I INTRODUCTION

The Employment Act serves as the central piece of employment legislation in Singapore, outlining salient terms and conditions for employment, as well as rights and responsibilities of employers and employees under contracts of service. Notably, significant amendments to the Employment Act will be introduced on 1 April 2019. These changes will now afford all employees in Singapore coverage under the Employment Act (with the exception of Singapore government employees, seamen and domestic workers),2 which impacts around 430,000 more workers.3

The current version of the Employment Act, in addition to the above categories of employees, does not apply to those employed in managerial or executive positions (including professionals) earning more than S$4,500 per month.4 In other words, such persons do not have statutory rights and benefits (such as protection from wage deductions and wrongful dismissals) under the Employment Act's provisions. However, the forthcoming amendments will now provide these employees with coverage. Part IV of the Employment Act also provides additional protection (such as mandatory rest days, overtime pay and maximum hours of work) to select groups of employees, namely (1) workmen (essentially manual labourers) earning a maximum of S$4,500 in basic monthly salary; and (2) employees other than workmen and persons employed in managerial or executive positions, earning a maximum of S$2,500 in basic monthly salary (or S$2,600 after 1 April 2019).5

In addition to the Employment Act, other statutes govern specific aspects of employment in Singapore, including the Retirement and Re-Employment Act, the Child Development Co-savings Act (concerning maternity and parental leave), the Employment of Foreign Manpower Act, the Workplace Safety and Health Act, the Employment Claims Act 2016, and the Personal Data Protection Act 2012. Singapore's Tripartite Alliance for Fair Employment Practices (TAFEP) also issues guidelines (the Tripartite Guidelines), some of which the relevant courts and tribunals would be statutorily required to have regard to from 1 April 2019.6

In addition to the Personal Data Protection Act 2012, which is enforced by the Personal Data Protection Commission (PDPC), the other employment-related statutes are primarily enforced by the courts and the Ministry of Manpower (MOM). In particular, the amendments to the Employment Act contemplate employment-related claims up to S$20,000 (or S$30,000 for union-assisted claims or claims where the employee has participated in a tripartite mediation) in quantum (each), which are heard at first instance before the Employment Claims Tribunals (ECT), a division of the state courts. The ECT was established under the Employment Claims Act 2016, facilitating access to justice for employees who cannot afford legal representation.

II YEAR IN REVIEW

The most significant development to Singapore's employment and labour law regime in 2018 was the announcement of sweeping changes to the Employment Act and related statutes, which have now been passed by Parliament and, as mentioned in Section I, are expected to come into force on 1 April 2019. In connection with these amendments, Tripartite Guidelines on Wrongful Dismissal are expected to be published prior to 1 April 2019. These Guidelines certainly bear close watching as the Employment Act amendments envisage paradigm shifts to Singapore's approach to wrongful dismissal, which are to be clarified by the Guidelines.

There have also been some notable developments insofar as case law is concerned, as detailed in Section III.

III SIGNIFICANT CASES

The High Court's decision in Hasan Shofiqul v. China Civil (Singapore) Pte Ltd (Hasan Shofiqul) was a particularly significant employment case decided in 2018 concerning overtime pay.7 It concerned a foreign construction worker who was paid a basic salary of S$2,200 a month. The employee held the title of site supervisor, and oversaw six to seven workers. The employee was required to work long hours (sometimes through the night, and on his rest days) without receiving any overtime pay. After his termination, the employee lodged a claim for, among other things, overtime pay.8

The High Court found that despite the employer's argument that the employee was not entitled to overtime pay under Part IV of the Employment Act because he was a site supervisor (and therefore a manager or executive), the employee was not employed in a managerial or executive position at law and was therefore entitled to statutory overtime pay. As a result, the employer was ordered to pay the employee all overtime accrued until his termination.

In coming to its decision, the High Court reasoned that 'Supervisory responsibility does not mean the person cannot be a workman' for purposes of Part IV.9 It also observed that 'the fact that [the employee] is employed as a site supervisor is not sufficient by itself to lead to the conclusion that he is an executive'. Instead, '[m]uch must depend on the nature and level of supervisory powers that he has been given and all other circumstances'. In this regard, the Court noted that the employee did not have a diploma, did not possess any specialised skills or training, and was largely involved in 'hands-on' supervision. The employee's supervisory functions were also not executive functions but in fact 'regular on-site routine administrative work'. The employee also did not have authority to hire, dismiss or promote any of the workers who he was 'in charge' of.

Hasan Shofiqul emphasises that an employer cannot simply rely on its own arbitrary classification of its employees to determine whether statutory rights (in particular, those under Part IV of the Employment Act, including as to overtime pay) would accrue, the practice of which has led to 'disguised PMEs' (employees labelled as professionals, managers and executives (PMEs) when they are actually not). The MOM has now warned that it 'takes a serious view of attempts to misclassify employees in order to avoid employer obligations'.10

There have also been notable case law developments in 2018 in the area of restrictive covenants, in particular, non-compete clauses. See Section V.

IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employment relationship

At common law, contracts of employment or of service (as opposed to contracts for service, which are independent contractor relationships) can be formed in writing, orally or by conduct. An employee does not necessarily need to sign a written employment contract for the terms of employment to be enforceable, though evidentiary issues may arise when there is no written contract.

However, employers in Singapore are now statutorily required to set out certain key employment terms (KETs) in writing, and to issue a copy of these written KETs to all employees covered by the Employment Act (if the employee was hired on or after 1 April 2016) within 14 days of commencing employment. The KETs must include provisions relating to, among other things, payment of salary; allowances and other salary-related payments, such as bonuses and incentives; leave entitlement; and termination notice periods. Employers should ensure that any onerous financial terms are set out expressly and unambiguously in the employment contacts, and specifically brought to the employees' attention where possible. This is important, as the courts have leaned in favour of the employee when construing onerous terms in employment agreements,11 and have also endorsed the concept of an implied duty of mutual trust and confidence between the employers and employees.12

Fixed-term employment contracts are not uncommon and are enforceable, and may potentially be terminated prior to the expiry of the fixed term (depending on their provisions). In the absence of agreement, the notice period for termination of a fixed-term contract should be not less than the minimum notice periods prescribed by the Employment Act.13

The distinction between independent contractors and employees is as follows: the latter includes freelancers and gig workers, who are engaged through contracts for services and who are presently not entitled to any particular statutory rights or protection under Singapore law; and the former are hired through contracts of service and entitled to statutory employee rights and protections. The distinction is not always clear, and as the High Court in National University Hospital (Singapore) Pte Ltd v. Cicada Cube Pte Ltd held, there is no single, clearly defined test that determines whether an individual is an employee or a contractor.14 Yet, the distinction is an important one, as an entity may ultimately be liable or in breach of statutory requirements for failure to provide mandatory employee benefits to individuals misclassified as independent contractors.

