Terms of Employment Contract
Terms of Employment Contract
Singapore’s manpower law requires all employers to issue Key Employment Terms (KETs) in writing to employees. What other terms should you include to protect your interests as an employer?
Beyond the basic KETs, employers should also be aware of and consider including the following non-exhaustive types of clauses in their employment contracts to protect themselves:
- Confidentiality clause – this clause defines what is considered confidential information or a trade secret and sets certain parameters as to what the employee can or cannot do with that information and the restrictions placed upon employees in dealing with such information. For example, employees should not be disclosing confidential information to unauthorized third parties without the company’s consent.
- Intellectual property clause – this clause provides that all creative works or intellectual property produced or created by the employee in the course of employment belongs to the company and not the employee.
- Non-competition clause – this clause provides that during and for a certain period of time after the termination of employment the employee is not allowed to carry out certain activities within a certain geographical scope e.g. not allowed to work for a competitor, not allowed to start a competing business. Such a clause is considered a restraint of trade clause and is unenforceable unless the employer can satisfy certain conditions such as proving that it has a legitimate proprietary interest to be protected by the clause and that the clause is reasonable in scope.
- Non-solicitation clause – this clause provides that during and for a certain period of time after the termination of employment the employee is not allowed to solicit the employer’s customers or employees. Similar to the non-compete clause, this clause will be unenforceable unless the employer can satisfy certain conditions such as proving that it has a legitimate proprietary interest to be protected by the clause and that the clause is reasonable in scope.
- Dispute resolution and governing law clause – this clause provides how any dispute arising from the employment relationship is to be handled and what is the applicable law to govern the dispute. There are various permutations in which this can be done – for example, the clause may provide that the dispute be resolved by way of arbitration, or mediation, or simply that parties are free to commence proceedings in the Singapore Courts.
- Termination clause – a termination clause should provide not just for the notice period should either party wish to terminate the employment contract, but also situations in which the employment may be terminated without notice by either party.
Employers should seek legal advice and engage a lawyer to draft these clauses for them as having poorly drafted clauses in an employment contract would not only have the consequence of these clauses being unenforceable, but may also have the unintended consequence of contradicting other clauses in the contract. If such a situation is not properly navigated, you as the employer may be accused of wrongfully or constructively dismissing your employee.
Some areas typically overlooked by employers
One common mistake made by employers is to “cut and paste” from different employment contract templates found on the internet resulting in a “Frankenstein” employment contract. The danger in doing this is that firstly, the template that you took a clause from may not even be drafted in accordance with Singapore law and could be a contract from a US or European company and with clauses drafted for compliance with the laws of that jurisdiction. You may end up with a clause that is legally meaningless and unenforceable in Singapore – for example, a clause prohibiting the termination of employment with notice by either side.
Another issue that may arise from “Frankenstein” contracts is that your clauses may be inconsistent with each other especially if you are not adept in understanding the legal effect of such clauses. At best, these clauses may simply “cancel” each other out without affecting the rest of the contract but the company then risks having a contract which does not meet the requirements of the Employment Act and with certain key clauses such as non-compete or non-solicitation clauses which cannot be enforced against an errant employee who may take advantage of such a loophole.
Non-compete and non-solicitation clauses are often hotly contested by employees for the obvious reason that it seeks to prohibit them from activities such as working for a competitor and it is not uncommon for employees to argue that these clauses are too broad or unreasonable in scope and hence unenforceable. Such clauses should be drafted as narrowly as possible so as not to be considered too broad or unreasonable in scope and specific to the employee in question – employers should steer away from adopting a “one clause fits all” approach.
At the end of the day, employers should ensure that the clauses in their employment contracts best fit their business needs and should not zealously throw in every clause that they can think of in the hope that it will somehow protect them when needed – this will only have the opposite effect.
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