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. 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. The terms of Mr Leimanâs employment contract 10 Mr Leimanâs contract with NRL is set out in a letter dated 6 December 2005 on NRLâs letterhead and signed by Mr Elman as adirector of NRL.10 11 The letter states that the agreement âcontains the whole agreementâ between Mr Leiman and NRL, and that Mr Leiman agreed to comply with The Employment Contract sets out detailed provisions on various aspects of employment. More importantly, this applicant’s case highlights the importance of keeping a copy of documents one signs. Employment contracts are also subject to other laws, such as the Employment Act, which requires that certain workers must receive salary payments at least once a month and are entitled to an additional one day’s salary if they are required to work on a public holiday. (Check out my write-up on this case here.). And the Act stipulates certain minimum conditions of employment terms which cannot be contracted out. That’s odd, given that almost all employment relationships would necessarily involve contracts, whether verbal or written. A contract can be entirely written, entirely oral or partly written and partly oral. Second, s 38 of the Employment Act actually provides that 44 hours are the maximum work hours per week for employees, not the minimum. All she needed to do is give (written or oral) notice of termination of her employment. An employment contract is an agreement between the two parties (the Employer and the Employee) which govern their relationship and is enforceable by law. When she took MC, her employer will make her “pay back” by working on a Sunday. Inductive Bible Study Method Framework COMA. The employee works in the back office and has no direct contact with clients. 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. A recent decision from the Singapore Court of Appeal gives insight into the approach taken in that country. Please select one of our lawyers below to chat on WhatsApp or send us an email to [email protected], Call us on +65 6298 2537 from 9:30am to 6:00pm. Some important factors include how long the restrict lasts, how large an area the restriction covers, and which specific activities are restricted. Receiving compensation is not as straightforward as it may seem and it may be very complex and difficult in certain situations. The position adopted by Singapore courts is largely based on the early 20th century authority of Dunlop Pneumatic Tyre Company v New Garage and Motor Company[1915] AC 79 (“Dunlop Tyre”). The Employment Act in Singapore covers many areas. The employer then refused to cancel her S-Pass even though it was obliged to under the law. The Employment Contract sets out detailed provisions on various aspects of employment. 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. These clauses are likely penalties, which are unenforceable as a matter of contract law. Under contract law, contract clauses which stipulate a pre-determined sum of money as damages, known as liquidated damages, may be valid. 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. As a Christian, I strive to live out my faith with integrity, with the grace of God. The information is not legal advice, and should not be treated as such. Accordingly, the Dunlop formulation remained the applicable test for penalties in Singapore. If your employee’s role … 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. Liquidated damages and penalty clauses. Please choose a time during our office hours (9:30 - 18:00 weekdays). 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. She does not need her resignation to be accepted by her employer. 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. This is so that you have the documentary evidence to support your position later, whether you will pursue litigation, complaint, or some other action later. This site uses Akismet to reduce spam. Hence, the rules developed in the Singapore courts do bear a very close resemblance to those developed under English common law. Enter your email address to subscribe to this blog and receive notifications of new posts by email. First, these applicants fell within scope of employees covered by the Employment Act. Third, the so-called “bonds” or penalty clauses in their employment contracts are most likely unenforceable. I was furious when I heard about such exploitative wrongdoing. The amount of the penalty can be by reduced by the judge. 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. At BCS legal clinic yesterday, 2 separate foreign applicants came distressed, seeking legal advice on how they can quit their job. 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… the loss of fees which would otherwise have been paid by the employer. The United Kingdom Supreme Court (“UKSC”) has since created a new leading authority to replace Dunlop Tyre. Find out the guidelines for termination with or without notice and termination due to misconduct. Failure to do so could depend on the nature of the breach, leading to a fine of $100-$200 per incident, and/or an order from the Ministry of Manpower to rectify the breach. 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. As a result most penalty clause disputes tend to be settled by agreement. An important factor to consider in drafting an employment contract is whether or not the type of employment is covered by the Employment Act. The terms of Mr Leiman’s employment contract 10 Mr Leiman’s contract with NRL is set out in a letter dated 6 December 2005 on NRL’s letterhead and signed by Mr Elman as adirector of NRL.10 11 The letter states that the agreement “contains the whole agreement” between Mr Leiman and NRL, and that Mr Leiman agreed to comply with Repeat offenders could face fines of up to $10 000, up to 12 months in prison, or both. Any contravention of such minimum conditions amount to an offence under the Act. She worked till 4 am on several days and was verbally abused for failing to meet ridiculous deadlines. Question. Contracts are made up of terms, which reflect the various aspects of the agreement. 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. Clause in Employment Contract. Penalty clauses in employment contracts. 