The Singapore High Court in a recent December 20251 judgement held that although modern commerce involves professionals moving frequently between companies, the principles of loyalty, integrity and fair dealing remain at the core of any functioning business environment, and the freedom of choice for clients to engage with whom they please, does not confer a parallel freedom on employees to quietly orchestrate transitions behind the scenes, nor does it diminish the importance of honouring reasonable restraint of trade provisions designed to ensure a level playing field. Reasonable restraint of trade clauses serve a vital purpose, which is to prevent individuals from unfairly exploiting the trust, goodwill and proprietary knowledge acquired in one role for the immediate benefit of another employer.
Understanding the Nature of Non-Compete Clauses
Non-compete clauses are a type of restraint of trade, or a restrictive covenant. They are designed to prevent a former employee from engaging in activities that may compete with their former employer for a specific duration, within a certain geographic scope, or in relation to certain clients or business sectors. Such clauses often come into play in high-level roles where proprietary information, trade secrets, or sensitive customer relationships are involved.
While commonly included in employment contracts, it cannot be assumed that all non-compete clauses or restrictive covenants will ultimately be enforceable against the former employee.
When Restrictive Covenants are Enforceable
A restrictive covenant is enforceable if: (a) it protects a legitimate interest of the employer, (b) it is reasonable in the interests of the parties, and (c) it is reasonable in the public interest.2
Restrictive covenants in the employment context are scrutinised more strictly that in other contexts.
- Legitimate Interests of the Parties
Nonetheless, the Singapore Court has recognised three legitimate interests which an employer commonly seeks to protect through restrictive covenants, which includes:
- its interest in protecting trade secrets or confidential information akin to trade secrets;
- its interest in protecting trade connection (primarily clients or customers but presumably including trade connection with suppliers); and
- its interest in maintaining a stable, trained workforce.3
In determining whether an employer’s trade connection with its clients is a sufficient legitimate interest, it must be shown that the employee has personal knowledge of, and influence over, the employer’s clients4. Factors which the Court will take into consideration include5:
- the extent of the former employee’s knowledge of, and influence over, the clients in so far as it indicates the actual or likely future influence of the former employee over the clients’ decision as to where to direct their business;
- the frequency of the former employee’s contact with the clients;
- the seniority of the former employee; and
- the nature of the former employee’s relationship with the clients.
Protecting legitimate interests are critical in industries like finance, technology, law, or pharmaceuticals, where client retention and confidential processes are extremely valuable assets. However, when the clause simply attempts to stifle competition or control an employee’s future employment options without protecting specific business assets, courts tend to strike it down. Singapore’s judiciary has made it clear that the balance must tilt toward allowing individuals to earn a living, especially when no confidential information or client poaching is at risk.
- Reasonable in the Interests of the Parties
The restrictive covenant must be reasonable in scope, duration, and geographic reach. For example, attempting to enforce a two-year global non-compete clause on a mid-level marketing executive with limited access to confidential data would likely fail the test of reasonableness.
Similarly, a clause barring an employee from working in any capacity in a related industry, regardless of the specific nature of their new role, would likely be considered excessive.
Further, blanket bans covering entire countries or continents are unlikely to be upheld unless the business operates at that scale and the employee held a correspondingly influential position.
The reasonableness of any restrictive covenant is a factual inquiry that varies between each case.
Ultimately, it is important to remember that where the legitimate interest to be protected is trade connection, the purpose of the protection under the law is to prevent the departing employee from relying on his trade connection to draw custom away for a reasonable period of time. The restraint ought not, therefore, to last longer than reasonably necessary to allow the employer the breathing space it needs, free of active interference with its trade connection from the departing employee, to transfer that trade connection to its other employees.6
What constitutes a reasonable period or length of time depends on the strength and persistence of the trade connection and the time it takes to build and cement a new trade connection. That in turn will depend on the particular industry involved, the life cycle of trade connection in that industry and the role of the departing employee in the employer’s business7. All of this will need to be shown through evidence submitted to the Court.
- Reasonable in the public interest
Under this third requirement, the Court considers the impact of the restrictive covenant on local circumstances in determining whether it would be reasonable in the interests of the public.8 As an example, it would not be reasonable to uphold a restrictive covenant which would result in the creation of a monopoly.
Non-Compete vs. Other Restrictive Covenants
Non-compete clauses often appear alongside other restrictive covenants such as non-solicitation and non-disclosure clauses. Generally speaking, non-solicitation and confidentiality clauses are more regularly enforced than non-compete clauses. While the former can be narrowly tailored to protect specific relationships or sensitive information, the latter types of clauses inherently limit broader employment rights.
When possible, employers are encouraged to rely on these narrower restrictions, which are more palatable to the courts and less likely to be deemed unenforceable. Some companies use layered approaches, where non-solicitation or confidentiality clauses are backed by a more limited non-compete clause to cover the rare scenario of direct competition.
Drafting Enforceable Non-Compete Clauses
Employers aiming to include non-compete clauses in employment contracts must be precise and proportionate. A well-drafted clause will:
- Clearly identify the business interest being protected.
- Specify a time period that aligns with the risk posed by the departing employee.
- Limit the geographic scope to the actual operational range of the company.
- Define the restricted activities with enough clarity to avoid ambiguity.
Courts are more likely to uphold a clause that demonstrates thoughtfulness in its drafting rather than one that appears to be a generic template applied indiscriminately.
Employers who find themselves facing a situation where a former employee breaches any restrictive covenants (whether non-solicitation, non-compete or non-disclosure), the employer may have recourse to various legal remedies including seeking injunctions in a timely and urgent manner to prevent further breaches, and potentially claim damages.
Implications for Employees
Signing an employment contract with a non-compete clause should never be approached casually. Seeking legal advice on non-compete clauses in Singapore is particularly important for professionals in roles that deal with confidential business strategies, proprietary systems, or sensitive client information. A clear understanding of how the Courts view these non-compete clauses can empower employees to negotiate fairer terms from the outset and reduce the likelihood of future legal conflicts.
For individuals already bound by such a clause who believe it may be unreasonable or unenforceable, it is possible to apply for a legal review or court declaration challenging its validity. However, this route can be costly and time-consuming, with no guaranteed outcome.
The reported Court decisions in Singapore regularly highlight the necessity of drafting clear, focused, and justifiable terms. Whether you are an employer or an employee, it is advisable to proactively seek legal consultation before entering into any contracts or agreements, which may be more cost-effective in the long run and the larger scheme of things, for all parties involved.
- Guy Carpenter & Co Pte Ltd v Choi Okmi and others [2025] SGHC 241 at [1] (“Guy Carpenter”).
↩︎ - Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd [2014] 3 SLR 27 at [34] (“Lek Gwee Noi”), citing Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR(R) 663 (“Man Financial”) at [70].
↩︎ - Lek Gwee Noi at [58], citing Man Financial at [81], [121]. ↩︎
- Guy Carpenter at [125]. ↩︎
- Guy Carpenter at [125], citing Lek Gwee Noi at [74]. ↩︎
- Guy Carpenter at [129], citing Lek Gwee Noi at [114]. ↩︎
- Guy Carpenter at [129], citing Lek Gwee Noi at [114]. ↩︎
- Tan Kok Yong Steve v Itochu Singapore Pte Ltd [2018] SGHC 85 at [89], citing Man Financial at [77] ↩︎