Impact of MoneySmart ruling trumps Shopee drama on non-competes

In the first quarter of 2024, the Singapore High Court issued its judgment regarding a lawsuit filed by Shopee against one of its ex-employees, Lim Teck Yong. Within days, the decision was widely reported in the media.

While much of the interest was due to Shopee’s status as a tech major, more intriguing for me as an employment lawyer was that this was a dispute regarding a restraint of trade covenant, particularly a non-competition clause. In essence, a non-competition clause seeks to limit an employee’s ability to work for a competing business for a period of time after leaving their current job.

Image credit: Timmy Loen

In Singapore’s legal jurisprudence, it is rare to see a written judgment about the enforceability of non-competition clauses. This is often because the prohibitive legal costs of fighting such a case typically stops employees from going all the way to court. Employees usually either comply with their restraint of trade clauses or reach an out-of-court settlement.

That means this judgment is a rare opportunity for employers and employees in Singapore’s tech industry to learn more about these clauses, and more precisely, the ability of an employer to dictate what staff can or cannot do after they leave.

That said, another case involving fintech firm MoneySmart may end up having more of an impact on the city-state’s tech landscape. Let’s dive in.

Case notes

Lim Teck Yong was a former employee of Shopee and held key management roles such as regional head of operations and head of operations for Shopee Brazil. He resigned from Shopee in August 2023 and joined ByteDance in September 2023 as the leader for TikTok Shop governance and experience.

Shopee launched proceedings against Lim on the basis that he had violated his restraint of trade obligations – including a non-compete clause – which prohibited him from engaging with a competitor within 12 months of leaving the company. Shopee also sought interim injunctions to prevent Lim from working at ByteDance and also from soliciting Shopee’s clients and employees.

See also: Shopee lawsuit loss sparks debate on noncompetition clauses

The High Court decided that the non-compete was not enforceable under Singapore law for several reasons.

For one, Shopee could not show what other legitimate proprietary interests the non-compete was intended to protect since Lim’s contract already included confidentiality clauses and a clause on non-solicitation of clients. Second, the scope of the non-compete was too broad, as it effectively excluded Lim from being employed in all the markets Shopee was operating in, even if he had no responsibilities in them.

How groundbreaking was the Shopee case?

Despite the widespread publicity the Shopee lawsuit received, it was not exactly groundbreaking in my view. The Singapore High Court in this case simply applied existing legal principles; it did not lay down new ones.

What was arguably more notable was the lawsuit filed by MoneySmart against a former staff member, Artem Musienko. The decision by the Singapore High Court for this case was issued shortly after the judgment regarding the Shopee proceedings.

This lawsuit caused a stir among Singapore employment lawyers, as it was the first time a Singapore High Court judge said “cascading clauses” should not be enforceable. Cascading clauses are contractual mechanisms used by employment lawyers to get around the existing legal rules.

Why should the Shopee decision matter to tech employees and firms?

Implications for employees and new companies looking to hire