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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. Once a contracting party signs a written contract, the court will conclude that he or she has agreed to all of the terms contained within the contract. Sixth, in another applicant’s case, her employer kept her employment contract and her resignation letter. I also write on the law; some of my articles are published in academic journals. Receiving compensation is not as straightforward as it may seem and it may be very complex and difficult in certain situations. All she needed to do is give (written or oral) notice of termination of her employment. I try to promote access to justice by volunteering pro bono. A penalty clause is an express provision in a contract. Penalties in a contract are specified terms that cause a penalty to be paid by a party if that party doesn't keep the terms laid out in the contract. Yes. obligations triggered by a breach of contract. 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. Enter your email address to subscribe to this blog and receive notifications of new posts by email. Article: What if an expatriate dies in Singapore? A penalty clause is an express provision in a contract. I believe in being an advocate who seeks justice, peace and joy for others. Unfair, Unlawful & Wrongful Dismissal in Singapore, Complying with Responsible Retrenchment in Singapore. The penalty clause of the Contract is twenty percent (20%) of the total value of the Contract, and shall apply as indicated in the General Conditions. The gloss to this principle is the recent UK Supreme Court decision which posits the touchstone of penalty clauses to be “whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation“. Therefore, the penalty rule kicked in and the court had to consider whether clause 4 was a legitimate liquidated damages clause. Accordingly, the Dunlop formulation remained the applicable test for penalties in Singapore. If the penalty rule applies, we have to then consider whether the consequence of a breach is out of all proportion or “unconscionable” or “extravagant” having regard to the legitimate interests of the innocent party. Find out the guidelines for termination with or without notice and termination due to misconduct. 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. Under Singapore law at present, the touchstone for penalty clauses is still the Dunlop Pneumatic Tyre Company v New Garage and Motor Company [1915] AC 79 (HL) principle that the sum is “not a genuine pre-estimate of loss” (CLAAS Medical Centre v Ng Boon Ching [2010] 2 SLR 38; Max Media FZ LLC v Nimbus Media Pte Ltd [2010] 2 SLR 677). An employment contract is an agreement between the two parties (the Employer and the Employee) which govern their relationship and is enforceable by law. In one case, it said that she had to pay 2 years’ salary for terminating the contract before the 2 years are up. In fact, her contract stipulated that she had to work at least 44 hours a week. If the contract does not contain an express termination clause with a notice period, the court will imply a reasonable notice period instead. Receiving compensation is not as straightforward as it may seem and it may be very complex and difficult in certain situations. A contract can be entirely written, entirely oral or partly written and partly oral. Hence, the rules developed in the Singapore courts do bear a very close resemblance to those developed under English common law. It may be determined that an employee who breaches the confidentiality obligation has to pay a certain amount in penalties for each violation. Such clauses belong to a group of contractual clauses known as ‘restraint of trade’ clauses. An important factor to consider in drafting an employment contract is whether or not the type of employment is covered by the Employment Act. In other words, if the stated sum in the clause is not … (1) The High Court remained bound by the Singapore Court of Appeal's endorsements of the Dunlop formulation in the previous case of Xia Zhengyan v Geng Changqing. They were overworked and exploited. I also enjoy culture and the arts,  dabbling in music, creative & non-fiction writing, theatre & film, creative media and producing podcasts. Possible examples of penalty clauses. In general, Singapore law follows a freedom-of-contract approach, meaning that the parties are free to include whatever terms they wish into a contract, provided that these terms are not illegal. According to Singapore law, if one party to a contract does not perform his or her obligations under a contract, the other party may file a civil suit to sue for damages for breach of contract. The Supreme Court recently examined the common law rule on penalty clauses in consumer and commercial agreements. Should you require legal services on Singapore law, you may contact me at ron[at]ronaldjjwong.com. The other applicant was made to work long hours without claiming overtime pay. 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. Does it mean that MOM would not get involved in all of such matters? 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. The contract provision you’ve described is a liquidated damages provision. A non-disclosure agreement is a legally binding contract under which one party undertakes not to disclose certain confidential information. (Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis [2015] UKSC 67 at [32]). Remember that this period may not suit your needs as an employer, so it is important to include your desired notice period when drafting an employment contract. However, non-compete clauses that apply after the termination of the employment contract are only enforceable in Singapore if: The non-compete clause protects a “legitimate proprietary interest” of the employer, and; The scope of the non-compete clause is reasonable. Elements of an Employment Agreement. First, these applicants fell within scope of employees covered by the Employment Act. 