The Employment Act serves as the central piece of employment legislation in Singapore, outlining salient terms and conditions for employment, and the rights and responsibilities of employers and employees under contracts of service. On 1 April 2019, significant amendments to the Employment Act were introduced, and the Act now affords essentially all private sector employees in Singapore coverage under its provisions, regardless of position or salary level. Prior to this, the Employment Act did not cover employees in managerial or executive positions (including professionals) earning more than S$4,500 per month. What remains unchanged is that the Act continues to exclude Singapore government or statutory board employees, seafarers and domestic workers from its coverage.
Part IV of the Employment Act provides additional protection (such as mandatory rest days, overtime pay and maximum hours of work) to select groups of employees, namely workmen (essentially manual labourers) earning a maximum of S$4,500 as a basic monthly salary, and those other than workmen and persons employed in managerial or executive positions (including professionals), earning a maximum of S$2,600 as a basic monthly salary.
In addition to the Employment Act, other statutes govern specific aspects of employment, including the Retirement and Re-Employment Act, the Child Development Co-savings Act (concerning maternity and other 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 and advisories. While some are non-binding in nature and provide best-practice guidance, there are other guidelines that employers, the relevant courts and tribunals are statutorily required to have regard to, a notable example being the Tripartite Guidelines on Wrongful Dismissal. In practice though, given how TAFEP and the Ministry of Manpower (MOM) of Singapore have been actively looking into complaints relating to non-compliance with Tripartite guidelines and advisories, employers would be best served to try to comply wherever possible.
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 (including the Employment Claims Tribunals (ECT) and the Industrial Arbitration Court (IAC)) and the MOM. Certain types of employment-related claims may be heard at first instance before the ECT, a division of the state courts. The ECT was established under the Employment Claims Act 2016 to facilitate quick and affordable access to justice for employees who cannot afford legal representation. Employees may bring both salary-related and wrongful dismissal claims before the ECT, with each claim capped at S$20,000, or S$30,000 if the employee is assisted by a union. Before a claim can be made before the ECT, a request must be made for mediation before the Tripartite Alliance for Dispute Management (TADM).
II YEAR IN REVIEW
i Changes to employment law regime
The far-reaching changes to the Employment Act alongside the consequent expansion of the ECT's jurisdiction have resulted in seismic changes to Singapore's employment and labour law regime. Essentially all private sector employees are now able to submit employment-related disputes (in particular wrongful dismissal claims) to the TADM for mediation, and thereafter to commence employment-related claims before the ECT without needing to engage lawyers. As a result, employers in Singapore are now compelled to carefully scrutinise their employment practices and further ensure that all their employees are treated fairly. Particular caution must now be exercised when classifying an employee for the purposes of determining any entitlement to the further benefits under Part IV of the Employment Act, and when suspending or terminating an employee's employment. These matters are discussed further in Sections IV.i and XIII, respectively.
ii Retrenchment exercises
There was a number of high-profile mass retrenchment (or redundancy) exercises during 2019. Perhaps the most significant one took place in late September 2019, when Hong Kong-based travel retailer DFS (which operated duty free outlets at Changi Airport and other prominent locations across Singapore) asked about 60 workers to leave from one of its largest outlets with immediate effect.2 DFS initially offered a severance package of one week's pay per year of service, capped at 13 weeks' pay.3 This drew widespread criticism from the media, the unions and TAFEP. Even the Minister for Manpower, Ms Josephine Teo, commented publicly that the DFS Group 'could have better handled' the exercise, referring also to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment.4 Even when DFS increased its severance package to two weeks' pay per year of service, to be capped at 26 weeks' pay, the amount was described by a union representative as 'peanuts'.5 Around a month later and after extensive discussions with the relevant employee union, DFS revised the severance package to one month's salary per year of service, capped at 25 years.6
To allay concerns on the ground amid the retrenchments, the National Trades Union Congress has recently announced that it will be starting a job security taskforce aimed at protecting workers at the pre-retrenchment stage.7
With the increasing attention on retrenchment exercises and employee unions actively intervening in these exercises, employers in Singapore contemplating retrenchment exercises are encouraged to be guided by the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment when offering severance packages and further assistance to affected employees, notwithstanding that this is not strictly statutorily binding. More requirements on retrenchment are discussed further in Section XIII.vii.
iii Raising of retirement and re-employment ages
It was announced in August 2019 that the retirement and re-employment ages are to be increased.8 Last raised some 20 years ago, Singapore's current retirement age is 62. Employers are statutorily obliged to re-employ eligible employees who have reached 62 years of age until they reach the statutory re-employment age, which is presently 67 (some exceptions apply). If re-employment is not feasible, an employment assistance payment (EAP) must be provided.
By 1 July 2022, the retirement and re-employment ages will be raised to 63 and 68, respectively. Central Provident Fund (CPF, akin to a mutually funded social security scheme) contribution rates for older workers will also be increased as from 1 January 2021, as will the recommended EAP amount from 1 July 2022 onwards.9 The statutory retirement and re-employment ages will continue to be raised incrementally, up to 65 and 70, respectively, by 2030.
