Non Solicitation Clauses

  1. What can we understand from the term non-solicitation clause?
    • 1.1 “Non-solicitation clauses can, of course, apply to the solicitation of the former employer’s customers or employees, or to both.” (Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663 at [95])

      1.2 (Total English Learning Global Pte Ltd and another v Kids Counsel Pte Ltd and another suit [2014] SGHC 258 at [108])

      108    With regard to the issue of what could be regarded as solicitation, Tan Lee Meng J, in Walton International Group (Singapore) Pte Ltd and others v Yau Kwok Seng Winston and another [2011] SGHC 144 at [45], cited the following extract from the New South Wales Supreme Court decision of Hellmann Insurance Brokers v Peterson [2003] NSWSC 242 at [11]–[12]:

        11 The meaning of ‘solicitation’ is elucidated by a decision of Wood CJ at CL in R v Laws[2000] NSWSC 880 (2000) 50 NSWLR 96, at 98. His Honour, at [8] recorded the remarks of Spigelman CJ and Hidden J in R v Azzopardi, 1 October 1998, unreported, which in turn approved remarks of Stout CJ in Sweeney v Astle [1923] NZLR 1198 at 1202 which I quote:

          (g) The word ‘solicit’ is a common English word and it means in a simplified form, ‘to ask’. In various English dictionaries this simple meaning is given, but other simple words are also used to explain other meanings it possesses, such as ‘to call for’, ‘to make a request’, ‘to petition’, ‘to entreat’, ‘to persuade’, ‘to prefer a request’.

        12 Whether an employee is soliciting a former client is not something which depends upon whether it is the employee who telephones or arranges to meet the former client, or the other way around. Rather, whether solicitation occurs depends upon the substance of what passes between them once they are in contact with each other. There is solicitation of a client by a former employee if the former employee in substance conveys the message that the former employee is willing to deal with the client and, by whatever means, encourages the client to do so.

      The same extract was referred to by Belinda Ang J in the earlier decision of Tan Wee Fong and others v Denieru Tatsu F&B Holdings (S) Pte Ltd [2010] 2 SLR 298. That was a decision concerning the solicitation of employees.

  2. What are non-solicitation clauses used for and when are they enforceable in Singapore?
    • 2.1 In context of employees – “The appellant pointed us to precedents which acknowledge such clauses as being both appropriate as well as necessary in the employment context. The reasoning which underlies these cases is that the employer has a legitimate proprietary interest to maintain a stable, trained workforce.” (Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663 at [96])

      2.2 “The threshold condition is that the restrictive covenant protects a legitimate interest of the employer. If it does, the restrictive covenant will be enforceable if in addition: (a) it is reasonable in the interests of the parties; and (b) it is reasonable in the public interest.” (Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd [2014] 3 SLR 27; [2014] SGHC 64 at [34])

  3. What are the examples of non-solicitation clauses?
  4. An example in Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663; [2007] SGCA 53 at [6]:

    “C.1.  In further consideration of the foregoing, you agree that for a period of seven (7) months from the Termination Date, that is, up to 13 January 2006 you shall not directly or indirectly employ or solicit the employment of (whether as an employee, officer, director, agent or consultant) any person who is or was at any time during the period 13 June 2004 to 13 June 2005 an officer, director, representative or employee of the Company [ie, the appellant]. For avoidance of doubt, you shall not be deemed to employ any person unless you are involved or have otherwise provided input into the decision to hire such individual.”

  5. In what circumstances must one accept a non-solicitation clause? Can it be refused?
  6. Depends. If refused, parties may not even sign the contract.

    An example in Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663; [2007] SGCA 53 at [5] to [6]:

    “5  On 13 June 2005, Kevin Davis informed the respondent that he had decided to have someone else replace the respondent as CEO. However, Kevin Davis stated that because it would be difficult for the new CEO to perform his role in the presence of a former CEO, the respondent was to resign with immediate effect. Accordingly, the respondent was placed on “garden leave” from 13 June 2005 (“the Termination Date”) to 13 September 2005 while he served out a three-month notice period. The respondent was also handed a proposed termination agreement dated 13 June 2005 (“the Proposed Agreement”). The Proposed Agreement contained, inter alia, restrictive covenants on non-solicitation and non-competition for a period of one year from the Termination Date. However, the respondent did not agree to the provisions suggested by the appellant and therefore did not sign the Proposed Agreement immediately.

    6 Many rounds of negotiation between the parties as to the contents of the Proposed Agreement soon followed (see, generally, [26]–[38] below). The Termination Agreement was finally executed on 23 June 2005, albeit dated 13 June 2005 (viz, the Termination Date). The salient portions of the Termination Agreement were as follows:

      C.    Non-Solicitation and Non-Competition

      C.1.  In further consideration of the foregoing, you agree that for a period of seven (7) months from the Termination Date, that is, up to 13 January 2006 you shall not directly or indirectly employ or solicit the employment of (whether as an employee, officer, director, agent or consultant) any person who is or was at any time during the period 13 June 2004 to 13 June 2005 an officer, director, representative or employee of the Company [ie, the appellant]. For avoidance of doubt, you shall not be deemed to employ any person unless you are involved or have otherwise provided input into the decision to hire such individual.”

  7. What are the factors that make a non-solicitation clause unenforceable?
  8. It is unenforceable if you don’t fulfill these requirements mentioned earlier.

    “The threshold condition is that the restrictive covenant protects a legitimate interest of the employer. If it does, the restrictive covenant will be enforceable if in addition: (a) it is reasonable in the interests of the parties; and (b) it is reasonable in the public interest.” (Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd [2014] 3 SLR 27; [2014] SGHC 64 at [34])

  9. What can a business owner do if there is a breach of non-solicitation clause?
  10. Bring a civil claim against the party in breach.

  11. What is the punishment by law if one infringes a non-solicitation clause?
  12. There is no criminal punishment for a breach.

  13. Can a company prevent an individual from working for a competitor for a certain period of time?
  14. Yes. This is known as a non-competition clause.

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