The starting point under Singapore law is that any contractual term restricting a former employee’s business activities after termination of employment (known as a restraint of trade clause or a restrictive covenant) is – on its face – void and unenforceable for being a restraint on the freedom of trade and contrary to public policy. This is unless the former employer/company can show that the restraint of trade is: (a) necessary to protect a legitimate proprietary interest of the employer; and (b) reasonable in the interests of both the parties to the employment contract and the public.

Two decisions by the General Division of the Singapore High Court in the first quarter of 2024 have confirmed the position at law that where the protection of confidential information or trade secrets is already covered by other contractual clauses (e.g., a confidentiality clause), employers seeking to enforce a restrictive covenant (e.g., a non-compete clause) will have to demonstrate that the restrictive covenant in question protects a legitimate interest over and above the protection of confidential information or trade secrets – otherwise, such restrictive covenant would only serve to inhibit competition in business, and will be struck down. Therefore, overlapping restraints of trade aimed at protecting the same legitimate interest may not survive the Court’s scrutiny.

In this update, we summarise the key takeaways from these two decisions in MoneySmart Singapore Pte Ltd v Artem Musienko [2024] SGHC 94 (MoneySmart) and Shopee Singapore Pte Ltd v Lim Teck Yong [2024] SGHC 29 (Shopee)[1], which highlight the often-unexpected challenges with enforcing restrictive covenants and the importance of carefully drafted restrictive covenants in Singapore.  

Demise of non-compete clauses that are coterminous with other restrictive covenants protecting the same legitimate interest?

The facts of Shopee and MoneySmart are analogous. In both cases, the plaintiff company sued a former employee who had joined a competitor shortly after leaving the employ of the plaintiff, allegedly in breach of post-termination obligations in the employment contract with the plaintiff which prevented the former employee from doing so. Interlocutory injunctions were sought to restrain the former employee from joining the competitor and/or acting in breach of restrictive covenants. A key issue in dispute was whether the non-compete clause sought to be enforced protects a legitimate interest, beyond merely seeking to inhibit competition in business.

In that regard, the well-established forms of legitimate interest an employer may seek to protect and maintain are: (a) confidential information / trade secrets; (b) trade connections with customers; and (c) a stable and trained workforce.

Of particular importance in both cases was the employer’s argument that the legitimate interest it sought to protect through the non-compete clause was confidential information, despite there being separate confidentiality clauses in the contracts with the employee. An additional argument in MoneySmart was that the non-compete clause protected a legitimate interest of the employer, given the difficulty of policing any breach of the confidentiality clause. However, the Court in both cases rejected the employer’s argument, applying the general principle laid down by the Singapore Court of Appeal that where the protection of confidential information or trade secrets is already covered by other clauses in the contract, the covenantee will have to demonstrate that the restraint of trade clause in question covers a legitimate interest over and above the protection of confidential information or trade secrets. Given that there were other contractual clauses specifically protecting confidential information or trade secrets, the non-compete clauses in question could not be justified based on the employer’s legitimate interest in protecting confidential information or trade secrets[2]. The Court in both cases further noted that although there have been prior decisions critiquing this proposition, the proposition remains good law as it has not been overturned.

The above general proposition applies equally in the context of other legitimate interests. For instance, in Shopee, the Court held (in obiter) that even if the employer could argue that the non-compete clause protected trade connections with customers (instead of confidential information), such an argument would likewise fail as there is a separate non-solicit clause already restricting the employee from soliciting customers of the employer – the employer would thus have to demonstrate that the non-compete clause covered a legitimate interest over and above the protection of trade connections. Similarly, given the presence of a non-solicit clause prohibiting the employee from soliciting the other employees of the company, the employer could not rely on the maintenance of a stable, trained workforce (in the form of the employer’s existing / remaining employees) to justify the non-compete clause[3].

The Court in Shopee and in MoneySmart also considered whether it could be argued that the retention of the defendant-employee himself/herself amounts to a specific legitimate interest in the maintenance of a stable, trained workforce that could be protected by the non-compete clause (as opposed to the retention of other employees and the workforce generally, which may overlap with a separate clause addressing non-solicitation of employees). While the argument appears to resolve the issue of overlapping restraint of trade clauses, the Court rejected the argument, and clarified that such a legitimate interest in retaining the employee himself/herself can only arise if: (a) the industry is relatively small and specialised; and (b) the employee received training in the specialised field to build up his/her expertise in the area, such that the employee’s skillsets are specialised and difficult to replace, and the employer could rightfully protect its legitimate interest in preventing the employee from leaving for its competitors shortly after receiving extensive specialised training by the employer. In both Shopee and MoneySmart, the Court was not persuaded that there could be such a legitimate interest on the facts, and the employer was thus unable to demonstrate any legitimate interest that justified the non-compete clause[4].

As the decisions in Shopee and MoneySmart demonstrate, seeking to take multiple bites of the same cherry may risk rendering all the restraint of trade clauses void and unenforceable. The Court’s decisions highlight the perils of having non-compete clauses that are not drafted to protect a specific legitimate interest, when such non-compete clauses are coterminous with other post-termination clauses in the employment contract (regarding confidentiality, non-solicitation of employees, and/or non-solicitation of customers).