III SIGNIFICANT CASES
i Public Prosecutor v. Jurong Country Club and another appeal10
The Singapore High Court's decision in Jurong Country Club highlights both the importance and difficulty of properly distinguishing between independent contractors (under contracts for service) and employees (under contracts of service). In this case, the country club took the position that its gym instructor was an independent contractor and thus not entitled to employee CPF contributions, whereas the prosecution took the opposite view. On appeal, the Singapore High Court held that the gym instructor was indeed an independent contractor and therefore not entitled to employee CPF contributions.
Some observations made by the High Court are pertinent. First, the Court clarified that the expressed intentions of the contractual parties are not necessarily conclusive. Where the parties have either inadvertently or deliberately used a label that does not match the reality of the working relationship, the court should not hesitate to depart from the contractual wording in that respect. Here, the relative bargaining powers of the parties would also be taken into account. Second, the assessment of whether an employer-employee relationship exists would be done holistically, with due regard to all relevant circumstances. The Court held that it may not always be useful to look at the extent of control the 'employer' has over the worker (previously cited as an important factor in determining this question), especially if the worker has particular skills and expertise that make it difficult for an 'employer' to direct how work is to be done; just an element of control would therefore not necessarily be inconsistent with an independent contractor relationship.
ii a World Fuel Services (Singapore) Pte Ltd v. Xie Sheng Gu
b HT SRL v. Wee Shuo Woon
In the context of non-competition and restraint of trade clauses, the Singapore High Court in recent years has raised queries as to whether the principles set out in the seminal 2005 Court of Appeal decision in Stratech Systems Ltd v. Nyam Chiu Shin (Stratech)11 should continue to apply. The key principle is essentially that every restrictive covenant must be shown to protect a specific legitimate proprietary interest; as such, when an employer's relevant legitimate proprietary interests are already all protected by other restrictive covenants in the contract, the non-competition clause (which arguably seeks to protect all the proprietary interests at once) would not be enforceable. This principle was affirmed in the 2008 Court of Appeal decision of Man Financial (S) Pte Ltd v. Wong Bark Chuan David (Man Financial)12 but has been doubted by at least two separate High Court judges in subsequent cases (see Section V.ii).
A couple of decisions by the High Court on the subject now appear to pull in different directions. In the March 2019 decision in World Fuel Services (Singapore) Pte Ltd v. Xie Sheng Guo,13 the Court said it saw no reason for the former employee to be honouring his duties of confidentiality but yet not honouring the non-competition clause. The Court also took the view that it was impossible to separate confidentiality from a detached discharge of the employee's duties to the new employer. While one can see the logic of the Court's reasoning, it also ran very much counter to the principle established in Stratech.
A month later though, the High Court reached the opposite conclusion in HT SRL v. Wee Shuo Woon14 in April 2019. On a straightforward application of the principle in Stratech, the Court held that a non-competition clause could not be relied on to protect an ex-employer's interests in confidential information because of the presence of an existing clause imposing a duty of confidentiality. The Court also held that, in any event, the non-competition clause was unreasonable and therefore unenforceable.
Given these clearly conflicting High Court decisions, it would certainly be useful if an appropriate case could be brought before the Singapore Court of Appeal for a fresh decision on whether the Stratech principle remains relevant and should continue to apply. It is to be hoped that this may happen this year. In the meantime, employers should as a matter of prudence treat the Stratech principle as continuing to apply.
IV BASICS OF ENTERING INTO 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 employment contracts, and specifically brought to employees' attention where possible. This is important, as the courts have leaned in favour of the employee when construing onerous terms in employment agreements,15 and have also endorsed the concept of an implied duty of mutual trust and confidence between employers and employees.16
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 (see Section XIII.iv).17
The distinction between independent contractors and employees is as follows: the former include 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 latter 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 Jurong Country Club held (see Section III.i), the assessment as to whether an employer-employee relationship exists would have to be done holistically, with due regard to all relevant factors. Be that as it may, the distinction is an important one. As the decision in Jurong Country Club shows, 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. It may therefore serve employers to err on the side of caution in this respect.
Another important distinction must be made between employees who are covered by Part IV of the Employment Act (and who are therefore entitled to additional protections) and employees who are not (see Section I). Employers ought to exercise prudence in making this determination, as wrongly classifying an employee may have significant consequences, as the High Court's 2018 decision of Hasan Shofiqul v. China Civil (Singapore) Pte Ltd (Hasan Shofiqul) shows.18
There, 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 nominally a construction site supervisor (and therefore a manager or executive), the employee was not in fact 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 contract was terminated.
In coming to its decision, the Court reasoned that '[s]upervisory responsibility does not mean the person cannot be a workman' for the purposes of Part IV. 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 specialist skills or training, and was largely involved in hands-on supervision. The employee's supervisory functions were also not executive functions but 'regular on-site routine administrative work'. The employee also did not have authority to hire, dismiss or promote any of the workers whose work he was overseeing.
