Q UPON joining my present firm, I was made to sign a 'competitor's agreement'.

It stated that in the event of my resignation, I was not to switch over to a competitor company for at least a year.

If I breach this condition, I am liable to pay back all the incentives and bonuses that I received during my employment with the company.

I was recently told by my friends that this agreement is not legally binding. I would like to know if I have to abide by it.

A THE 'competitor's agreement' you referred to sounds like a Non-Competition Agreement or Clause (also known as a Restraint of Trade clause/agreement).

A non-competition clause can be imposed only on employees who come into contact with confidential information or trade secrets in the course of their jobs.

To give an extreme example, if one works as a cleaner or forklift driver in a company that spends a lot of money on the research and development of, say, the manufacture of computer semi-conductors, the cleaner or forklift driver can join the company's competitor when they resign, even if there is such a clause in their employment contracts.

They did not come into contact with or possess confidential information or trade secrets from the old employer that they can take to the new employer.

If you are in sales, however, it is less clear whether the non-competition clause applies.

There have been court decisions to say that price lists and customer lists are confidential information that ought to be protected. So if your job puts such confidential information into your hands, you may be bound by this clause/agreement.

Do note, however, that even if you possess confidential information or trade secrets such as to prevent you from joining the company's competitor, this restraint can only be for a few months, for example, three to six months generally.

This is because the court takes the view that it should be sufficient if a 'head start' of a few months' protection be given to the old employer, enough for it to make any changes or contact the customers. Thereafter, the employee should be allowed to join whichever company he wants.

In your case, unless you are the chief executive officer or a very high ranking officer in the company - such as to have been given a lot of confidential information - a one-year restraint is too long. The courts are unlikely to uphold it.

Doris Chia
Consultant
Harry Elias Partnership

Advice provided in this column is not meant as a substitute for comprehensive professional advice. E-mail questions to a1admin@sph.com.sg.

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