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Do you have this in your Employment Contract? Part 1

September 19, 2008

Do you have any clauses in your employment contract that just doesn’t smell right?

At the top of my list of smelly clauses is the non-compete clause. Its the one that says you cannot join a company in the same industry after you quit your job.

Everyone understands the reason behind it and yet I still can’t help thinking, surely there’s a more humane way than to chop the arms off someone who doesn’t want to stay?

In the history of resignations, have you ever heard of anyone who joined a competitor and used his knowledge to create havoc for his ex-employer? Was it successful? If it was, was it because of the leaked secrets or because the ex-employer was so terribly mismanaged that the only place it could go was down?

What do you think? Is it a fair clause?

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13 Comments leave one →
  1. September 19, 2008 9:30 am

    No it’s not a fair clause, but it has to be included for legal purposes. I don’t know anyone who has used his knowledge of his ex companies unethically, but I’ve heard of it. Definitely not a wise move as the current company won’t hold said person in high regards if it’s been done so.

    Hello, first time here. šŸ™‚

    Hi cc, welcome to my blog. I have heard of people who spill the beans when they leave – like customer lists – but none of it seems to have tipped the scales to anyone’s favor. Far as I can tell, the fear is imaginary more than anything.

  2. September 19, 2008 9:35 am

    This is an illegal clause in Malaysia. It’s prohibited by the Contracts Act 1950 for employees.

    Check this out:
    http://www.lawyerment.com.my/boards/article-Malaysia_Employment_Law-298.htm?Page=6

    How do I know this? šŸ™‚

    Let me guess, you are working in a legal firm? Hehe.Thanks for the link man, a good resource for a lot of ppl out there I’m sure.

  3. September 19, 2008 9:39 am

    it’s definitely not a fair clause esp for ppl who are in the sales n marketing industry. for IT sales ppl, they have “contacts” which are very important…… and going to another company (most IT companies are competitors with each other…no?) also means bringing “contacts” to the new company. That’s their portfolio anyway…people hire sales guy coz of his contacts.

    so if this clause is there……does that mean this sales guy has to quit IT industry and goes elsewhere like selling pancakes?
    If that’s the case, why should the pancake hires a guy who only has IT contacts?

    Err… to sell pancakes to his IT contacts? Haha but that’s a good point. It just illustrates the absurdity of the clause, especially for those that last 4-5 years.

  4. ahkiong permalink
    September 19, 2008 9:43 am

    Ive working for an explosive company few years ago as a project manager for bakun hydroelectric and i face the same problem as you. The contract did stated that im unable to join any related industries company that might be relevant to the ex company im working for.

    How long did they tie you down?

  5. Lays permalink
    September 19, 2008 9:44 am

    I thought usually it’ll state when the clause will expire, it can be 3 months, 6 months or more. It is an unfair clause.

    Yes they usually state for how long. The link provided by avatar highlighted a case whose prohibition period was 5 years. Unbelievable.

  6. ahkiong permalink
    September 19, 2008 10:03 am

    Oh mine will be 1 years then only it expire Hmm..

    It must be a very competitive company that you joined, They sound insecure.

  7. September 19, 2008 12:06 pm

    Its a dumb clause. Why hide the cheddar for others when your own cheddar is bad anyway? I normally dont give a damn to the clause as it is very poorly substantiated.

    Ironically I’ve never come across any co. that actually took action against an ex-employee who joined a competitor. You wonder why have it in the first place.

  8. angeles permalink
    September 19, 2008 12:39 pm

    this year, we had 2 ppl who quit to join a competitor… business is as usual for us…

    Hmm… does your company have this clause in your employment contracts?

  9. September 19, 2008 5:19 pm

    As I’ve said earlier, unless you are in a very special situation (i.e. the 3 circumstances outlined in the Contracts Act 1950), these restriction of trade clauses are rendered illegal and therefore ineffective.

    And companies never explain these 3 clauses to its employees do they.

  10. Damien permalink*
    September 19, 2008 9:20 pm

    Hey everyone, I’ve put my responses to your comments at the bottom of your individual comment, in bold. Thanks for all your inputs!

  11. September 19, 2008 9:40 pm

    I believe most companies that put these clauses in their employees’ contract actually realize they’re ineffective.

    However, not everyone checks with their lawyers or have a skeptical mind, so some people might think these clauses are actually good in law.

    On a side note, Damien – if you’re thinking of using this in your company, your employees better not have access to your blog LOL šŸ™‚

    Nope, I don’t work in a law firm (yet).

    So it is because of insecurity, as I suspected.

    There’s only 3 of us in my company and truthfully we treat ourselves more like partners than anything. They’re both older than I am anyway, hehe šŸ™‚

  12. angeles permalink
    September 20, 2008 12:56 am

    err.. i dont quite remember cos it’s been years since i last saw my employment contract :p

    my boss was the one who left.. and pinched another staff 1 mth later.. after that, went around ‘pinching’ some of our freelance workers… ethical wise, not admirable but i suppose it’s in the name of “survival”? šŸ™‚

    He didn’t pinch you? šŸ™‚

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