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) through inflated job titles when they are actually not). Following this, the MOM warned in 2018 that it 'takes a serious view of attempts to misclassify employees in order to avoid employer obligations'.19 In light of this, employers should also err on the side of caution in classifying employees and determining which are covered by Part IV of the Employment Act and which are not.
ii Probationary periods
Probationary periods are allowed and are generally between one and three months. The contractual notice period for termination is also, in practice, shorter during probationary periods (e.g., one week, as opposed to one month post-probation). There are currently no statutory requirements in this respect.
iii Establishing a presence
A foreign company must be registered in Singapore 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 from where a business is wholly or partly conducted. 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 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),20 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 further in Section V.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 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 an ex-employee on the other. As 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 improved during the course of employment.
When 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,21 discussed in Section V.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). These clauses are subject to the requirement of reasonableness, taking into account the 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 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 Section V.i are already protected by other clauses. In its 2005 Stratech decision (briefly discussed in Section III.ii),22 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 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).23
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),24 the judge commented that though he was bound by Stratech, it did not seem logical that an employer which had both a non-compete covenant and a confidentiality clause in its contract had a lower chance of using the non-compete covenant to protect its confidential information than an employer which had only a non-compete covenant with no confidentiality provision.
Thereafter, a different High Court judge in Lek Gwee Noi v. Humming Flowers & Gifts Pte Ltd (Humming Flowers)25 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 High Court in Solomon Alliance Management Pte Ltd v. Pang (Solomon Alliance) (which did not refer to Stratech at all)26 also recognised in a novel fashion that there could be a legitimate proprietary interest in the exclusive marketing of an entity's products. This was held to justify the upholding of two non-competes against an independent contractor (one restraint operating during the term of the contract and the other both during the term and for one year after the term of the contract). This might have been 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).
In another 2018 decision in Powerdrive Pte Ltd v. Loh Kin Yong Philip and others (Powerdrive),27 the High Court recognised that Stratech remains binding, though it also reiterated that concerns have been raised over that decision in CCL and Humming Flowers. The Court took the view, however, 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'.
As discussed in Section III.ii, the cases decided in 2019 relating to restrictive covenants appear to continue to pull in different directions. It would therefore be timely if an appropriate case is brought before the Singapore Court of Appeal for a fresh decision on whether the Stratech principle remains good law. Until then, employers should as a matter of prudence treat the Stratech principle as continuing to apply.
iii Non-compete clauses and the notion of reasonableness
Powerdrive also 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 High 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.28 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.29 Considering the scope of activities restrained, the Court observed 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'.30
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, in general, 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 April 2018 decision of Tan Kok Yong Steve v. Itochu Singapore Pte Ltd,31 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 specialist 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 to need at least two years to rebuild the same contacts without any interference from the ex-employee.
If a restrictive covenant is 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),32 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 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 after employment. However, the employer should take great care in doing so.
In Mano Vikrant Singh v. Cargill TSF Asia Pte Ltd (Mano),33 the Court of Appeal 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 to be enforceable. The employer in Mano attempted to retain a declared and vested deferred bonus payment due to its ex-employee, but the Court held that the restriction was unreasonable because, among other things, it had no geographical limit and was twice as long as the one in the employment contract. 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 the 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 head start 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),34 the High Court granted an interim springboard injunction as it was found that:
- there was misuse of confidential information, or the risk of misuse;
- the misuse of confidential information had given rise to an unfair competitive advantage for the party that the applicant sought to restrain;
- the unfair advantage was still being enjoyed by the party the applicant sought to restrain at the time the injunction was sought; and
- 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: the appeal was allowed by the Court of Appeal, which overturned 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 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,35 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, when a specific period is not expressly stipulated in a confidentiality clause (and the relevant clause does not indicate how long this obligation will last), the Court of Appeal in Tang Siew Choy and others v. Certact Pte Ltd36 ruled that the time needed to restrain 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.
i Working time
Generally, employees covered by Part IV of the Employment Act (see Sections I and IV) 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 aforementioned 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 workers, 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 be, which is usually Sunday by default. However, these employees may elect to work on, and be remunerated for, the rest day.
No statutory restrictions as to working hours, days or periods presently apply to employees not covered by Part IV of the Employment Act (see Sections I and IV for a more detailed discussion of the distinction between employees covered by Part IV of the Act and those who are not), 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.
An employee covered by Part IV of the Employment Act (see Sections I and IV) 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 twice the rate if the employee is requested by the employer to work on a rest day. Overtime payments 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 entitled to an extra day's salary at the basic rate of pay. Alternatively, and provided that the employee is not covered by Part IV of the Employment Act, he or she may be given a day off or part of a day off in lieu of an extra day's salary.
An employee may work overtime at higher rates of pay for more than the aforementioned numbers of hours or on a rest day, provided that no employee works overtime for more than 72 hours in a month. In the 2013 High Court decision in Monteverde Darvin Cynthia v. VGO Corp Ltd,37 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.
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 (with limited exceptions depending on the type of work being carried out). 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 are valid only for the employer, type, place or time of employment expressly specified, and each work pass is issued with mandatory conditions that the employer and 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. The 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. It typically lasts two years, and there are limitations on quotas and maximum employment periods, depending on the industry sector, and an employee's skill level and nationality. In comparison, there are no maximum employment periods with respect to S Pass holders, which are usually issued to skilled workers such as technicians, though employers are bound by quota restrictions that are calculated by way of various prescribed ratios in each case. The minimum qualifying salary for a foreign employee to be issued an S Pass was S$2,300 as of 1 January 2019, which was increased to S$2,400 as of 1 January 2020. 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 for 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 subject to renewal requirements.