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. The penalty rule applies only to secondary obligations, i.e. 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. Continuing the discussion, assuming the Employment Act does not apply and further assuming the 2 months' compensation clause (the "Clause") is valid. I try to promote access to justice by volunteering pro bono. Non-workmen covered under the Employment Act earning below $2,500 in basic monthly salary. An employment agreement is a contract between your company and the employee that discusses both the employee's and your company's responsibilities and rights. unenforceable) is whether the … I’m Ronald JJ Wong / Ronald Wong Jian Jie / 黄健杰. Repeat offenders could face fines of up to $10 000, up to 12 months in prison, or both. I’m a Singapore lawyer with commercial litigation, international arbitration and corporate business advice practices. However, both parties must enter into the contract voluntarily for the contract to be enforceable. Generally parties are free to contract as they choose subject to complying with the Employment Act and certain limits. This website contains general information and opinions about legal matters. Termination of employment Either you or your employer can end an employment relationship by terminating the contract of service. The next step is to deploy the law of contract and argue that the Clause is not a liquidated damages clause (enforceable) but a penalty clause (non-enforceable). Therefore, it is essential that when drafting a non-compete clause, employers should word a non-compete clause as carefully as possible to ensure that the clause is enforceable in court. 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. It was most recently applied by the Court of Appeal in Xia Zhengyan v Geng Changqian (“Xia Zhengyan”).2 Potential changes could include a new rate of pay, new working hours or new duties. 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 court finds that the scope of the restraint of trade clause is excessive, the court may either find the entire clause unenforceable or will apply the ‘doctrine of discretionary severance’ to remove excessive portions of the clause and only enforce the legitimate portions of the clause. I believe in being an advocate who seeks justice, peace and joy for others. Question. The Employment Act of Singapore is the principal statute governing termination of employment. The Employment Act of Singapore is the principal statute governing termination of employment. Courts are generally reluctant to find that agreed damages amount to a penalty clause in a commercial contract where the parties have equal bargaining power. However, once a contract is formed, its terms of a contract can only be varied if both parties agree to the changes. An Employment Contract is a contract by which a company hires an employee. The employer then refused to cancel her S-Pass even though it was obliged to under the law. 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. 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. Our company used to do it but we removed the clause from our employment contract a few years ago, as the clause is not enforceable if it limits the employability of the employee. As a result most penalty clause disputes tend to be settled by agreement. Liquidated damages provisions in contracts are unenforceable if they constitute a "penalty". Such clauses may prevent an employee from practising his or her profession for a certain period or within a particular geographic area. Learn how your comment data is processed. ... the question was whether the relevant provision of a settlement agreement was a penalty. What is an employment contract? The relationship between employer and employee in Singapore is regulated largely by the contract of employment between them. Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window), Article: Cross-border or international aspects in matrimonial and divorce law, Article: Considerations When Drafting Employment Contracts - RONALD JJ WONG, commercial litigation & arbitration and corporate practices, some of my articles are published in academic journals, music, creative & non-fiction writing, theatre & film, creative media and producing podcasts, faith with integrity, with the grace of God. Persons employed in executive or managerial positions earning more than $4,500 in basic monthly salary; Seamen, Domestic workers and persons employed by the Government or by a Statutory Board, Workmen earning below $4,500 in basic monthly salary, and. Article: Can You Get Bail After Being Charged For A Criminal Offence? It places an obligation upon the party who has breached the contract to provide compensation to the aggrieved party affected by the breach. The Employment Contract sets out detailed provisions on various aspects of employment. 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. Contracts are made up of terms, which reflect the various aspects of the agreement. 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. The rule does not apply to primary obligations. Penalty clause. 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. This agreement can be made orally or in writing. 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. I’m burdened about seeking the common good of society, building community and being a social justice advocate for marginalized people. A penalty clause in a contract is a provision that obligates the defaulting party to provide some form of compensation to the innocent party in the event of a breach of contract. Penalty clauses in employment contracts. 