For example, in Public Prosecutor v. Jurong Country Club, a district court found that a club was liable for Central Provident Fund (CPF) contributions15 to a gym instructor because it misclassified the instructor as an independent contractor.16 In coming to its conclusion, the court looked at factors, such as (1) the degree or extent of control exercised by the club over the individual; (2) whether the individual was given any employment benefits; and (3) whether the contractual terms allowed the club to terminate the relationship without notice. The court observed that although the club did not control the manner in which the individual carried out his work, the club tracked his attendance, dictated his hours, required him to seek approval before taking leave and did not authorise him to publicise his training programmes without its approval. The court also noted that having worked at the club for approximately 25 years, there was 'a certain degree of permanency in [the individual's] relationship with the club', and 'some expectation on the part of both parties for this relationship to continue indefinitely'.17

While there is presently a pending appeal against the decision in Public Prosecutor v. Jurong Country Club, employers should nevertheless make a conscious and deliberate effort to properly classify the individuals they engage (whether they are independent contractors or employees, and if the latter, what benefits they are entitled to). Notably, the prosecution in the aforementioned case sought an order that the club pay S$416,924 in CPF contributions that should have been paid to the gym instructor over a period of around 18 years, and employers who wrongly classify their employees may face similar consequences. While the district court in that case did not exercise its discretion to grant such an order, it remains to be seen whether such an order may be granted on appeal.

ii Probationary periods

Probationary periods are allowed and are generally one to three months. The contractual notice period for termination is also, in practice, shorter during probation periods (e.g., one week, as opposed to one month post-probation). There are no present statutory requirements in this respect.

iii Establishing a presence

A foreign company must be registered in Singapore in order to carry on business in Singapore. In this respect, the hiring of employees (local or foreign, through an agency or another third party) or agents to conduct the company's affairs and operations in Singapore would generally be considered as carrying on business in Singapore. On the other hand, registration is unlikely to be required when only an isolated transaction is contemplated.

Carrying on business in Singapore or having a permanent establishment (PE) in Singapore is likely to attract corporate income tax liability as long as the income is accrued in or derived from Singapore, or received in Singapore from outside Singapore in respect of gains or profits. Singapore's Income Tax Act defines a PE as having a fixed place where a business is wholly or partly carried on from. A person is also deemed to have a PE in Singapore if that person has another person acting on that person's behalf in Singapore who has and habitually exercises authority to conclude contracts.

For employees, income tax in Singapore is determined by the employee's residence status as well as the source of his or her income. Employers are obliged to report employee earnings to the Inland Revenue Authority of Singapore (IRAS), and withhold salary payments for tax purposes when the employment is terminated. For example, before a non-Singapore citizen employee ceases employment, the employer is generally required to withhold all moneys due to the employee until tax clearance with the IRAS is completed.

V RESTRICTIVE COVENANTS

Under Singapore law, restraints of trade are generally contrary to public policy and therefore unenforceable. The exception, as held by the Court of Appeal in Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v. Wong Bark Chua David (Man Financial),18 is where a restrictive covenant (1) seeks to protect a legitimate proprietary interest of the employer, and (2) satisfies the twin tests of reasonableness, namely, that the clause is reasonable between the parties concerned and with respect to the interests of the public as a whole (see subsection i).

i Confidentiality, non-solicitation and non-poaching clauses

In Man Financial, the High Court recognised three legitimate proprietary interests in the employment context: trade secrets and confidential information; trade or business connections (clients and customers); and the maintenance of a stable, trained workforce (staff).

An employer's trade secrets and confidential information can be protected by an express confidentiality provision. While this interest could also be generally protected at common law, an express confidentiality clause helps to identify the precise trade secrets or confidential information that the employees are precluded from using or disclosing during and after employment, and also aids in enforcement. However, care must be taken to distinguish between trade secrets and confidential information on the one hand, and the skill and knowledge belonging to the ex-employee on the other. As the Court held in Man Financial, the courts will not sanction a covenant seeking to prevent an employee from exercising his or her own natural skill, talent and abilities, even if these were acquired or bolstered in the course of employment.

Where an employee has personal knowledge and influence over an employer's customers or clients (i.e., the employer's trade or business connections), the employee can be restrained from taking advantage of this after employment. This is usually done through a 'non-solicitation of customers or clients' clause, which must be reasonable in duration and geographical area of restraint. Non-solicitation provisions may extend to non-solicitation of suppliers as well. Periods of restraint of up to one year may be enforced. Although there is no clear prohibition against longer periods and restraints of up to two years have been allowed in certain specialised industries (see Tan Kok Yong Steve v. Itochu Singapore Pte Ltd, as discussed in subsection iii), the prohibition period may affect the overall enforceability of the clause.

An employer can protect its workforce by a 'non-solicitation of employees' clause (also known as a 'non-poaching' clause). Such clauses are again subject to the requirement of reasonableness, taking into account duration and the types of employees covered. The restraint should not be a blanket prohibition on the prospective solicitation of all employees of the ex-employer, but should be referable to the position, training or knowledge of the target ex-employee, and should also be restricted to employees over whom the ex-employee had influence. Again, periods of restraint of up to one year may be enforced (with longer periods not impossible but potentially affecting enforceability of the clause).

ii Non-compete clauses and Stratech Systems Ltd v. Nyam Chiu Shin

Under Singapore law, non-compete clauses are difficult to uphold and enforce if the three recognised legitimate proprietary interests identified in subsection i are already protected by other clauses. In its earlier decision of Stratech Systems Ltd v. Nyam Chiu Shin (alias Yan Qiuxin) and others (Stratech),19 the Court of Appeal found that the employer that sought to enforce a non-compete clause was unable to demonstrate any other legitimate proprietary interest that required protection, apart from the interests that were already protected by other restrictive covenants (in that case, a confidentiality clause). As such, the Court concluded that the main function of the non-compete clause was to inhibit competition, and was therefore unenforceable. The Court of Appeal in Man Financial reaffirmed the principle in Stratech and took the view that it would apply equally in the context of other legitimate proprietary interests (i.e., not just confidentiality).