Foreign workers are not 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 foregoing clearly to their employees. Other materials, such as a Tripartite Advisory on Managing Workplace Harassment and Tripartite Standards on Grievance Handling, have also been published, with a Grievance Handling Handbook on requirements and guidelines in managing grievances within the workplace. While these particular Tripartite advisories and 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 employees on a company's intranet or detailed in a company's human resources policies or employee handbook, and are usually expressly incorporated into employment contracts.
IX PARENTAL LEAVE
i Regimes under the Employment Act and Child Development Co-Savings Act
Parental leave is governed by the Employment Act and the Child Development Co-Savings Act (CDCA). Generally, to qualify for parental leave under the Employment Act, an employee must have worked for the employer for at least three months; however, to be eligible for parental leave under the CDCA, the employee's child must be a Singapore citizen, which is generally the case if at least one parent is a Singapore citizen, and the child is either born in Singapore or (if born outside Singapore) the child's birth is duly registered in Singapore within a year. The employee must also have worked for the employer for at least three months before the child's birth or adoption (as the case may be).
Parental leave entitlements are generally greater under the CDCA, and employers may seek partial or full reimbursement from the Singapore government (as the case maybe, as discussed further below) for payment of parental leave benefits of employees covered by the CDCA. Leave entitlements under the Employment Act are generally less favourable (see below), and no government reimbursements can be applied for to cover these benefits.
Once an employee is entitled to parental leave under the CDCA, the employee will no longer be entitled to parental leave under the Employment Act. There are elements that are common to both statutory regimes, as the CDCA provides that certain provisions of the Employment Act shall also apply to employees covered by the CDCA with the relevant modifications. For example, under both the Employment Act and the CDCA, it is not lawful for an employer to give a female employee notice of dismissal (or termination) while the female employee is on maternity leave or such that the notice period will expire while she is on maternity leave. While it is not entirely clear from the relevant statutes, this prohibition is also likely to apply to a dismissal issued with immediate effect by payment in lieu of notice (i.e., the notice period, if fully served, would have expired while the employee was on maternity leave).
Further, if an employer gives a female employee notice of dismissal (or termination) without sufficient cause (or on grounds of redundancy or reorganisation) while the female employee is pregnant (as certified by a Singapore medical practitioner before the notice of dismissal is given) but prior to her maternity leave, the notice of dismissal cannot deprive the employee of any payments or entitlements that she would otherwise have received had she not been dismissed (provided the female employee is entitled to maternity leave under the Employment Act or the CDCA). This is the case even if the notice period would expire prior to the maternity leave. In other words, the employer would still have to pay the employee for her paid maternity leave.
A contract that purports to deprive a female employee of her statutory maternity benefits or reduce an employer's obligations in this respect will be null and void. It is also generally an offence to refuse to allow an employee to take parental leave. Over and above all this, an employee who takes the view that he or she has been dismissed for a wrongful reason (for example, because the employer was seeking to deprive the employee of his or her statutory entitlements) may commence a claim for wrongful dismissal against the employer (see Section XIII.v).
ii Maternity and adoption leave
An eligible female employee under the CDCA is entitled to 16 weeks of paid maternity leave (subject to a cap of S$10,000 per four weeks or a total of S$20,000 per child for a first or second child, and a cap of S$10,000 per four weeks or a total of S$40,000 per child for each subsequent child). The government will reimburse the employer for the ninth to 16th weeks of maternity leave for a female employee's first or second child, and for all 16 weeks of maternity leave for a female employee's third and any subsequent children. A female employee may absent herself from work up to four weeks immediately before and 12 weeks immediately after delivery (i.e., totalling 16 weeks). If there is a mutual agreement with her employer, an employee can take the last eight weeks (the ninth to 16th weeks) of her maternity leave flexibly during the 12 months after the child's birth.
Female employees who meet the eligibility criteria under the CDCA (as discussed above) are also entitled to 12 weeks of paid adoption leave (so long as the adopted child is below the age of 12 months at the time of taking the leave). A similar cap of S$10,000 per four weeks applies, with a total cap of S$30,000. Note that, the government will reimburse only up to S$20,000 for adoption leave in respect of a first or second child, but up to the full S$30,000 for a third and any subsequent children.
A female employee who is covered under the Employment Act but not under the CDCA (e.g., a foreign national) will be entitled to up to 12 weeks (instead of 16) of maternity leave, eight of which would be paid for by the employer, with the remaining four unpaid (unless she already has two or more living children born during more than one previous confinement, in which case the employee would no longer be entitled to any payment of maternity benefits). Presently, unlike the position under the CDCA, the amount of maternity leave benefits provided for under the Employment Act is not subject to any statutory caps. Notwithstanding this and as mentioned above, female employees who are entitled to maternity benefits under the CDCA will not be entitled to further maternity benefits provided for under the Employment Act.
