A contract is terminated either by the employer or the employee. The Employment Contract sets out detailed provisions on various aspects of employment. However, it is not quite that simple. Clause in Employment Contract. Getting compensation for a contract breach can sometimes be a difficult process that requires an arduous and costly legal battle. This was an example given by the Ministry of Manpower (MOM) on Wednesday (Oct 30) in a statement addressing the issue of unfair clauses found in employment contracts in Singapore. When they left the legal clinic, they were uplifted and relieved because they found out from us that they could leave their unhealthy jobs without penal consequences. unenforceable) is whether the … Question. Singapore High Court considers application of “legitimate interest” test to liquidated damage clauses Singapore 14.01.2019 This article is produced by CMS Holborn Asia, a Formal Law Alliance between CMS Singapore and Holborn Law LLC. A non-disclosure agreement is a legally binding contract under which one party undertakes not to disclose certain confidential information. Alternatively, a well-drafted contract may contain provisions stating that a specific sum of money, known as “liquidated damages,” must be paid by the party breaching the contract. A recent decision from the Singapore Court of Appeal gives insight into the approach taken in that country. Non-workmen covered under the Employment Act earning below $2,500 in basic monthly salary. Employers may also include non-solicitation clauses to prevent former employees from soliciting clients or employees away from the employer’s business. (Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis [2015] UKSC 67 at [32]). More recently, in Cargill International Trading Pte Ltd v Uttam Galva Steels Ltd 8 the High Court held that Cargill was entitled under the terms of a contract to default interest at a rate of one-month LIBOR plus 12% p.a., applying the two limb test for penalty clauses which had been proposed by Lord Mance in Cavendish Square. If that party later discloses this information, this will be considered a breach of contract which would allow the innocent party to claim damages or even seek an injunction to prevent future breaches of contract. In Singapore, liquidated damages clauses may be enforced if they represent a genuine pre-estimate of loss and they aim to estimate in advance the loss likely to result from a breach of contract. When drafting a non-disclosure agreement, it is important to bear in mind exactly what kind of information you wish to protect or exclude, as well as how long the agreement is intended to last, and whether the receiving party should destroy the information once the assignment or other purpose is complete. Receiving compensation is not as straightforward as it may seem and it may be very complex and difficult in certain situations. For contracts governed by the Employment Act, one party may terminate employment without providing a reason or notice if the other party willfully breaches a condition of the employment contract or if found to have committed misconduct which conflicts with an express or implied term of the contract. However, if the stated sum is disproportionately large compared to the primary obligation, the clause may be deemed under the law to be a penalty and therefore not valid and enforceable. These are some of the following areas covered: The Employment Act covers all persons (including foreigners) working under a contract of service in Singapore except: Additionally, Part IV of the Employment Act, which contains provisions for working hours, days of rest and other conditions of service, only applies only to: If the employment in question is covered by the Act, AND the employer enters into an employment contract which does not follow the requirements of the Employment Act, then the employer will be found guilty of a criminal offence which is punishable with a fine of up to $5000, up to six months in prison, or both. Such contracts would unlikely to be deemed penalty clauses because the 1 month’s salary would likely be the recruiter’s genuine pre-estimate of loss, i.e. In the other, it was 6 months. Councils should nonetheless be aware that these clauses may exist in their contracts with employment agencies, check the terms carefully and avoid falling foul of such clauses if they do employ former agency staff permanently. The contract provision you’ve described is a liquidated damages provision. The Employment Act in Singapore covers many areas. If an employee chooses not to complete the bond, they might have to pay the amount of liquidated damages provided in the contract. Alternatively, a contract governed by the Employment Act may be terminated by payment of salary instead of notice. Penalty clauses in employment contracts. In other words, if the stated sum in the clause is not … In the highly anticipated S… It may be determined that an employee who breaches the confidentiality obligation has to pay a certain amount in penalties for each violation. When drafting an Employment Contract in Singapore, the employer should be aware of certain statutory provisions in determining the terms of employment, for example the amount of … Fifth, in one applicant’s case, she said that when she tried to resign, her supervisor refused to accept her resignation. This agreement can be made orally or in writing. That’s odd, given that almost all employment relationships would necessarily involve contracts, whether verbal or written. She went to the Ministry of Manpower (“MOM”), who purportedly told her that since there was a contract between her and her employer, she had to deal with it herself and MOM couldn’t help her. I also write on the law; some of my articles are published in academic journals. Terms may be express (stated explicitly in the contract, either orally or in writing) or implied (not stated explicitly but taken to form part of the contract). Companies from civil law jurisdictions may make little distinction between liquidated damages clauses and penalty clauses in their contracts. Such clauses belong to a group of contractual clauses known as ‘restraint of trade’ clauses. Courts will