The correctness of the Stratech principle has since been doubted. In the High Court decision in Centre for Creative Leadership (CCL) Pte Ltd v. Byrne Roger Peter and others (CCL),20 the judge commented that it did not seem logical that an employer that had both a non-compete covenant and a confidentiality clause had a lower chance of using the non-compete covenant to protect its confidential information than an employer that had only a non-compete covenant with no confidentiality provision, as the employer would have been able to enforce the non-compete under the Stratech principle. However, the High Court noted that it was bound by Stratech and Man Financial as they were Court of Appeal decisions.

Thereafter, a different High Court judge in Lek Gwee Noi v. Humming Flowers & Gifts Pte Ltd (Humming Flowers)21 expressed similar views to the Court in CCL and opined that the legitimate proprietary interest of trade connections could potentially suffice to support both a non-compete and a non-solicitation clause. The Court ultimately did not grant the non-compete injunctions sought, and in any event, the position that trade connections can support both a non-compete and a non-solicitation clause is questionable on the present authority of Man Financial. Like CCL, the Humming Flowers decision was appealed to the Court of Appeal, but settled before it could be heard. The Stratech principle therefore remains law for now.

In the High Court's June 2018 decision in Solomon Alliance Management Pte Ltd v. Pang Chee Kuan (Solomon Alliance) (which did not refer to Stratech at all),22 two non-competes against an independent contractor (one restraint operating during the term of the contract, and the other restraint operating both during the term and for one year after the term of the contract) were upheld. In coming to its decision, the Court found a legitimate proprietary interest 'in ensuring that an independent contractor . . . [the plaintiff] had hired to market products sold by [it] did not market those same products on behalf of other companies while the contract was still in operation between the parties' (presumably to justify the first non-competition restraint) over and above the plaintiff's 'interest in safeguarding and maintaining its trade connections with its product suppliers and in preventing the use of its confidential information' (presumably to justify the second post-employment non-competition restraint along with restrictions on the use of confidential information).23

This decision is an unprecedented recognition by the Singapore courts of a legitimate proprietary interest in the exclusive marketing of an entity's products. It could be the Court's way of avoiding the application of Stratech, but it also could be that this decision will eventually prove itself as a reliable authority for a new legitimate proprietary interest of exclusive marketing. After all, the Court in Man Financial did state that 'other legitimate proprietary interests may also exist and be protected by the courts . . . although they must obviously be legally justified', but this remains to be seen. However, the Solomon Alliance decision concerned an independent contractor rather than an employee, and the courts have noted that restrictive covenants are scrutinised less strictly in non-employment contexts (i.e., the courts are more prepared to give precedence to freedom of contract).

The High Court's October 2018 decision in Powerdrive Pte Ltd v. Loh Kin Yong Philip and others (Powerdrive)24 (see subsection iii) made some reference to the decision in Stratech. The Court recognised that Stratech remains binding, though it also reiterated that concerns have been raised over that decision in CCL and Humming Flowers. Apart from those brief remarks, in Powerdrive the Court essentially bypassed the issue of whether there was a legitimate interest capable of justifying the restraint in holding only that the non-competition restrictive covenant in question was unreasonable and therefore unenforceable. The Court took the view that given the unreasonableness of the restraint, it was 'not necessary to decide whether to rule against the enforceability of the [non-competition restraint] based on Stratech'.

Some observers note that the High Court appears to consciously avoid the application of the Stratech decision where possible, while waiting for an appropriate case to be brought before the Court of Appeal to determine whether the decision ought to remain good law.

iii Non-compete clauses and the notion of reasonableness

Powerdrive serves as an important reminder that when determining whether a restrictive covenant is reasonable, the court will also consider the types of employees sought to be restrained, over and above other common factors (i.e., the scope of activities restrained, the geographical scope of restraint and the period of restraint).

In Powerdrive, the Court noted that the non-compete clause was used against 'all its employees regardless of their seniority, nature of work or level of access to information'. Following past decisions, the Court further noted that 'such an indiscriminate application would suggest that the true purpose of the provision was to restrain competition rather than to protect a legitimate interest of an employer', which would make the non-compete unenforceable.25 In this regard, the Court also suggested that even if an employer intends to enforce the non-compete against specific groups of employees, making the non-compete applicable to all employees will make it unreasonable and therefore unenforceable.26 Considering the scope of activities restrained, the Court observed in Powerdrive that each employee was prohibited from working for a rival 'regardless of the scope of his work with his new employer'. The Court further noted that the two-year duration of the non-competition restriction appeared to be 'arbitrarily selected'.27

In light of this decision, employers should be vigilant when drafting non-competition restraints. Over and above stipulating an appropriate scope of work and geographical area, the employer would also need to carefully consider the types of employees to be restrained and, as Powerdrive suggests, would need to be able to provide some explanation and basis as to why the stipulated period of restraint is appropriate (although generally speaking, shorter periods of restraint would be relatively easier to justify).

That is not to say that long periods of restraint would always be unreasonable and unenforceable though. In the earlier April 2018 decision of Tan Kok Yong Steve v. Itochu Singapore Pte Ltd,28 the High Court upheld a non-competition restraint that lasted for two years. This case concerned an employee who was in charge of his employer's cement products business (which the Court noted was a specialised industry) in various Asian countries, and who had taken about four years to build up customer connections on behalf of his employer. As such, it was reasonable that the employer would expect at least two years to rebuild the same contacts without any interference from the ex-employee.

iv Severance

If a restrictive covenant is indeed directed at protecting a legitimate proprietary interest but it is too wide and unreasonable to be enforceable, the court may sever some portions of the relevant clause so that the remainder becomes reasonable and enforceable. This 'blue-pencil' test allows for severance by deletion but not addition or other amendment.