Unlike the CDCA, the Employment Act does not provide for adoption leave.
iii Paternity and adoption leave, and shared parental leave scheme
Eligible male employees under the CDCA are entitled to two weeks of government-paid paternity leave (whether the employee is the natural or adoptive father of a child), to be taken within 16 weeks of the date of the child's birth (unless otherwise agreed between the employer and the employee). The payment to which the male employee is entitled cannot exceed S$2,500 per week, or S$5,000 in total. This will be reimbursed by the government.
There is also a Shared Parental Leave scheme under the CDCA, whereby a working father is entitled to share up to four of the 16 weeks of the working mother's maternity leave (to be taken within 12 months of the child's birth) if he meets the eligibility criteria and if a proper joint application is submitted. The female employee's maternity leave will then be reduced accordingly. A similar cap of S$2,500 per week applies. This will likewise be reimbursed by the government.
Paternity leave, adoption leave and shared parental leave are not available to employees who are not covered by the CDCA and are only covered by the Employment Act.
iv Infant care, childcare and extended childcare leave
In addition to maternity and paternity leave, parents of children under the age of two are also entitled to six days of unpaid infant care leave per year under the CDCA, regardless of the number of children they have (or whether a child is adopted). Parents of children under the age of seven are further entitled to six days of paid childcare leave per year under the CDCA, regardless of the number of children. Finally, parents of children between seven and twelve years of age are entitled to two days of paid extended childcare leave per year. Parents are not allowed to take more than a combined total of six days of childcare leave and extended childcare leave in a year. Payment for each day of childcare leave is not capped for the first three days of childcare leave, but is capped at S$500 per day for the next three days, whereas payment for every day of extended childcare leave is capped at S$500 per day. The government will reimburse up to S$500 per day of childcare leave, capped at S$1,500 per year, and up to S$500 per day for extended childcare leave, capped at S$1,000 per year.
Employees covered under the Employment Act but not covered under the CDCA are not entitled to unpaid infant care leave or extended childcare leave. However, they are entitled to two days of paid childcare leave in respect of children below the age of seven years.
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 its employees can understand, especially with respect to 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.
XI EMPLOYEE REPRESENTATION
The Trade Unions Act allows employees to form or join trade unions to regulate their relationships 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 if there is a real or potential conflict of interest between the PMEs and the non-PMEs, or if management effectiveness may be undermined.
Once formed and registered with the Registrar of Trade Unions, a 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. This agreement 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. They could also facilitate collective negotiations and, as described in Section II.ii, unions have been seen to take quite an active role in negotiating retrenchment 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. If an employer continually refuses, the MOM Commissioner for Labour may 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 in which, 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 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 (1) it has any other object than the furtherance of a trade dispute, (2) it is in furtherance of a trade dispute of which the IAC has cognisance, or (3) 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.
XII DATA PROTECTION
The Personal Data Protection Act 2012 (PDPA) governs personal data protection and applies to all organisations except 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 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., a 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 with the PDPC.
The PDPA generally requires that an individual's consent be obtained before an 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 evaluation 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 an employee's 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 relating 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. 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.
In 2019, the PDPC released a Guide to Managing Data Breaches addressing what organisations should do to prepare for and respond to data breaches. Among other things, organisations are required to contain any data breach that may occur, assess the data breach within 30 days of when it first becomes aware of a potential breach, and notify the PDPC within 72 hours of establishing that the data breach is likely to result in significant harm or impact to the individuals involved, or is of a significant scale. Affected individuals and other parties are also to be notified as soon as possible. The organisation should then evaluate its systems, reviewing and learning from the data breach incident to improve its personal data handling practices and prevent the reoccurrence of similar data breaches. The PDPA has not yet been amended to reflect this, but the PDPC has indicated that organisations are expected to comply with these new provisions.
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, the PDPC guidelines 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 Act, which include 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 evaluation or investigative purposes, as discussed in Section XII.i.
XIII DISCONTINUING EMPLOYMENT
Employees may generally be dismissed in one of two ways: termination with notice or with payment in lieu of notice (i.e., dismissal without cause); or summary termination without notice or payment in lieu (i.e., dismissal for cause).
i Summary dismissal
Sections 11(2) and 14(1) of the Employment Act 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. The ECT and the courts hearing appeals from the ECT are statutorily required to have regard to the Tripartite Guidelines on Wrongful Dismissal (the Wrongful Dismissal Guidelines). It is as yet unclear whether courts hearing wrongful dismissal claims brought directly to the courts (and not as an ECT appeal) are required to apply, or even have regard to, the Wrongful Dismissal Guidelines. The Guidelines also expressly provide that misconduct is the only legitimate reason for dismissal without notice (although it appears that the Guidelines may have subsumed the ground of wilful breach under 'misconduct'). In this regard, the Guidelines define misconduct in a non-exhaustive fashion, which includes theft, dishonest or disorderly conduct at work, insubordination, and bringing the organisation into disrepute. The MOM also defines misconduct as a failure to fulfil the conditions of employment in the contract of service (including theft, dishonesty, disorderly or immoral conduct at work, and insubordination).
