Jamus Lim urges Govt action against noncompetes clauses for mid-level workers

SINGAPORE: Associate Professor Jamus Lim, Workers’ Party (WP) Member of Parliament (MP) for Sengkang GRC, has reiterated his concerns about the harmful effects of noncompetes clauses for mid-level employees.

He strongly urges the government to offer clear guidance or consider outright bans to safeguard workers’ rights in this group.

In a recent Facebook post, Assoc Prof Lim shed light on the evolving attitudes towards job loyalty, particularly among millennials.

He illustrated this with his sister’s frequent job changes, which exemplify a proactive approach towards professional development and seizing opportunities.

Delving into the wider economic ramifications of job mobility, Assoc Prof Lim emphasized the positive outcomes of labour market churn.

He emphasized that such transitions can enhance efficiency, allowing more talented individuals to gravitate towards more productive firms, thereby facilitating higher wage levels.

Additionally, he mentioned the benefits of knowledge sharing across firms, which can improve overall productivity.

However, Assoc Prof Lim also acknowledged the downside of churn, pointing out that firms may be reluctant to invest in training their workers if they fear those workers will leave, potentially taking proprietary knowledge or trade secrets with them.

He then acknowledged the role of noncompete clauses in this context, which restrict departing employees from joining competitors for a designated period.

While acknowledging their utility in safeguarding a company’s interests, such as preventing the dissemination of sensitive information, he also underscored their adverse effects.

“The problem with noncompetes is that they are effectively a restriction on what a worker can (or cannot) do as a job, even after they no longer work for the company. ”

“It can also suppress wages, by reducing employee bargaining power (since their outside options are more limited),” he added.

Assoc Prof Lim illustrated this point with his sister’s experience, stating that despite being largely unenforceable in courts, noncompete clauses are still commonly included in contracts, as his sister faced one in her previous job in middle management.

The detrimental impact of noncompete clauses on middle and lower-level employees

Assoc Prof then cautioned against the detrimental impact of noncompete clauses, particularly when applied to middle and lower-level employees.

He argued that such employees typically do not possess critical business-defining trade secrets and are less likely to significantly affect the company’s bottom line.

Additionally, he highlighted the financial strain that noncompetes can impose on these employees, as they may lack the resources to navigate transitional periods of unemployment.

Prof. Lim emphasized that even when noncompete clauses are unenforceable, they still have a chilling effect on workers seeking new opportunities.

He then reiterated the WP’s position to advocate for government intervention to either provide strong guidance on the use of noncompetes or outright ban them for non-senior employees.

Assoc Prof Lim suggests defining exempt positions based on criteria such as salary caps or job scope, with carve-outs for roles dealing with high-value proprietary information.

“The key is to remove boilerplate noncompetes from labor contracts, as a default. ”

He asserted that removing boilerplate noncompetes from labour contracts would not only protect worker rights but also enhance the overall vitality of the local labour market, promoting both equity and efficiency.

Manpower Minister: No new regulations on non-compete clauses, guidelines to unveil in 2024

Despite the WP’s call for government intervention to provide clear guidance or outright ban noncompete clauses for non-senior employees, Singapore’s Manpower Ministry has opted for a different approach.

Instead of enacting sweeping regulations to address potentially unfair non-compete clauses in certain employer-employee contracts, Manpower Minister Tan See Leng disclosed during a February parliamentary session that guidelines on such clauses are nearing finalization.

These guidelines are expected to be unveiled in the second half of 2024.

When pressed by Assoc Prof Lim about the possibility of directly prohibiting non-compete clauses, Dr Tan clarified that the MOM currently has no plans to introduce additional regulations on this matter.

Dr Tan informed the Parliament on 6 February that the MOM and its tripartite partners are actively developing guidelines to educate employers and shape norms, similar to existing guidelines in use.

Addressing the Parliamentary Questions (PQs) filed by fellow (MPs about Lazada’s recent retrenchment exercise, he highlighted the clear principles established by civil courts to determine the acceptability and enforceability of non-compete or restraint of trade clauses in employment contracts.

Following a retrenchment exercise in early January, former Lazada employees expressed unease, questioning the 12-month non-compete clause imposed on them. This clause extended its coverage to a broad list of tech, retail, and logistics companies.

Rather than advocating for additional regulations, Dr Tan advised employees who believe they are adversely affected by unreasonable or unjustified restraint of trade clauses to seek assistance from unions, TAFEP, or MOM.

Defending his stance, Dr Tan asserted that overly restrictive restraint of trade clauses could “disadvantage retrenched employees and create difficulties in finding employment.”

While he acknowledged concerns raised by Assoc Prof Lim regarding mid-level employees, Dr Tan said MOM aims to assist them in negotiations, there is recognition that the nature of negotiations for RSUs, stock options, and wages often involves a different level of seniority, maturity, and experience.

“I  hope that we should not think of smearing across as a one-size-fits-all policy because we’ll be setting ourselves back.”