Significantly, in Smile Inc Dental Surgeons Pte Ltd v. Lui Andrew Stewart (Smile Inc),29 the Court of Appeal indicated that it was not in favour of the 'notional' severance approach where a court applies the flexible 'reading down' test by modifying or adding to the clause as appropriate, as opposed to the blue-pencil test. The Court stated that employers should draft reasonable restrictive covenants from the outset, instead of drafting unreasonably long periods of restraint in trying to potentially obtain maximum protection, then subsequently relying on the courts to read down the provision to make it enforceable where necessary. As such, a restrictive covenant with an unreasonably long period of restraint (e.g., three years) cannot be notionally read down (e.g., to one year) and could therefore be struck out in its entirety as unreasonable. While the Court of Appeal in Smile Inc raised, without apparent disapproval, the use of 'cascading clauses', which consist of multiple overlapping periods and areas of restraint, to specifically allow the offending clauses to be blue-pencilled out, the subsequent High Court decision in Humming Flowers opined that cascading clauses offend against public policy. The High Court reasoned that they increase rather than reduce uncertainty, particularly on the part of the employee, and should accordingly not be upheld. This is now the correct view unless and until the Court of Appeal holds otherwise.

v Deferred bonuses

A potential way to achieve a similar result to a non-compete clause may be to expressly incentivise employees not to compete, or disincentivise employees from competing, for a specific period of time after employment. However, the employer should take great care in doing so.

In the Court of Appeal's decision in Mano Vikrant Singh v. Cargill TSF Asia Pte Ltd (Mano),30 the Court held that to financially disincentivise an employee from competing through a contractual clause that deprived the employee of a vested right effectively amounted to a restraint of trade, and it would then have to pass the test of reasonableness in order to be enforceable. The employer in Mano attempted to retain a declared and vested deferred bonus payment due to his employee pursuant to the employment agreement, and the Court held that the restriction was unreasonable because, among other things, it had no geographical limit. This was notwithstanding the fact that the clause in question did not actually prohibit competition by the ex-employee, as his competition with the company was not in breach of his employment contract per se, leaving the company with no recourse to damages or an injunction. In light of this decision, while a financial disincentive to compete may still be a viable alternative means to effectively stifle competition, employers should ensure that the benefits withheld cannot be construed as having been vested, or otherwise encourage expectations that employees are entitled to such benefits, if this is not the intention.

vi Springboard injunctions

Injunctive relief may also be granted to prevent a person who has obtained confidential information from using it as a 'springboard' for activities detrimental to the person, including an entity, to whom the confidential communication belongs, or to gain an unfair advantage over or a headstart on that person. Although similar in effect to an injunction based on express restrictive covenants, springboard injunctions originate from cases involving a breach of the duty of confidence, and do not exclusively arise in employer–employee situations. Accordingly, a springboard injunction may even be granted in the absence of any express restrictive covenants, although the presence of these would certainly be relevant.

In Goh Seng Heng v. RSP Investments and others and another matter (Goh Seng Heng),31 the High Court granted an interim springboard injunction as it was found that:

  1. there was misuse of confidential information, or the risk of misuse;
  2. the misuse of confidential information had given rise to an unfair competitive advantage for the party that the applicant sought to restrain;
  3. the unfair advantage was still being enjoyed by the party the applicant sought to restrain at the time the injunction was sought; and
  4. damages for the misuse would be inadequate.

The High Court found that the four requirements were satisfied as the ex-employees had, among other things, taken and misused confidential information and trade secrets. The Court found that the ex-employees' actions were intended to and did affect the company financially, and the breaches of confidentiality gave an unfair competitive advantage to the ex-employees' new company. There was a real likelihood that without a springboard injunction, the company would be ruined before the matter reached trial, and damages in lieu of an injunction would therefore be insufficient. As such, the springboard injunction was found to be necessary. The ex-employees appealed against the High Court's decision in this regard, and the appeal was in fact allowed by the Court of Appeal, overturning the springboard injunction. However, no written grounds of decision were handed down, so it is unclear what view the Court of Appeal took of the High Court's reasoning above, and whether the injunction had been overturned on the facts, or as a result of the Court of Appeal's rejection of the legal principles applied by the High Court.

A clause prohibiting the misuse of confidential information for a stipulated period of time may be a relevant consideration for the court in deciding how long the springboard injunction should remain in place. In PH Hydraulics & Engineering Pte Ltd v. Intrepid Offshore Construction Pte Ltd and another,32 the High Court stated that the springboard doctrine did not apply, as the two-year period in the relevant confidentiality clause had expired and the information was no longer confidential. On the other hand, where a period of time was not expressly stipulated in a confidentiality clause (and the relevant clause did not indicate how long this obligation would last), the Court of Appeal in Tang Siew Choy and others v. Certact Pte Ltd33 ruled that the period of time to restrain the ex-employees from using confidential information would have to be gathered mainly from the complexity of the information protected, with the injunction to continue for the period for which the unfair advantage may reasonably be expected to continue.

VI WAGES

i Working time

Generally, employees covered under Part IV of the Employment Act cannot be required to work for more than eight hours a day (or nine hours a day in a working week that is five days or fewer) or 44 hours a week, or work for more than six consecutive hours without a leisure period. Under exceptional circumstances (e.g., urgent work, or work essential for defence or security), these employees may be permitted to exceed the eight- or nine-hour daily limit, provided they still do not work for more than 12 hours a day.

Employees covered under Part IV of the Employment Act are also allowed one whole day, or for shift work employees, any continuous period of 30 hours, as a rest day each week without pay. The employer can determine which day of the week the rest day shall fall on, which is usually Sunday by default. However, these employees may elect to work on, and be remunerated for, the rest day.

An employee may work overtime at higher rates of pay for more than those numbers of hours or on a rest day, provided that no employee works overtime for more than 72 hours in a month. An employee covered under Part IV of the Employment Act also cannot work for more than 12 hours a day save in exceptional circumstances. In the 2013 High Court decision in Monteverde Darvin Cynthia v. VGO Corp Ltd,34 it was held that any contractual term requiring an employee covered by Part IV of the Employment Act to work for more than 44 hours without overtime payment was illegal, and the employee would be entitled to overtime payment for the extra hours worked.

