Bunker trading firms are part of the marine fuels supply chain. When a bunker trader starts representing their company, they usually gain access to privileged information and industry contacts as part of their line of work; this is especially so for senior staff.

Marine fuels publication Manifold Times is privileged to have Matthew Teo, Director, Head of Employment at multi-disciplinary law firm Helmsman LLC, answer questions relating to staff movement.

Employment law is one of Matthew’s areas of specialisation. He often advises on restrictive covenants, contentious terminations of employment and non-contentious aspects such as drafting employment contracts and disciplinary policies. Matthew also acts regularly in employment disputes in Singapore.

MT: How should employment contracts within bunkering firms be structured where privileged knowledge is kept within company walls even when a trader leaves?

Employers generally utilise a mix of contractual obligations placed on employees in order to protect confidential trade information. There are normally confidentiality clauses and restrictive covenants (e.g. non-competition and non-solicitation clauses). However, these are not a panacea. In reality, it is difficult to police and prove breaches of confidentiality clauses. Similarly, restrictive covenants are, by default, unenforceable unless they meet certain criteria.

For more effective protection, employers should consider segregation of confidential information within the company and ensure that only people with a “need to know” are granted access to such information. Employers can also implement data loss policies and measures to monitor and track unauthorised download of confidential information. For example, if a trader resigns, the employer should immediately cease the trader’s access to the company’s confidential information.

MT: Regarding non-compete clauses, what are employer’s and employee’s rights on enforceability of ex-traders joining competitors?

The default position is that as a matter of public policy, non-competition clauses are unenforceable unless they protect a legitimate proprietary interest of the employer and are reasonable.

In recent cases in 2024, the Singapore courts have taken a very strict approach towards analysing non-competition clauses and held that confidentiality clauses which are premised on the protection of confidential information or trade connections are unenforceable where the employment contracts also contain confidentiality and non-solicitation obligations. There has been some academic discussion as to whether this approach is correct but this remains the current status of the law until the Court of Appeal of Singapore decides otherwise.

This is not to say that non-competition clauses will always be deemed unenforceable. Much will depend on the extent of the particular circumstances of each case and the ambit of the clause.

MT: On the topic of non-solicitation, can a former employer stop ex-traders from trading with previous customers even when bunker trading is such a niche market?

Non-solicitation clauses generally restrict the solicitation of an ex-employer’s customers. In other words, it requires a positive act of solicitation. On that basis, if the non-solicitation clause is reasonable in terms of period of restraint, scope of restraint and geographical area of restraint, it is possible for such a clause to be upheld as enforceable.

On the other hand, clauses which purport to prevent a former employee from trading with a previous customer without any solicitation may not be enforceable.

MT: What is the difference between notice period and garden leave?

A notice period is the period of time between the date on which an employer or employee notifies the other party that it intends to terminate or cease employment. This is a statutory requirement and most employment contracts will stipulate the specific notice period (failing which the Employment Act provides for the minimum period which will apply). For example, if an employment contract has a notice period of 1 month, then if the employee resigns today, the employee will have to serve the employer for another month (i.e. the notice period) unless the employee pays the employer 1 month’s salary in lieu of notice.

Garden leave is different concept. It is a period of time during the notice period in which the employee may be asked to stay away from the workplace and not conduct any work. The purpose of this is to cease the employee’s access to other employees and trade connections, as well as confidential information, so that the employer can then take steps to build relationships with those trade connections or prevent employees from being influenced to leave the company. In order to place an employee on garden leave, the employer must have included a right to do so in the terms of employment.

MT: It is common for big bunker trading firms to impose non-competition clauses for up to a year which prevents traders from being bunker traders during the period. Who should be paying the trader in this period and what can be considered fair for an ex-trader to ‘comply’ when considering a 100%/50%/0% non-competition payment scheme?

There are various jurisdictions in the world which have specific legislation governing non-competition clauses and in some cases, the laws of these jurisdictions may require the employer to make payment of a percentage of the employee’s last drawn salary during the period of post-termination restraint. Singapore, however, does not have any legislation governing this issue. Nevertheless, some employers in Singapore have drawn inspiration from these jurisdictions and introduced the concept of payment of “salary” during the post-termination period of restraint in Singapore to compensate ex-employees for not competing.

In my view, if an employer wishes to restrain an employee from working in the industry and utilising his skill sets post-termination, and if the period of restraint is very long (e.g. a year), then the employer should consider compensating the employee. Otherwise, the employee may have no alternative but to find work in the industry and “compete” with the employer in order to earn a livelihood.

The quantum of payment during such period of post-termination restraint is also a difficult issue. Whilst an employer may think it is fair if it pays the employee 100% of the employee’s last drawn salary during the period of post-termination restraint, the employee’s perspective may be different because the employee will be out of the industry for a long period and there may be a negative impact of the employee’s future career development that is greater than the compensation received. In other words, there is no law or fixed rule as to what percentage of salary payment would satisfy an employee, but I would think that a former employee would find it more palatable to accept such a clause and abide by it if there is a bigger financial incentive.

MT: Can an ex-trader compensate the former employer if he/sure wishes to seek relief from the non-competition period? How can it be done?

There is no specific legislation or law in Singapore that governs this issue. As such, this will have to be a negotiation between the former employee and former employer. In reality, a former employee is likely to obtain legal advice on the enforceability of the non-competition clause. If such legal advice is favourable to the employee, the employee may decide to proceed as if there was no such clause and test the former employer’s appetite in pursuing legal action.

Note: Matthew can be contacted at [email protected] for further enquiries.

Photo credit: Helmsman LLC
Published: 24 July 2024