Singapore: Decision on post-employment restraints

In the judgment of Shopee Singapore Pte Ltd v. Lim Teck Yong [2024] SGHC 29, the High Court of Singapore explored the balance between enforcing restrictive covenants in employment contracts and preserving an individual's right to work.
The judgment critically examines the enforceability of non-competition and non-solicitation clauses, underscoring the necessity for these covenants to protect legitimate business interests without overly restricting the employee's future employment opportunities.

The case concerns Lim, a former senior employee of Shopee, who joined ByteDance, a direct competitor, after leaving Shopee. Shopee sought to enforce restrictive covenants, specifically non-competition and non-solicitation clauses, contained in Lim's employment contract to prevent him from working with ByteDance and soliciting Shopee's clients and employees. The High Court, applying the principles set out in the case American Cyanamid Co v Ethicon Ltd [1975] AC 396 ("American Cyanamid"), evaluated whether these restrictive covenants were enforceable, focusing on their necessity to protect legitimate business interests and their reasonableness in scope, duration, and geographical limitation.

The court's decision to dismiss Shopee's application for interim injunctions is significant. The court considered that the non-competition clause did not protect a legitimate proprietary interest over and above the protection of confidential information, already safeguarded by another contractual agreement. Additionally, the court determined that the balance of convenience did not favour granting the injunction, highlighting the potential undue restriction on Lim's employment opportunities and career development.

This judgment underscores the judiciary's careful consideration of restrictive covenants within employment contracts, balancing the protection of business interests with the individual's right to employment and career progression.

Its adherence to the American Cyanamid principles for assessing interim injunctions signifies a rigorous test for the enforceability of restraint clauses.

Employers must demonstrate that the restrictive covenant protects a legitimate interest, is reasonable, and does not contradict public policy. This case serves as a legal beacon for employers, guiding the construction of defensible and equitable non-competition and non-solicitation clauses.

Therefore, employers must draft restrictive covenants with precision and clarity to ensure that they protect legitimate business interests, such as trade secrets, customer connections, and workforce stability.