No statutory restrictions as to working hours, days or periods presently apply to employees not covered by Part IV of the Employment Act, and any such restrictions would be a matter of contract between the employees and their employers. In late 2017, however, the Tripartite Standards on Flexible Work Arrangements were released, encouraging employers to implement variations from usual work arrangements in exchange for public recognition as a progressive employer.

ii Overtime

An employee covered by Part IV of the Employment Act (i.e., workmen earning up to S$4,500 in basic monthly salary and non-workmen earning up to S$2,500 (or S$2,600 as of 1 April 2019) in basic monthly salary) must be paid for overtime at a rate of not less than one-and-a-half times the employee's basic hourly rate of pay, or double, where the employee is requested by the employer to work on a rest day. In this respect, the overtime rate applicable to non-workmen covered by Part IV of the Employment Act is capped at the salary level of S$2,250, even for employees earning between S$2,250 and S$2,500, to help employers manage costs, though this lower cap will be removed in April 2019 (with the aforesaid Part IV salary limit of S$2,600 for non-workmen then applying to their overtime rates). There is no such statutory cap for workmen covered by Part IV of the Employment Act, and the Part IV salary limit for workmen of S$4,500 therefore applies to their overtime rates. Overtime payment must be made to the employee within 14 days of the last day of the employee's salary period.

In addition, an employee covered by the Employment Act, regardless of whether he or she is also covered by Part IV, who is required by his or her employer to work on any public holiday is also entitled to an extra day's salary at the basic rate of pay. Alternatively, and provided that the employee is employed in a managerial, executive or professional position, he or she may be given a day off or part of a day off in lieu of an extra day's salary. This option will, as of April 2019, be extended to all employees under the Employment Act who are not covered by Part IV.

VII FOREIGN WORKERS

The principal statutes governing employment of foreign workers are the Employment Act and the Employment of Foreign Manpower Act (EFMA). Under the EFMA, no foreign employee may be employed or work without a valid work pass. In addition, all employers are required to keep a register of foreign employees to whom they have issued work passes. The more common types of work passes include Work Permit, S Pass and Employment Pass. These types of work passes are valid only for the employer, type, place or time of employment expressly specified, and each work pass is issued with mandatory conditions the foreign employee must follow.

Different eligibility criteria and restrictions apply depending on the specific work pass and the foreign employee concerned. A Miscellaneous Work Pass may be granted for foreigners who are directly involved in organising or conducting seminars, conferences, workshops or gatherings that relate to religion, race, a cause or politics; giving talks related to any religion; or journalists, reporters or accompanying crew members not supported or sponsored by any Singapore government agency to cover an event or write a story in Singapore. This Miscellaneous Work Pass allows foreigners take on assignments of up to 60 days in Singapore. There are no published quota limitations on such passes. Work Permits, S Passes or Employment Passes would be more suitable for longer-term assignments.

Generally, there is no minimum qualifying salary to obtain a Work Permit, which is usually applicable to manual or unskilled workers, or domestic helpers. A Work Permit typically lasts two years, and there are limitations on quotas and maximum employment periods, depending on the industry sectors, and the employee's skill level and nationality. In comparison, there are no maximum employment periods with respect to S Pass holders, which usually apply to skilled workers such as technicians, though employers are bound by quota restrictions that are calculated by way of various prescribed ratios on a case-by-case basis. The minimum qualifying salary for a foreign employee to be issued an S Pass is being raised progressively from S$2,200 to S$2,300 as of 1 January 2019 onwards, and S$2,400 from 1 January 2020 onwards. At the next level, foreign PMEs earning at least S$3,600 a month with acceptable qualifications could apply for an Employment Pass. There is no foreign worker quota imposed on Employment Pass applications, nor is there a maximum employment period in this regard, though an Employment Pass (as with Work Permits and S Passes) is also subject to renewal requirements.

Foreign workers are not, however, entitled to benefits that only Singaporean citizens or permanent residents qualify for, such as CPF contributions. As for taxes, employers are not required to pay taxes for foreign employees, but are required to observe the tax reporting and tax clearance procedures as explained in Section IV.iii.

VIII GLOBAL POLICIES

Singapore has no specific laws mandating the implementation of internal disciplinary rules and procedures by employers, though the Tripartite Guidelines on Fair Employment Practices require that employers (1) set out their disciplinary procedures and policies for breaches of conduct; (2) set up mechanisms to deal with complaints of discrimination; and (3) communicate the above clearly to their employees.35 The Tripartite Standards on Grievance Handling have also been published, along with a Grievance Handling Handbook on requirements and guidelines in managing grievances within the workplace.36 While these particular Tripartite Guidelines are not legally binding per se, the MOM has warned that non-compliance may result in administrative actions, including the curtailment of an employer's work pass privileges.

In practice, many employers in Singapore, especially multinational companies, institute internal disciplinary rules and policies with respect to issues such as discrimination, corruption and sexual harassment. These policies are commonly made accessible to the employees on the company's intranet or detailed in the company's HR policies or employee handbook, and are usually expressly incorporated into the employee's employment contracts.

IX TRANSLATION

Singaporean commercial contracts, including employment contracts, are generally in English, which is the language of business in Singapore. However, this does not mean that employment contracts that are not in English will not be upheld. In fact, employers are also encouraged to adopt the language that the employees can understand, especially with respect to the KETs. There is also no legislation or guidelines requiring translation of employment-related documents (if in another language) into English, though this would be necessary before the documents may be received, filed or used in the Singaporean courts.

X EMPLOYEE REPRESENTATION

The Trade Unions Act allows employees to form or join trade unions to regulate their relations with their employers through collective agreements. Following amendments to the Industrial Relations Act in 2015, PMEs may also be collectively represented by trade unions. That said, where the majority of a trade union's membership is made up of non-PMEs, it will not be able to collectively represent PMEs where there is a real or potential conflict of interest between the PMEs and the non-PMEs, or where management effectiveness may be undermined.

