Restraint of trade clauses: Can you work in a competing firm after you resign?

Restraint of trade clauses are clauses in your contract that seek to prevent you from working for another employer in a competing business. But there is no need to freak out if you’ve only just realised that you agreed to such a clause in your employment.

Generally speaking, the courts have decided that such clauses are generally not enforceable. 

The commercial interests of the employer are weighed against the livelihood of the employee. Where the law is concerned, it is against the principals of fairness if they were to be forced to give up their livelihood, something that they’ve trained their whole lives in just because a prospective employer compelled them to.

The only times where a restraint of trade clause is upheld, is when the employee has an upper hand. For example, he has access to trade secrets, understanding, access to clients or any such proprietary information that would make it unfair for the employer. Or if he was the face of the company for example, or if it was against some sort of public interest that this employee cannot work for a competing trade. 

Even in these cases, the duration of restraint (which means, how long he/she cannot work for a competing firm) must be limited, however we shall not go into that detail in this article.

With that in mind, I’d like to point you to this interesting article on Vulcan Post ( Too long? Didn’t read? Here’s a summary: Security officer gets sued by former employer for breaching restraint of trade. Loses. Trade union is not happy and continuing to assist officers.

Kubaren Algasamy, the Industrial Relations Officer representing the Union of Security Employees, had this to say about the case: “I expected the case to be thrown out on the basis that it was unenforceable”

He is absolutely right. So to his surprise, the judge upheld an injunction for the workers to stop working for the new employer and for the workers to pay damages to their ex-employer. 

At this point, some explanation is needed: what the judge upheld was a consent order. Which means, the security officers themselves had agreed to the damages. However, one may question whether or not the courts should have stepped in to scrutinise the case? 

Security officers are rank and file workers. The skills and licences they possess, though important and difficult to acquire, do not warrant them to be bound to the clause. Their working for someone else does not cripple or disable their former employer in anyway. Unless there were facts that the Vulcan Post article did not cover, there should be little reason why the security officers be imposed damages. 

The only small clue afforded by the Vulcan article is that it was “clear that the ex-employer was unhappy with losing its contract”, which we can only assume to be a security business contract. 

“But to take it out on low wage workers and for the workers to come out bearing the brunt of this is unfair”, said Kubaren, who further added that the union is providing support to the workers whilst they were redeployed to another worksite by their new employer.

To what we understand, the company is blaming the employees for the loss of a contract. But I just cannot fathom how a few security officers can bring an unfair advantage to the new hiring company. If these security officers can do that, wouldn’t it mean that there are structural problems at the company? Customers switch vendors because they don’t see value, shouldn’t they be fixing the issue of value rather than suing for damages amongst a few of their ex-employees?

For the rest of us, these clauses should generally be little cause for concern. Unless of course your involvement with the company fundamentally affects their reputation, profit and loss. No one should be denied of their ability to make a living for their families, the law has made itself quite clear on that.

  1. I am going through a similar court case. I am being sued by my ex-agency for continuing to work with the same client through another new agency.

    Ironically, my ex-agency suing me for 2 months of my salary and they know this is unfair.

    No one from MOM or Government is ready to support my side , just because I am merely a foreign worker. I have to fight alone in Singapore court against a well-known, unreasonable, unfair clause.

    Quite tiring and exhausting.

Share your thoughts!

Zeen is a next generation WordPress theme. It’s powerful, beautifully designed and comes with everything you need to engage your visitors and increase conversions.