Realising that some of the restraint provisions might be found to be unreasonable and therefore invalid, the company sought to save some portions of the provisions by requesting the court to separate those which were invalid from those which could stand. The judge declined to do this on the basis that it would lead to uncertainty. An employee would be left in an invidious position of not knowing the extent of his obligations and not knowing what he could and could not do with regard to his future employment after leaving the company. In relation to the undertaking not to disclose confidential information, the employee argued that the information he had access to was not confidential or was easily discoverable by competitors. The Judge also noted that the employee’s position as a technical service specialist was a relatively junior one.
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While in relation to both the restraint of trade issue and the confidentiality issue, the Judge found that the company had satisfied the requirement of showing a serious question to be tried, the balance of convenience lay against granting the injunction applied for. In considering this the Judge took into account the weakness of the company’s case noting that where there is reasonable doubt as to the plaintiff’s eventual success, it is preferable not to disturb the status quo, namely, that the employee was no longer working for the company and had already started working for another company. The Judge also noted the relative youth of the employee and the blight that such an injunction could cause on his future career. (2) SINGAPORE HIGH COURT OVERTURNS MINISTER’S ORDER ON COMPENSATION FOR UNFAIR DISMISSAL: NOTE ON STANSFIELD BUSINESS INTERNATIONAL PTE LTD v MINISTER OF MANPOWER The case is note-worthy as the High Court of Singapore overturned the decision of the Minister of Manpower (the ‘‘Minister’’) in respect of a representation by an employee to the Minister, notwithstanding Section 14(5) of the Employment Act which provides that the decision of the Minister on any representation made under Section 14 shall be final and conclusive and shall not be challenged in any court. The High Court ruled that Section 14(5) will not be effective to oust the jurisdiction of the court if the process by which the decision was reached was not in accordance with the rules of natural justice. The complainant (‘‘Mr N’’), was employed by Stansfield Business International Pte Ltd (‘‘Stansfield’’), as a lecturer in a private commercial school. Stansfield was dissatisfied with Mr N's conduct and his performance as a teacher and asked Mr N to resign with an ex-gratia payment of one-month’s salary. Mr N refused to do so and was issued with a letter of termination without notice. Mr N then complained of unjust dismissal to the Minister. Under Section 14(2) of the Employment Act (Cap. 91), an employee who suffers unjust dismissal can, within one month of the dismissal, make representations to the Minister to be reinstated to his former employment. After carrying out some investigations in accordance with the then existing internal procedures of the Manpower Ministry, the Minister gave the order that there was unfair dismissal and that Stansfield was to pay compensation to Mr N. The Court held that, on the facts, the basic requirements of natural justice were not fulfilled as:1. Stansfield was not told properly or at all what Mr N was alleging against it (hence breaching the rule that a party is to be told of the case he has to meet and of the allegations made against him); the procedure adopted by the Ministry of Manpower was a compartmentalised one of conducting interviews separately with the disputants and, amongst other things, the comments of the relevant officer at the Ministry of Manpower which were communicated to the Minister about Stansfield's motive in terminating Mr N’s employment was not put to Stansfield (thus breaching the rule that a person should be given not only a fair opportunity to put his own case but also a fair opportunity to correct or contradict the case and allegations of the other party).
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The High Court also noted under Section 14 of the Employment Act that, it was the Commissioner who was to conduct inquiry into the dismissal and to report whether the dismissal was justified. On the facts, the labour relations officer in the Labour Department who handled the matter was not of such a rank and the High Court regarded that as a procedural irregularity. Because of the procedural deficiencies, the High Court declared that the decision arrived at by the Minister, on the facts, invalid. It was reported in a newspaper article in the Singapore Straits Times on 4 August 1999 that the Manpower Ministry will not appeal against the High Court’s decision.
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(For more information on the above, please contact Gary Pryke or Raymond Oh. Gary Pryke can be contacted in the first instance at (65) 531 4104 or via email: gary.pryke@drewnapier.com. Raymond Oh can be contacted in the first instance at (65) 531 2224 or via email: raymond.oh@drewnapier.com)
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