Once formed and registered with the Registrar of Trade Unions, the trade union may approach an employer for statutory recognition under the Industrial Relations (Recognition of a Trade Union of Employees) Regulations. Upon recognition, a trade union can invite the employer to negotiate a collective agreement for its relevant employees pursuant to the Industrial Relations Act. These collective agreements would then govern the employment relationship between the employer and the unionised employees. The unions may also assist individual unionised employees in negotiating better bonuses, salary increments and other benefits. A fair number of the larger companies and multinationals in Singapore have granted statutory recognition to, and negotiated collective agreements with, trade unions.

It is difficult for an employer to refuse to recognise a trade union at law in the long run. Where the employer continually refuses, the MOM Commissioner for Labour may then call for a secret ballot among the employees entitled to vote, and if a majority of those employees are members of that trade union, the employer must give it recognition. If the majority is not met, then the union is precluded from seeking recognition again for six months. Because secret ballots are logistically challenging, cannot guarantee success and can create hostility, trade unions typically prefer to use a memorandum of understanding (MOU) with employers as an interim step. MOUs are contracts where, for example, the union agrees not to seek recognition for a certain number of years, and the employer in return agrees to sponsor or subsidise its employees' union fees and dues, therefore effectively securing the success of any future secret ballot. If the employer refuses to negotiate a collective agreement, a statutory trade dispute will exist, which will have to be determined by the Industrial Arbitration Court (IAC), where legal representation is not allowed. Prior to that, the Commissioner for Labour from the MOM may intervene to facilitate reconciliation between the parties.

Technically, a registered trade union is also able to commence, promote, organise and finance a strike or industrial action, but it may only do so in very limited circumstances – the majority of affected members must consent to strike through a secret ballot, and under the Trade Disputes Act an industrial action is illegal if: it has any other object than the furtherance of a trade dispute; if it is in furtherance of a trade dispute of which the IAC has cognisance; or if it is designed or calculated to coerce the government either directly or by inflicting hardship on the community. Union-led strikes are very rare in Singapore. The last strike, in 2012, did not involve a union (it involved non-unionised foreign bus drivers taking unilateral action), and the previous strike was in 1986, which lasted a day.

XI DATA PROTECTION

The Personal Data Protection Act 2012 (PDPA) governs personal data protection and applies to all organisations except for those in the public sector. It generally protects personal data, which is broadly defined as data about an individual who can be identified from that data, or in conjunction with other likely accessible information, through governing its collection, use and disclosure. The PDPA is administered and enforced by the PDPC, which has also released substantive Advisory Guidelines informing the content and application of the PDPA.

i Requirements for registration and protection of personal data

The PDPA does not contain any express requirement for an organisation to register itself with the PDPC. However, it requires that an organisation designate one or more individuals to be responsible for ensuring that the organisation complies with it (i.e., the data protection offer (DPO)). The business contact information of at least one of these individuals must be made available to the public, and DPOs are encouraged to register themselves with the PDPC.

The PDPA generally requires that an individual's consent be obtained before the organisation can collect, use or disclose personal data. This applies to all forms of relationships with companies, including clients, customers, suppliers and employees. However, the PDPA dispenses with the requirement for the individual's consent in certain situations, four of which are pertinent in the employment context.

First, personal data produced for the purposes of an individual's employment, and personal data for the purposes of managing or terminating an employment relationship, may be collected, used and disclosed for those purposes, provided that notification of the purposes are given to the employee.

Second, an employee's personal data can also be collected, used and disclosed for 'evaluative purposes', without the need for the employee's consent and without the need to notify the employee. This includes determining suitability for employment, promotion or removal from employment by obtaining references from a former employer and maintaining employees' performance records.

Third, an employee's personal data can be used by the employer or disclosed to a third party or prospective third party in a business asset transaction, provided the personal data relates to the part of the employer's organisation or business assets with which the transaction is concerned if the personal data is necessary for the third party to determine whether to proceed with the transaction, and the employer and the third party have entered into an agreement that requires the third party to use or disclose the personal data only for the purposes related to the transaction. In such a case, the employer must notify the employees that the transaction has taken place and that their personal data has been disclosed to the third party. If the business asset transaction is ultimately not completed, the third party to the transaction must return or destroy the personal data obtained.

Fourth, an employee's personal data may be collected, used or disclosed without notification or consent if it is 'necessary for any investigation or proceedings'. Collection of the data may only take place if it is reasonable to expect that seeking the consent of the individual would compromise the availability or the accuracy of the personal data. While the term 'proceedings' relates to civil, criminal or administrative proceedings by or before a court, tribunal or regulatory authority, it is quite likely that the term 'investigations', as distinguished from 'proceedings', would also encompass investigations within an organisation. Organisations must also safeguard the personal data in their custody or control by making reasonable security arrangements to prevent unauthorised access, use, disclosure, copying, modification, disposal or other similar risks. They must destroy or anonymise personal data once the purpose for its collection has expired. Employers must also ensure that their employees understand and uphold the PDPA obligations regarding data privacy. Under the PDPA, any conduct engaged in by an employee in the course of his or her employment is treated as also engaged in by the relevant employer, regardless of whether it was with the employer's knowledge or approval.

Revisions to the PDPA that impose stricter breach reporting rules can be expected. Proposed revisions that may come into effect in 2019 include requiring organisations to notify individuals who have been affected by a data breach as soon as practicable. Organisations would have 30 days to determine the veracity of suspected breaches, following which they would have 72 hours to notify the PDPC of the breach. Additionally, the PDPC has approved a proposal for organisations to share blacklists to detect fraud and prevent abuse of data, provided that the organisation ensures that the consumer is not harmed in any way and the data is not abused.

ii Cross-border data transfers

Under the PDPA, an organisation is not allowed to transfer any personal data to a country or territory outside Singapore except in accordance with requirements prescribed under the PDPA to ensure that organisations provide a standard of protection to personal data that is comparable to the protection under this Act. Insofar as the transfer may constitute disclosure of personal data to different organisations, consent would have to be obtained from the relevant individuals unless an exception applies. This is pertinent to multinational corporations as the personal data of employees is often transferred to offices outside Singapore.