also consider how experienced the former employee is, how much confidential information he or she had access to, and which industry the employee works in. I try to promote access to justice by volunteering pro bono. A contract can be entirely written, entirely oral or partly written and partly oral. If either of these parties wishes to terminate the employment, they must follow the terms of the employment contract or the minimum statutory period. In Singapore, however, this is a critical difference: a penalty clause is unenforceable while a liquidated damages provision is enforceable if it meets the conditions set forth in Dunlop. A clause will be regarded as a penalty, and therefore unenforceable, if it is not a “genuine covenanted pre-estimate of damages”.1 In Singapore, Dunlop remains good law, despite being more than a century old. An important factor to consider in drafting an employment contract is whether or not the type of employment is covered by the Employment Act. However, this clause may not be found to be enforceable in court. SECTION 1 GENERAL APPLICATION A. Singapore contract law largely based on English contract law 8.1.1 Contract law in Singapore is largely based on the common law of contract in England. If the employment in question is covered by the Act, AND the employer enters into an employment contract which does not follow the requirements of the Employment Act, then the employer will be found guilty of a criminal offence which is punishable with a fine of up to $5000, up to six months in prison, or both. Typically, when drafting an employment contract, employers include terms relating to commencement of work, salary and remuneration, job scope and requirements, working hours, leave (including medical leave, benefits, grounds for dismissal and notice periods for termination. Contracts are made up of terms, which reflect the various aspects of the agreement. The Act is a significant piece of legislation which governs employment contracts. SINGAPORE: An employee who wanted to quit after less than three months on the job was told to pay the company a month's worth of salary as compensation. An employment contract cannot last forever. Generally, where employees covered by the Act are required by their employers to work beyond 44 hours, they’re entitled under the Act to claim overtime and rest day pay. I also enjoy culture and the arts. Noble countered by contending that clause 3(c) could not be a penalty, because a penalty only arises where there is a breach of contract (i.e. If an employee does not agree to the changes but continues to work under the new conditions, the court may decide that the employee has agreed to the new terms. Inductive Bible Study Method Framework COMA. Find out the guidelines for termination with or without notice and termination due to misconduct. It was most recently applied by the Court of Appeal in Xia Zhengyan v Geng Changqian (“Xia Zhengyan”).2 Whether a non-compete clause is enforceable under Singapore law depends on the context. Enter your email address to subscribe to this site and receive notifications of new posts by email. She was not allowed to claim overtime pay. Failure to do so could depend on the nature of the breach, leading to a fine of $100-$200 per incident, and/or an order from the Ministry of Manpower to rectify the breach. In one case, it said that she had to pay 2 years’ salary for terminating the contract before the 2 years are up. Applying Cavendish Square, the court held that clause 1 was a primary obligation and clause 4, which stipulated the consequence of breach of clause 1, was in a substance a secondary obligation. This website contains general information and opinions about legal matters. At BCS legal clinic yesterday, 2 separate foreign applicants came distressed, seeking legal advice on how they can quit their job. Penalty clause. The other applicant was made to work long hours without claiming overtime pay. They were overworked and exploited. Unfair, Unlawful & Wrongful Dismissal in Singapore, Complying with Responsible Retrenchment in Singapore. An Employment Contract is a contract by which a company hires an employee. I try to promote access to justice by volunteering pro bono. Some employers include these clauses to discourage breach by … Clauses 3 and 4 in the examples above are drafted to minimize the risk of those clauses being deemed to be "penalty clauses". Some important factors include how long the restrict lasts, how large an area the restriction covers, and which specific activities are restricted. If the contract does not contain an express termination clause with a notice period, the court will imply a reasonable notice period instead. Article: What if an expatriate dies in Singapore? Most employment contracts contain an express termination clause, which states the required notice period that one party must give the other before terminating the contract. Such clauses may prevent an employee from practising his or her profession for a certain period or within a particular geographic area. Article: Can You Get Bail After Being Charged For A Criminal Offence? These clauses are likely penalties, which are unenforceable as a matter of contract law. There are no restrictions on the kinds of information that can be covered by a non-disclosure agreement – typical examples include sales plans, design specifications, software and client databases. She does not need her resignation to be accepted by her employer. Potential changes could include a new rate of pay, new working hours or new duties. She had no idea what the contract terms were and no proof of when she had given notice of termination. First, these applicants fell within scope of employees covered by the Employment Act. When would a contractual provision be considered a penalty clause not enforceable in courts? I’m a Singapore lawyer with commercial litigation, international arbitration and corporate business advice practices. Fourth, in some cases I’ve seen, a recruiter would charge a client about 1 month’s salary should the client terminate the employment which the recruiter brokered prior to a stipulated time period. 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