The Employment Act and Wrongful Dismissal Guidelines expressly require that an employer conduct a due inquiry process before dismissing an employee for misconduct. While the term 'due inquiry' is not defined under the Employment Act, the MOM stipulates that, as a general guide, (1) the employee should be told of his or her alleged misconduct, (2) the employee should have the opportunity to present his or her case, and (3) the person or persons hearing the inquiry should not be in a position that may suggest bias. Though not having the force of law, the High Court has in the past referred to these guidelines in determining whether a due inquiry was carried out.38
For the purposes of conducting a due inquiry, an employer may suspend an employee from work for a period not exceeding one week, but the suspension cannot continue beyond a week unless the MOM approves a longer suspension. During the period of suspension, the employee must also be paid at least half his or her salary, and if the inquiry does not disclose any misconduct, the employer must immediately restore to the employee the full amount of salary so withheld.
Employers should also bear in mind that if an employee brings a wrongful dismissal claim before the ECT, the employer would bear the burden of proving that there was misconduct sufficient to warrant a summary dismissal. It would therefore be prudent for employers contemplating a summary dismissal to document any alleged instance of misconduct, the surrounding circumstances, the due inquiry process, as well as its final decision to summarily dismiss the employee.
ii Dismissal with notice or salary in lieu of notice
According to the Wrongful Dismissal Guidelines, the legitimate reasons that may be given for dismissing an employee with notice include poor performance and redundancy. In these cases though, notice or salary in lieu of notice would still have to be provided. The employer would also need to substantiate the reason for dismissal, especially if poor performance is being relied on as a reason. In these cases and given that it is the employer's burden to prove before the ECT that there was poor performance, the employer should have documented proof thereof. Ideally, the employee's poor performance should have continued for a significant period, and especially if the employer has a performance improvement plan (PIP) policy, this should be followed prior to any dismissal for poor performance.
The Wrongful Dismissal Guidelines further define redundancy as occurring when the employer has excess manpower, the company is undergoing restructuring, a job no longer exists, or an employee's job scope has changed. Provided that the situation is one of genuine redundancy, an employee can be dismissed on this ground with notice or salary in lieu of notice. In these cases, employers should also have regard to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (discussed in Section II.ii and Section XIII.vii).
Employers are still at liberty to terminate an employee's employment with notice or salary in lieu of notice through a pure exercise of contractual rights. The Wrongful Dismissal Guidelines expressly state that this type of dismissal is presumed not to be wrongful. So for example, and using an illustration set out in the Wrongful Dismissal Guidelines, an employer who dismisses an employee with notice without giving any reasons (and continuing not to give any reasons even when asked) would not be considered wrongful if the employee is unable to point to any facts, incidents or situations that could suggest the employer's intention was anything other than termination in accordance with the contract.
However, the presumption that a dismissal is not wrongful may be displaced if an employee is able to substantiate a wrongful reason for dismissal, such as discrimination (including on the basis of age, race, gender, religion, marital status, family responsibilities or disability), being deprived of an employment benefit (e.g., an imminent mandatory payment), or if an employee is exercising his or her statutory rights (e.g., to parental leave). The last ground may also cover whistle-blowing in some circumstances (although Singapore has no overarching whistle-blowing legislation and the forms of protected whistle-blowing differ from statute to statute). The Wrongful Dismissal Guidelines also provide that when an employer has provided a reason for dismissal with notice, but the reason given is later proven to be false, the dismissal may then be wrongful.
iii Termination by mutual agreement
A contract of employment can 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 this type of agreement is subject to provisions of the Employment Act and general common law principles. Importantly, a contractual release and discharge alone cannot bar a subsequent ECT claim, although its presence may then be taken into account by the ECT. However, a valid and enforceable contractual release and discharge should operate to bar a claim directed to the court or arbitration.
iv Notice periods and other statutory requirements
If an employment contract is silent as to the relevant notice period, the Employment Act prescribes minimum notice periods according to the employee's length of service: (1) one day for employees employed for less than 26 weeks; (2) one week for employees employed for between 26 weeks and two years; (3) two weeks for employees employed for between two and five years; and (4) four weeks for employees employed for five years or more.
There are presently no statutory notification requirements for dismissing employees, unless there is a retrenchment exercise (see Section XIII.vii below). There is also no absolute statutory prohibition against dismissals, save for a few situations, including the following:
- employers cannot dismiss female employees during their statutory maternity leave;
- 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
- employers should not wrongfully or unfairly dismiss employees on pain of having to compensate or reinstate them.
v Employee recourse
Employees who feel that they have been dismissed without just cause or excuse (or who have other employment-related disputes) may submit the dispute for mediation before the TADM, where no legal representation is allowed. If mediation is unsuccessful, the employee may then commence proceedings before the ECT, where external legal representation is likewise not allowed. Commencing a claim before the ECT essentially involves little if no legal costs (though some filing fees and disbursements do apply), although organisations may use in-house legal counsel, and may be advised by external counsel behind the scenes (as has often been the case in practice).
Claims for wrongful dismissal must be submitted for mediation before the TADM not later than one month after the date of dismissal, and a claim before the ECT for wrongful dismissal must be lodged within four weeks of the date of issue of a claim referral certificate (which will be issued by the TADM if a dispute remains unresolved). Any party to the proceedings may, if it is dissatisfied with an ECT decision, also appeal against the decision to the High Court. However, appeals can only be made on the ground that the claim was outside the ECT's jurisdiction, or on any ground involving a question of law. Leave to appeal must also be granted by the District Court before an appeal can be brought to the High Court. The authors are not aware of a successful appeal having been brought to date.