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. It places an obligation upon the party who has breached the contract to provide compensation to the aggrieved party affected by the breach. The past few years have seen subtle but important shifts in how the concept of a penalty is defined. In the highly anticipated S… She had no idea what the contract terms were and no proof of when she had given notice of termination. If an employee chooses not to complete the bond, they might have to pay the amount of liquidated damages provided in the contract. In other words, if the stated sum in the clause is not a genuine pre-estimate of the employer’s loss should the employee terminate his employment, then it’s a penalty clause and not valid and enforceable. When would a contractual provision be considered a penalty clause not enforceable in courts? It is not necessary for the employment contract to be in writing, though it is advisable to issue a written contract so that both parties are aware of the specific terms of the agreement, including their rights and responsibilities. Our company used to do it but we removed the clause from our employment contract a few years ago, as the clause is not enforceable if it limits the employability of the employee. (2) The Dunlop formulation does not apply to a true deposit because:- In certain circumstances, it may also be possible to obtain an injunction to prevent the employee from continuing to breach the contract. Typically, a non-compete clause prevents employees from plying their trade or skill or engaging in businesses in certain markets and geographies for a certain period of time. Getting compensation for a contract breach can sometimes be a difficult process that requires an arduous and costly legal battle. If there is no clause in the contract explaining the termination process, the termination provisions of the employment act are applicable. 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. Some important factors include how long the restrict lasts, how large an area the restriction covers, and which specific activities are restricted. Failure to comply with a MOM order will constitute a criminal offence punishable by fines up to $5000, imprisonment of up to 6 months, or both. If your employee’s role … If an employee chooses not to complete the bond, they might have to pay the amount of liquidated damages provided in the contract. Third, the so-called “bonds” or penalty clauses in their employment contracts are most likely unenforceable. the loss of fees which would otherwise have been paid by the employer. I’m burdened about seeking the common good of society, building community and being a social justice advocate for marginalized people. However, this clause may not be found to be enforceable in court. A contract is terminated either by the employer or the employee. An employment contract cannot last forever. The Employment Contract sets out detailed provisions on various aspects of employment. A contract may also be terminated by expiry once a specific task or project is completed. Under Singapore law at present, the touchstone for penalty clauses is still the Dunlop Pneumatic Tyre Company v New Garage and Motor Company [1915] AC 79 (HL) principle that the sum is “not a genuine pre-estimate of loss” (CLAAS Medical Centre v Ng Boon Ching [2010] 2 SLR 38; Max Media FZ LLC v Nimbus Media Pte Ltd [2010] 2 SLR 677). Whether a non-compete clause is enforceable under Singapore law depends on the context. While this was a clause … Please choose a time during our office hours (9:30 - 18:00 weekdays). 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. At BCS legal clinic yesterday, 2 separate foreign applicants came distressed, seeking legal advice on how they can quit their job. 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. Fifth, in one applicant’s case, she said that when she tried to resign, her supervisor refused to accept her resignation. She was not allowed to claim overtime pay. The contract can be terminated either: With Notice 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. The court will compel the breaching party to pay this sum as compensation, provided that the sum is not found to be a penalty which is wholly disproportionate to the innocent party’s loss. 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. These clauses are likely penalties, which are unenforceable as a matter of contract law. Liquidated damages provisions in contracts are unenforceable if they constitute a "penalty". Alternatively, a contract governed by the Employment Act may be terminated by payment of salary instead of notice. Inductive Bible Study Method Framework COMA. 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. The Act is a significant piece of legislation which governs employment contracts. 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. Around 50 of such cases, with some involving a high financial penalty, had been lodged with the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) since September 2018. 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. This site uses Akismet to reduce spam. 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). They allow businesses to obtain financing, outsource work to experts and to pursue selling their business with the security that important business secrets will remain confidential and will not be used by competitors with their interests. If your employee’s role requires him or her to have access of trade secrets or other sensitive business-related information which would harm your business if leaked, a non-disclosure agreement can help to ensure that such information remains confidential. 