MOM will not hesitate to take action against employers who impose ‘unethical clauses’ in employment contracts –

– Advertisement –

After 50 unethical employment contracts cases have been lodged with the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP), the Ministry of Manpower (MOM) announced on Wednesday (Oct 30) that it will now be addressing the issue of unfair clauses found in these  work arrangements.

Employers involved in these cases were “generally … cooperative” after being told to justify the contractual clauses imposed and to remove or not enforce those that were unfair, said MOM.

MOM’s statement was in response to media queries about a blog post by Member of Parliament (MP) Zainal Sapari.

One-sided and unethical clauses

– Advertisement –

Writing on the labour movement’s blog on Wednesday, Mr Zainal, who is the assistant secretary-general of the National Trades Union Congress (NTUC), cited examples of “one-sided and unethical clauses” that take advantage of the “vulnerable position” of workers, and called for more to be done.

“Due to the challenging business environment, there are employers who may resort to underhand practices or tactics to address the problems they are facing, but to the possible detriment of the workers … (Including) unfair clauses is unethical as they abuse the vulnerable position the workers might be in,” wrote the MP.

MOM said it has been in “active discussion” with tripartite partners on such issues and will ensure that unreasonable contractual clauses do not become the norm in workplaces in Singapore.

“While there are legitimate reasons why employers include restraint of trade clauses in employment contracts (such as to protect trade secrets and trade connections) or impose liquidated damages for specific contractual breaches (such as breaking a training bond), excessive or unreasonable use of such practices cannot be justified.”

The ministry added that “clear principles and markers on when such clauses are not enforceable” have also been set by the Civil Courts.

“Other than intervening in such cases to help the employees, MOM will also not hesitate to take other actions, such as suspension of work pass privileges, against recalcitrant employers,” it said.

“Catch-all phrases”

Human resource and legal experts said the unfair terms found in some job contracts can range from illegal salary deductions when performance targets are not met and penalties for contract termination to excessive non-compete or restraint of trade clauses.

Some also contain “catch-all phrases” like “all the above terms and conditions are subject to changes.”

According to Singapore Human Resources Institute’s (SHRI) president Low Peck Kem, “Such catch-all phrases usually allow the companies to easily make changes to pay structure, work location or schedule, and benefits without having to consult all employees.”

These experts added that unfair employment contracts affect not just vulnerable workers, such as those earning lower wages, but the professionals, managers, executives and technicians (PMETs) as well.

For the former, these tend to be illegal salary deductions and clauses that exclude them from overtime pay, said Mr Ian Lim, partner and head of employment at TSMP Law.

Construction is one industry that has seen more low-wage workers, usually foreigners, falling victim to such unfair clauses, added Mr Lim.

Another is the outsourced services industry, where job contracts are found with clauses that require workers to pay liquidated damages incurred by the company, according to Mr Zainal.

“In the outsourced service industry, such as cleaning and security, it is quite a standard practice for service buyers to reflect the liquidated damages payable for non-performance issues in the contract.

“Given the narrow profit margins they are getting, these service providers may then resort to passing the cost of liquidated damages to the workers,” the MP wrote in his blog post.

The MOM website indicates that salary deductions for such liquidated damages should not be made, even if employees have given their consent.

However, some low-wage workers may not be aware of their rights or are afraid to report their bosses for fear of losing their jobs, thus allowing errant firms to get away with these unreasonable practices, said Mr Zainal.

For the PMETs, contractual disputes tend to involve excessive “non-compete” or restraint of trade clauses.

These typically involve non-solicitation clauses that seek to stop a worker from soliciting clients or staff away from a former employer. Non-compete clauses prevent people from working in the same industry for a certain period of time.

One excessive example, according to Mr Lim, is a contract that had a non-solicitation and non-poaching clause lasting five years, as well as a two-year non-compete clause.

There is currently “no bright-line test to determine reasonableness” of these clauses, he added, given the current lack of specific guidelines in this area.

Ms Amarjit Kaur, partner at Withers KhattarWong, echoed that: “The Employment Act provides basic legislative protection to employees and goes into the details for areas like overtime pay, but not everything is prescribed.”

Referring to the restraint of trade clauses as “some of the most onerous clauses” that can be found in job contracts here, she added: “A lot of it is left to the freedom of contract between the employer and employee.”

“When there is an imbalance of power, the employer will be able to dictate the terms and very often, employees will just sign the contract because they don’t feel they have the opportunity to negotiate it,” said Ms Kaur.

Rank-and-file workers have not been spared, according to Mr Zainal, who raised the example of how one security agency used the restraint of trade clause on its security officers.

These contractual terms are typically aimed at preventing employees in senior management positions from competing with the firm after they leave, but this security agency stated in its contracts that it would take legal action against officers who join another agency within four months of resigning.

“The law is on the workers’ side in this aspect but the only thing is that workers must take it to the courts if challenged by their employer which, unfortunately, many low-wage or vulnerable workers are not prone to doing,” added the MP. /TISG

– Advertisement –