The PDPC's Advisory Guidelines provide further guidance in this regard. Personal data may be transferred overseas provided that the PDPA's substantive data protection provisions are complied with. This may be done through ensuring that the recipient of personal data is bound by legally enforceable obligations to afford the personal data transferred a standard of protection that is comparable to that under the PDPA.

iii Sensitive data

The PDPA does not expressly differentiate between sensitive personal data and other personal data that is not sensitive. The general obligation is to obtain appropriate consent before collecting, using or disclosing personal data (whether sensitive or not).

The extent of personal data collected, used or disclosed would have to be reasonable, as the PDPA provides that an organisation may collect, use or disclose personal data about an individual only for purposes that a reasonable person would consider appropriate in the circumstances. An organisation is also prohibited from requiring an individual to consent to the collection, use or disclosure of personal data about the individual beyond what is reasonable to provide products or services to that individual.

Accordingly, guidelines published by the PDPC (which will be applied by the PDPC in interpreting the PDPA from 1 September 2019) indicate that organisations are generally not allowed to collect, use or disclose national identifiers (national registration identification card numbers, birth certificate numbers, foreign identification numbers and work permit numbers) unless it is required by law, is an exception under the PDPA or is necessary. In the employment context, employers are required under Section 95 of the Employment Act to maintain detailed employment records of employees covered by the Employment Act, which includes employees' national identifiers and other relevant information.

Once collected, as with all kinds of personal data, an organisation is obliged to make reasonable security arrangements to prevent unauthorised access, collection, use, disclosure, copying, modification, disposal or similar risks. As the PDPC recognises in its guidelines, there is no 'one size fits all' solution, and an organisation should, among other things, implement robust policies and procedures for ensuring appropriate levels of security for personal data of varying levels of sensitivity. A higher level of security would therefore be warranted if the personal data concerned is more sensitive.

iv Background checks

Background checks are generally permissible. Though the general rule remains that an individual's consent must be provided before his or her personal data may be collected, used or disclosed, the PDPA provides certain exceptions. These include where the personal data is publicly available, where the personal data is collected by a credit bureau and where collection is necessary for evaluative or investigative purposes, as discussed above.

XII DISCONTINUING EMPLOYMENT

i Dismissal

Employees may generally be dismissed in one of three ways:

  1. termination with notice (if the employee is covered by the Employment Act and his or her employment contract does not state the applicable notice period, the periods prescribed in the Employment Act will apply);
  2. termination with payment in lieu of notice; and
  3. summary termination without notice or payment in lieu.

The scenarios in points (a) and (b) are generally understood as termination without cause, while the scenario in point (c) is generally understood as termination for cause.

Sections 11(2) and 14(1) of the Employment Act, when applicable to the employee concerned, prescribe that termination without notice or payment in lieu of notice is only permissible (1) in the event of any wilful breach by the other party of a condition of service; or (2) on the grounds of misconduct inconsistent with the fulfilment of the conditions of service. As noted in Section VI.ii, the Employment Act presently does not cover PMEs earning above S$4,500 monthly, but it will from 1 April 2019 (when it will essentially cover all private-sector employees).

The Employment Act expressly requires that an employer conduct a 'due inquiry' process before dismissing the employee on second ground listed above, whether summarily or with notice or payment in lieu. A similar due inquiry process may also be required before summary termination on the first ground, and should be assumed to be the case as a matter of prudence.37 While the term 'due inquiry' is not defined under the Employment Act, TAFEP has advised that: a decision to dismiss an employee should be based on documented poor performance or misconduct; and an inquiry should be conducted to allow the employee to present his or her case before any decision is made dismissing the employee.38 The MOM's website also provides general guidelines for holding an inquiry,39 which have been referred to by the High Court.40 Employers and employees can also expect the new Tripartite Guidelines on Wrongful Dismissal to provide important further guidance in this regard. These Guidelines are expected to be released prior to the Employment Act amendment date (1 April 2019) and bear close monitoring as they should answer some of the above questions.

A contract of employment can also be brought to an end by way of an agreement, such as a separation or settlement agreement, between the employer and employee, which would normally contain release and discharge provisions, whether unilateral or mutual. The validity of such agreements is subject to provisions of the Employment Act and general common law principles.

There are presently no statutory notification requirements for dismissing employees, unless there is a termination or retrenchment exercise (see subsection ii). There is also no absolute statutory prohibition against dismissals, save for a few situations including the following:

  1. employers cannot dismiss female employees during the period of their statutory maternity leave;
  2. pursuant to the Retirement and Re-Employment Act, employers cannot dismiss elderly employees below the age of 62 solely on account of their age; and
  3. employers should not wrongfully or unfairly dismiss employees on pain of having to compensate or reinstate them.

An employee covered by the Employment Act who feels that he or she has been dismissed without just cause or excuse, regardless of whether notice or payment in lieu of notice has been provided, may make representations within one month of dismissal to the Minister of Manpower through the MOM. If the MOM finds for the employee, the employer may be directed to reinstate the employee to his or her former employment, compensate the employee for lost wages, or both. After changes to the employment regime are implemented by April 2019, all employees may bring wrongful or unfair dismissal claims before the ECT (which presently only hears employment payment disputes). As previously mentioned, the Tripartite Guidelines on Wrongful Dismissal should soon provide greater clarity on what amounts to wrongful dismissal and what the appropriate level of compensation for the wrongful dismissal should be (which the ECT and the courts would be statutorily required to have regard to).

With the exception of employment assistance payments, which are payable under the Retirement and Re-Employment Act to employees of 62 years of age or older who are terminated and not re-employed, severance or redundancy payments are not statutorily required in Singapore. Any contractual right to, and calculation of, severance pay will have to be set out in the employment contract, or any applicable collective agreement in the case of unionised employees. Notwithstanding this, employers may still choose to pay severance even in the absence of contractual obligations in order to maintain morale, reputation, industry norms or consistency with group offices in other jurisdictions (and a number do, in particular multinationals). The Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment, which are non-binding but may be considered by the ECT and the courts, suggest a scale of two weeks' to one month's pay per year of service, which is the customary norm.41

ii Redundancies

Employers who employ at least 10 employees are required to notify the MOM if five or more employees are retrenched, or dismissed on the ground of redundancy or by reason of any reorganisation of the employer's profession, business, trade or work, within any rolling six-month period. This applies to both permanent employees and contract workers with full contract terms of at least six months. This administrative retrenchment notification requirement will become a statutory requirement after amendments to the Employment Act are implemented in April 2019.

The Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment also provide that retrenchment exercises should be carried out responsibly in consultation with the union (if the company is unionised) or with the affected employees (if not unionised). The selection of employees for retrenchment should also be fair and based on objective criteria, and employees with at least two years' service should be eligible for retrenchment benefits. Those with less than two years' service should at least be granted an ex gratia payment. Employers are also urged to help affected employees look for alternative jobs.

Apart from this set of Tripartite Guidelines, which are not presently statutorily binding, there are no other rules mandating the provision of retrenchment benefits. While Part IV of the Employment Act provides that an employee covered by that part is not entitled to retrenchment benefits unless the employee has been in continuous service with an employer for two years or more, it does not automatically entitle the employee to any retrenchment benefit or severance payment in the absence of an express contractual provision or collective agreement.

XIII TRANSFER OF BUSINESS

Section 18A of the Employment Act generally provides that where an undertaking (defined as including 'any trade or business') or part thereof is transferred (defined as including 'the disposition of a business as a going concern and a transfer effected by sale, amalgamation, merger, reconstruction or operation of law') from one entity to another, the contracts of service of the affected employees covered under the Employment Act (which will essentially include all private-sector PMEs from April 2019) will have effect after the transfer as if originally made between the new employer and the employee. The transfer of the undertaking does not break the continuity of the period of employment, and the terms and conditions of the relevant contract of service remain the same (i.e., a statutory novation essentially takes place). Where there are unionised employees affected, the old employer would also have to notify the relevant unionised employees and their trade unions so that consultations may take place.

In practice, whether Section 18A applies to the relevant transaction is not always clear, and more clarity over what exactly constitutes a transfer of an undertaking would be helpful in determining whether any employees automatically transfer or not, and if so, which ones. In this regard, while no statutory amendments to Section 18A are imminent, a set of guidelines or frequently answered questions are expected to be released, which should help to provide greater clarity.42

XIV OUTLOOK

The far-reaching amendments to the Employment Act and related statutes in 2019 represent a seismic shift to Singapore's employment landscape. The degree to which Singapore will remain a de facto at-will employment jurisdiction with these new changes, and the new jurisdiction of the ECT to hear wrongful dismissal cases, should be closely monitored. Measures specifically directed at concerns over protection and rights for gig economy workers and freelancers, an ever-expanding group of workers in Singapore who are not presently considered employees and have no specific statutory work rights, could also be on the horizon, possibly as soon as this year.

Since 2016, there has been a trend of according employees greater rights and protection, as well as access to justice, which is expected to continue into 2019. As the jurisdiction of the ECT expands to allow employees to make various types of wrongful dismissal and other employment-related claims at low cost, it now behoves employers to thoroughly familiarise themselves with the statutory rights afforded to employees. At the other end of the spectrum, further clarity on the law of restraint of trade, and the principles of enforcement for non-compete covenants (and the degree of availability of springboard injunctions) should be closely watched as well, especially if a suitable case goes before the Court of Appeal in this respect.


Footnotes

1 Ian Lim is a partner, Nicholas Ngo is a senior associate and Li Wanchun is an associate at TSMP Law Corporation.

2 Employment (Amendment) Bill (No. 47/2018), Paragraphs 2(c) and 2(f).

3 Singapore Parliamentary Debates, Official Report (20 November 2018) Vol. 94 (Ms Josephine Teo, Minister for Manpower).

4 Employment Act (as at 3 January 2019), Section 2(1).

5 id., Sections 2(2) and 35; Employment (Amendment) Bill (No. 47/2018), Paragraph 7.

6 Employment (Amendment) Bill (No. 47/2018), Paragraphs 26(9)(b), 26(12)(b) and 26(17).

7 [2018] SGHC 128.

8 ibid at [3].

9 ibid at [19].

11 In Corinna Chin Shi Hwa v. Hewlett-Packard Singapore (Sales) Pte Ltd [2015] SGHC 204, the High Court observed that where an employer had used a standard form (as opposed to specifically negotiated) contract containing provisions that were ambiguous and obviously unfair without bringing these to the employee's attention, the employer may risk subsequently being unable to enforce those terms against the employee (this part of the High Court's decision was not disturbed on appeal).

12 Wee Kim San Lawrence Bernard v. Robinson & Co (Singapore) Pte Ltd [2014] 1 SLR 1382; [2014] 4 SLR 357.

13 Employment Act (as at 3 January 2019), Section 10(3).

14 [2017] SGHC 53.

15 The CPF is a mandatory social security savings scheme funded by contributions from employers and employees.

16 [2018] SGDC 314.

17 At [69].

18 [2008] 1 SLR(R) 663.

19 [2005] 2 SLR(R) 579.

20 [2013] 2 SLR 193.

21 [2014] 3 SLR 27.

22 [2018] SGHC 139.

23 ibid at [105].

24 [2018] SGHC 224.

25 ibid at [26].

26 ibid at [44].

27 ibid at [40] and [48].

28 [2018] SGHC 85.

29 [2012] 4 SLR 308.

30 [2012] 4 SLR 371.

31 [2017] 3 SLR 657.

32 [2012] 4 SLR 36.

33 [1993] 1 SLR(R) 835.

34 [2014] 2 SLR 1.

36 Available at https://www.tafep.sg/publication/grievance-handling-handbook (accessible as at 3 January 2019).

37 Ravi Chandran, Employment Law in Singapore, 5th Edition (LexisNexis) 2017, at [6.126].

40 Long Kim Wing v. LTX-Credence Singapore Pte Ltd [2017] SGHC 151.

42 Singapore Parliamentary Debates, Official Report (20 November 2018) Vol. 94 (Mrs Josephine Teo, Minister for Manpower). At the time of writing, there is no clear indication of when the guidelines or frequently asked questions will be released.