Employers should also bear in mind that, from 1 April 2019, dismissal is statutorily defined as including 'the resignation of an employee if the employee can show, on a balance of probabilities, that the employee did not resign voluntarily but was forced to do so because of any conduct or omission, or course of conduct or omissions, engaged in by the employer'. This is a statutory recognition of the concept of constructive dismissal, and employees may accordingly be regarded as having dismissed or terminated even if it is the employee who had actually resigned.
The jurisdictional limit for claims brought before the ECT (and TADM) is S$20,000 per claim (or S$30,000 per claim if the employee is assisted by a union), and an employee may potentially bring both a salary-related claim and a wrongful dismissal claim before the ECT (effectively claiming S$40,000, or S$60,000 in cases where the employee is assisted by a union, in aggregate). The ECT may order the employer to reinstate the employee to his or her former employment or compensate the employee with his or her lost wages, or both.
The Employment Claims Regulations 2017 provide that where wrongful dismissal is made out, the amount of compensation to be awarded by the ECT is to consist of compensation for (1) the employee's loss of income, subject to a maximum of three months of the employee's gross rate of pay and (2) the harm caused to the employee by the ex-employer as a result of the wrongful dismissal. With regard to point (2), the amount of compensation for harm caused to the employee is to be computed using a base amount not exceeding two months of the employee's gross rate of pay, which may increase or decrease by 50 per cent of the base amount, depending on the aggravating or mitigating factors at play. As such, the total amount an employee may claim for wrongful dismissal at the ECT (not including any other claims that the employee may have) would effectively range from zero to six months of basic salary, subject to the overall jurisdictional claim limits under the ECT.
An employee is also at liberty to commence proceedings before the Singapore courts for damages. However, it remains to be seen whether the Singapore courts would award damages for wrongful dismissal per se. In this respect, prior to the introduction of the Wrongful Dismissal Guidelines, the Singapore courts had taken the position that employees who have been wrongfully dismissed are only entitled to salary in lieu of notice, as this is what an employee would be contractually entitled to had the employee been dismissed in accordance with the contract instead of being wrongfully dismissed (since the employee would have had no further recourse for wrongful dismissal). This is unless the wrongful dismissal also resulted in a loss of other benefits, such as deferred bonuses or vested share options, in which case the claim could include those other benefits.
The Wrongful Dismissal Guidelines and the Employment Claims Regulations 2017 make clear that the ECT and courts hearing appeals from the ECT may award compensation for wrongful dismissal per se over and above salary in lieu of notice in appropriate cases, but these are strictly speaking only binding on courts hearing these cases. If other Singapore courts applying common law are to award damages for wrongful dismissal per se, this would require a change to Singapore's common law and jurisprudence on the subject.
vi Severance payments
With the exception of employment assistance payments, which are payable under the Retirement and Re-Employment Act to eligible employees who have reached the statutory retirement age and are not re-employed (see Section II.iii), 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 to maintain morale, reputation, industry norms or consistency with group offices in other jurisdictions (and a number do – multinationals in particular).
Employers are generally obliged to re-employ employees who have reached the statutory retirement age (which is currently 62), provided certain criteria are fulfilled, which include the employee being assessed as having at least satisfactory work performance and being medically fit to continue working. If the employer is unable to find a suitable re-employment role for the employee (which should be for a period of at least a year), then an EAP is statutorily required. The employer's re-employment obligations last until the employee reaches the statutory re-employment age (which is currently 67).
The Tripartite Guidelines on the Re-employment of Older Workers (to which employers are statutorily obliged to have regard) clarify that the intent behind the EAP is to help eligible employees who are not re-employed while they look for another job. It further suggests, among other things, that an EAP should be equivalent to 3.5 months of salary (subject to a minimum of S$5,500 and a maximum of S$13,000). In light of the diminishing obligation to re-employ a worker until the statutory re-employment age, older employees (between the ages of 64.5 and 67) may be provided with an EAP equivalent to two months' salary (subject to a minimum of S$3,500 and a maximum of S$7,500).
With the changes to the retirement and re-employment ages (see Section II.iii), from 1 July 2022, the minimum and maximum EAP amounts for eligible employees between the ages of 63 and 65.5 are expected to increase to S$6,250 and S$14,750 respectively, and to S$4,000 and S$8,500, respectively, for eligible employees between the ages of 65.5 and 68.
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.
The Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (which are strictly speaking non-binding but may be considered by the ECT and the courts) 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. The Advisory further suggests a scale of between two weeks' and one month's pay per year of service, with employees with less than two years' service granted at least an ex gratia payment. Employers are also urged to help affected employees look for alternative jobs.
Apart from this Tripartite Advisory, there are no other rules mandating the provision of retrenchment benefits. While Part IV of the Employment Act provides that an employee covered by Part IV 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.