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. Second, s 38 of the Employment Act actually provides that 44 hours are the maximum work hours per week for employees, not the minimum. As a Singapore employment lawyer, I hope that this clarifies the misconceptions people have about their employment contracts so they won’t be threatened, oppressed or enslaved by unlawful contract terms. 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. A recent decision from the Singapore Court of Appeal gives insight into the approach taken in that country. Accepted file types: jpg, png, pdf, doc, docx, jpeg, gif. However, it is not quite that simple. I’m a Singapore lawyer with commercial litigation & arbitration and corporate practices. The Singapore Employment Act does not apply to all She does not need her resignation to be accepted by her employer. The United Kingdom Supreme Court (“UKSC”) has since created a new leading authority to replace Dunlop Tyre. When she took MC, her employer will make her “pay back” by working on a Sunday. It remains to be seen whether the Singapore courts will also adopt the Cavendish Square principle for this doctrine on penalty clauses. Case Update: PropertyGuru Pte Ltd v 99 Pte Ltd [2018] SGHC 52 – Singapore High Court dismisses claim for copyright infringement by cross-posting listing app (inter alia), Case: Timing Ltd v Tay Toh Hin [2020] SGHC 169 - High Court holds that joint bank account may be garnished, Article: Employment contracts bonds & penalty clauses; refusing employees' resignation, Whether Managing Director or CEO has legal power or authority to borrow money or give security, Jurong Aromatics Corp Pte Ltd v BP Singapore Pte Ltd [2018] SGHC 215 – Charges over receivables as security; contracts prohibiting assignment, Ma Hongjin v SCP Holdings Pte Ltd [2020] SGCA 106 – Doctrine of Consideration in Variation of Contracts Upheld, Retailer Insolvency and Rights of Goods Suppliers, Lazada’s Personal Data Breach and Rethinking Cost-Benefit Analysis of PDPA Compliance, Article: Oral Contracts Amending Written Contracts, Case Update: Hewlett-Packard Singapore (Sales) Pte Ltd v Chin Shu Hwa Corinna [2016] SGCA 19 - construction of contract and contra proferentem, Case: Leiman, Ricardo and another v Noble Resources Ltd and another [2020] 2 SLR 386 (CA) - Law on Penalty Clauses. The employment contract must state the way in which either party can terminate the contract. I also enjoy culture and the arts. The Supreme Court has recently issued a judgment in the joined cases of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis which has clarified the position on penalty clauses in employment contracts. Can I include a term in the employment contract to prevent a former employee from working for a competitor, opening a competing business, or soliciting clients or employees from my business? What is an employment contract? If the employment is governed by the Employment Act and the employee is employed for 14 days or more, employers must issue a list of key employment terms, in writing, to the employee. In particular, if you are looking for a Singapore litigation lawyer; technology lawyer; employment lawyer; contract drafting; corporate lawyer; advice on shareholders agreements or dispute; startup lawyer; financing lawyer. Liquidated damages and penalty clauses. Penalty clauses such as clauses that restrict an employee from leaving employment although no training, upskilling, or upgrading cost was expended are also illegal. We'll do our best to work within your schedule. Non-compete clauses are commonly found in employment contracts in Singapore. Enter your email address to subscribe to this site and receive notifications of new posts by email. Any contravention of such minimum conditions amount to an offence under the Act. 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. Employment in modern law is not, and does not condone, slavery. A recent decision from the Singapore Court of Appeal gives insight into the approach taken in that country. The employer may negotiate a contract provision that says, for example, the employee must reimburse the full amount of the tuition if the employee quits within one year of earning the degree… (Check out my write-up on this case here.). In the other, it was 6 months. Some employers include these clauses to discourage breach by … Hi HR Professionals, I would like to check if my company include a clause in the company policy stating that employee need to compensate full course fees to company if employee resign within 1 year after completed training courses sponsor by company. An Employment Contract is a contract by which a company hires an employee. The Act contains certain minimum requirements which must be included in an employment contract. Every employment contract must contain a clause on termination, outlining both the employers and employees rights, duties and responsibilities on termination of employment. As a Christian, I strive to live out my faith with integrity, with the grace of God. The employment contract may include that the employee owes a penalty if he violates the agreed-upon conditions. Every employment contract must contain a clause on termination, outlining both the employers and employees rights, duties and responsibilities on termination of employment. Terms of a settlement agreement was a penalty is defined clause 4 a. A penalty clause is a significant piece of legislation which governs employment and. A significant piece of legislation which governs employment contracts and Dismissal, Check it out here. ) all. Ronald JJ Wong / Ronald Wong Jian Jie / 黄健杰 necessarily involve contracts penalty clause employment contract singapore whether verbal or written undertakes to... Very close resemblance to those developed under English common law rule on penalty clauses consumer. 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