Other key takeaways from Shopee and MoneySmart

Other key takeaways from the decisions in Shopee and MoneySmart include:

  • In assessing the reasonableness of a restraint of trade clause, the Court will examine whether there was a close connection between the restriction and the work done by the employee prior to leaving the employer. A restrictive covenant can only be reasonable if the employee was actually involved in the specific scope of activities and geographical scope covered by the restraint while he/she was employed. Prohibiting an employee from working for a rival company regardless of the scope of the employee’s work with his/her new employer would not be allowed[5].
  • Cascading restrictions, providing that the scope / duration of the restrictive covenant shall be reduced only in the event that a court finds a broader / longer restriction to be unenforceable, are too uncertain and unreasonable to be enforced[6].
  • The Court will only apply the doctrine of severance (i.e., severing parts of a restrictive covenant so that the remainder may be upheld against the employee) sparingly, to prevent abuse by employers, and uphold the underlying public policy that restraint of trade clauses ought to be drafted precisely, clearly and unequivocally[7].
  • In the same vein, employers are not permitted to elect to enforce only a more limited scope of a restrictive covenant that is otherwise too wide in scope and unenforceable[8].  
  • Confidentiality clauses that expressly extend to all information in relation to a business (regardless of whether such information is actually confidential) will not be upheld by the Court[9]. Furthermore, generic assertions of confidential information in the form of general knowhow acquired by the employee in the course of employment would not be sufficient to establish the reasonableness of the restraint of trade clause[10].

Increasing regulatory expectation for fairness in post-termination restraints of trade

While it is ultimately for the Court to decide on a case-by-case basis whether the restrictive covenants in question should be upheld, the Singapore Ministry of Manpower (MOM) has been taking active steps to set the tone for companies seeking to impose restrictive covenants on their employees.

  • In this regard, the MOM has emphasised in recent statements that “exploitative employment contracts” will not be condoned[11], and employers “should only include restraint of trade clauses (also known as non-compete clauses) in their employees’ employment contracts if there is a genuine need for such clauses to protect legitimate business interests. Restraint of trade clauses must be reasonable in terms of scope, geographical area, and duration – they must balance employers’ needs to safeguard their businesses and employees’ ability to earn a living, and should not be used to provide an unfair advantage[12].
  • To that end, the MOM announced that guidelines to “mak[e] sure that unreasonable employment contract clauses do not become a norm” will be released in the second half of 2024[13]. Although such guidelines will be non-binding in nature, they are expected to be persuasive to the Singapore Court, and may offer additional guidance to companies and employees beyond what the Court has decided so far through case law.
  • That said, it remains unlikely that legislation would be enacted to regulate the use of restrictive covenants in Singapore.  

As restraint of trade clauses are likely subject to increasing scrutiny by both the Court and prospective employees, companies / employers should take heed of both case law and regulatory guidelines in the drafting and enforcement of restraint of trade clauses to maximise the likelihood of enforceability.

If you have questions regarding restrictive covenants or any other employment matter, please feel free to contact us.


[1] Please note that there may be appeals in relation to the decisions in Shopee and MoneySmart. As of the time of this update, there are no reported appeal judgments in respect of either case.

[2] Shopee at [20], [59]-[61] and [68]; and MoneySmart at [23], and [32]-[33].

[3] Shopee at [64]-[65].

[4] Shopee at [66]-[67]; MoneySmart at [34]-[41].

[5] In Shopee, the Court analysed the geographical area for which the employee had performed duties prior to termination, and found that there was no evidence that the employee was in fact involved in the specific geographical areas subject to the prohibition under the non-compete clause (Shopee at [54]-[56]). There were thus serious doubts on the reasonableness of the non-compete clause which extended to markets beyond those in relation to which the employee had any duties or specific information about (Shopee at [82(a)]). Similarly, in MoneySmart, the Court found there was “at best, a very tenuous connection between the restriction [under the non-compete clause] and the work done by the defendant[-employee] while employed by the claimant, much less a close connection”, as the scope of work engaged by the employee prior to termination was different from the scope of activities prohibited by the non-compete clause (MoneySmart at [45]; see also [49]).

Apart from the scope of activities and geographical scope, the duration of the restraint of trade clause (among other factors) must also be reasonable, for the clause to be upheld.

[6] MoneySmart at [53]-[56].

[7] MoneySmart at [58]-[64].

[8] MoneySmart at [60].

[9] MoneySmart at [66].

[10] Shopee at [69]-[71]; MoneySmart at [80].

[11] See https://www.mom.gov.sg/newsroom/parliament-questions-and-replies/2024/0206-oral-answer-to-pq-on-responsible-retrenchment-and-contractual-clauses

[12] See the Ministry of Manpower’s Written Answer to Parliamentary Question on Regulating Non-Compete Clauses in Employment Contracts on 5 February 2024: https://www.mom.gov.sg/newsroom/parliament-questions-and-replies/2024/0205-written-answer-to-pq-on-regulating-non-compete-clauses-in-employment-contracts .

[13] See https://www.mom.gov.sg/newsroom/parliament-questions-and-replies/2024/0229-non-competition-clauses-in-employment-contracts#:~:text=Restraint%20of%20trade%20clauses%20must,or%20gain%20an%20unfair%20advantage.