That being said (and as discussed in Section II.ii), given the high-profile retrenchment exercises that have taken place in 2019 and given how employee unions have played an active role in negotiating for retrenchment benefits (with negative publicity often following if the employer fails to abide by the Tripartite Advisory), employers in Singapore intending to conduct a retrenchment exercise ought, as a matter of prudence, to adhere to the suggested retrenchment benefits and other guidelines set out in the Tripartite Advisory, and consult the unions as soon as is practicable.
XIV 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 be all private sector PMEs given the changes effective as of 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). When unionised employees are 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. The MOM has provided some guidance in this regard, stating that a Section 18A transfer could occur if the organisation is being restructured (which can involve a merger, takeover, sale of parts of a company or setting up a subsidiary company). The MOM has also clarified which transactions are not considered Section 18A transfers, namely transfers of assets only, transfers of shares, transfers of operations outside Singapore, outsourcing of supporting functions and a takeover of the provision of services through a competitive tendering. Nevertheless (and clarity as to what exactly constitutes a transfer of an undertaking would still be helpful), as in practice, a lot of employers simply effect contractual terminations and re-hires rather than deal with the uncertainty of whether a Section 18A transfer has taken place.
2019 was a significant turning point in Singapore's employment law statutory and regulatory regime. It would perhaps be timely for the judiciary to opine on how these new laws and guidelines should be treated and interpreted, and on the extent to which they are binding or persuasive in courts other than the ECT, or courts hearing appeals from ECT decisions. While it was announced in 2019 that certain decisions of the ECT would be published and made publicly available, this has yet to happen. In particular, it would be most interesting to see how the ECT has interpreted the Wrongful Dismissal Guidelines and decided on the disputes brought before it (and the appropriate levels of compensation) as that would help provide some guidance and jurisprudence on the new regime, which is presently lacking. Guidance from the Court of Appeal on whether the Stratech principle in restrictive covenants (discussed in Sections III.ii and V.ii) continues to apply would also be very useful, not least given the conflicting cases emerging in 2019 from the High Court. It is hoped that clarity on all these points will emerge in 2020.
As the global economy also begins to slow, one can also expect there to be more retrenchment exercises. It should equally be anticipated that trade unions will become increasingly active in an effort to safeguard the interests of their employee members (especially in large-scale and high-profile retrenchments).
Measures specifically directed at concerns regarding 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.
Finally, Singapore continues not to have overarching protections for whistle-blowers (currently spread across disparate statutes, such as the Workplace Safety and Health Act), and it would be timely for Singapore to consider introducing an omnibus whistle-blowing statute, or at least clarifying and confirming whether retaliation against whistle-blowers is a ground for employees to claim wrongful dismissal. It is likewise to be hoped that 2020 provides the needed clarity on this.
1 Ian Lim is a partner and Nicholas Ngo and Li Wanchun are senior associates at TSMP Law Corporation.
2 See https://www.channelnewsasia.com/news/singapore/tafep-dfs-group-retrenchment-exercise-11952090 (accessed 28 January 2020).
3 See https://www.straitstimes.com/business/dfs-retrenchments-severance-packages-not-substantial-enough-says-union (accessed 28 January 2020).
4 See https://www.straitstimes.com/singapore/manpower/dfs-could-have-better-handled-retrenchments-josephine-teo (accessed 28 January 2020).
5 See footnote 3, above.
6 See https://www.channelnewsasia.com/news/singapore/dfs-offers-retrenched-employees-better-severance-deal-following-12068822 (accessed 28 January 2020).
7 See https://www.channelnewsasia.com/news/singapore/ntuc-conference-taskforce-retrenchment-membership-goals-12006366 (accessed 28 January 2020).
8 See https://www.todayonline.com/singapore/govt-raise-retirement-age-65-and-re-employment-age-70-2030-cpf-contribution-rates-older (accessed 28 January 2020).
9 See https://www.mom.gov.sg/newsroom/press-releases/2019/0819-tripartite-workgroup-on-older-workers-releases-its-recommendations (accessed 28 January 2020); also see 'Report of the Tripartite Workgroup on Older Workers: Strengthening Support for Older Workers' (1 August 2019).
10  SGHC 150.
11  2 SLR(R) 579.
12  1 SLR(R) 663.
13  SGHC 54.
14  SGHC 96.
15 In Corinna Chin Shi Hwa v. Hewlett-Packard Singapore (Sales) Pte Ltd  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).
16 Wee Kim San Lawrence Bernard v. Robinson & Co (Singapore) Pte Ltd  1 SLR 1382;  4 SLR 357.
17 Employment Act, Section 10(3).
18  5 SLR 511.
19 See https://www.straitstimes.com/singapore/mom-warns-bosses-not-to-mis-label-staff-as-execs-managers (accessed 28 January 2020).
20  1 SLR(R) 663.
21  SGHC 85.
22  2 SLR(R) 579.
23  1 SLR(R) 663.
24  2 SLR 193.
25  3 SLR 27.
26  SGHC 139.
27  SGHC 224.
28 id., at .
29 id., at .
30 id., at  and .
31  SGHC 85.
32  4 SLR 308.
33  4 SLR 371.
34  3 SLR 657.
35  4 SLR 36.
36  1 SLR(R) 835.
37  2 SLR 1.
38 Long Kim Wing v. LTX-Credence Singapore Pte Ltd  SGHC 151.