Explainer: What is a non-compete clause, and why can an ex-employee get sued after joining a competitor?

SINGAPORE — It is quite common to see employment contracts containing restrictions that generally prevent employees from working for a competitor in the same industry after they leave their job.

Known as a non-compete clause, it was thrust into the spotlight on Thursday (Feb 1) after Shopee lost a lawsuit it filed against an ex-senior employee who now works for ByteDance, a competitor. 

Shopee took Mr Lim Teck Yong to court after learning of his new job, citing the non-compete clause. It tried to seek interim injunctions to stop Mr Lim from accepting employment with ByteDance and with any of Shopee’s competitors.

The case sparked online discussions on the fairness of a non-compete clause and its enforceability in Singapore. For Shopee’s case, the judge eventually dismissed it, saying Shopee had raised no “serious question” to be tried.

Legal experts TODAY spoke to said the clause can be enforced here, provided it meets specific legal criteria. It is also contingent on its reasonableness in terms of: 

• Duration

• Geographical scope

• The nature of the restricted activities