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. Fifth, in one applicant’s case, she said that when she tried to resign, her supervisor refused to accept her resignation. (Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis [2015] UKSC 67 at [32]). The past few years have seen subtle but important shifts in how the concept of a penalty is defined. (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. 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. Companies from civil law jurisdictions may make little distinction between liquidated damages clauses and penalty clauses in their contracts. Sixth, in another applicant’s case, her employer kept her employment contract and her resignation letter. 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. They had thought that if they quit their job, they’d have to pay a hefty sum of money for terminating their employment contract or agreement before a purported “bond” period. 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. 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. 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 âlegitimate proprietary interestâ of the employer, and; The scope of the non-compete clause is reasonable. For an article I wrote in the Singapore Law Gazette on termination of employment contracts and dismissal, check it out here. Non-compete clauses are commonly found in employment contracts in Singapore. It places an obligation upon the party who has breached the contract to provide compensation to the aggrieved party affected by the breach. If the contract does not contain an express termination clause with a notice period, the court will imply a reasonable notice period instead. 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. In other words, if the stated sum in the clause is not … 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. Every employment contract must contain a clause on termination, outlining both the employers and employees rights, duties and responsibilities on termination of employment. 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. 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. Some employers include these clauses to discourage breach by ⦠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. 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. A non-disclosure agreement is a legally binding contract under which one party undertakes not to disclose certain confidential information. 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. Non-disclosure agreements play an important role in businesses. 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. 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. I also enjoy culture and the arts, dabbling in music, creative & non-fiction writing, theatre & film, creative media and producing podcasts. Clauses 3 and 4 in the examples above are drafted to minimize the risk of those clauses being deemed to be "penalty clauses". 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. 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. Non-workmen covered under the Employment Act earning below $2,500 in basic monthly salary. 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. Such clauses may prevent an employee from practising his or her profession for a certain period or within a particular geographic area. For contracts governed by the Employment Act, one party may terminate employment without providing a reason or notice if the other party willfully breaches a condition of the employment contract or if found to have committed misconduct which conflicts with an express or implied term of the contract. The Employment Act of Singapore is the principal statute governing termination of employment. 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. I’m burdened about seeking the common good of society, building community and being a social justice advocate for marginalized people. 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. unenforceable) is whether the … Many employers try to include so-called non-compete clauses into their employment contracts to prevent former employees from working for competitors or opening a competing business by including a non-compete clause in the employee’s contract. Getting compensation for a contract breach can sometimes be a difficult process that requires an arduous and costly legal battle. 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. 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). The penalty rule applies only to secondary obligations, i.e. Every employment contract must contain a clause on termination, outlining both the employers and employees rights, duties and responsibilities on termination of employment. Unfair, Unlawful & Wrongful Dismissal in Singapore, Complying with Responsible Retrenchment in Singapore. Continuing the discussion, assuming the Employment Act does not apply and further assuming the 2 months' compensation clause (the "Clause") is valid. The Act contains certain minimum requirements which must be included in an employment contract. 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. Penalty clause. The employment contract may include that the employee owes a penalty if he violates the agreed-upon conditions. When drafting an Employment Contract in Singapore, the employer should be aware of certain statutory provisions in determining the terms of employment, for example the amount of ⦠(2) The Dunlop formulation does not apply to a true deposit because:- The contract provision youâve described is a liquidated damages provision. Accepted file types: jpg, png, pdf, doc, docx, jpeg, gif. In the highly anticipated S… Potential changes could include a new rate of pay, new working hours or new duties. 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. The relationship between employer and employee in Singapore is regulated largely by the contract of employment between them. Yes. Possible examples of penalty clauses. Employment in modern law is not, and does not condone, slavery. We'll do our best to work within your schedule. When would a contractual provision be considered a penalty clause not enforceable in courts? Liquidated damages provisions in contracts are unenforceable if they constitute a "penalty". A contract may also be terminated by expiry once a specific task or project is completed. 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. 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. In one case, it said that she had to pay 2 years’ salary for terminating the contract before the 2 years are up. 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