A clause added when reposition.

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asked on May 17, 2006 at 05:31
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It's expressly agreed that it's a condition of the employment that yourself not be allowed directly and/or indirectly to be employed by other and/or carry on and/or do the business of factory automation and other related business in Malaysia and Singapore(hereinafter reffered to as "The Restricted Trade") for 5 years from the date of your cessation of employmeny with us.Yourself shall not indulge in the Restricted Trade either on your own or in partnership with others or be employed by other in the Restricted Trade,failing which we shall seek such damages suffered for your breach of contract.

THE ABOVE IS THE CLAUSE INCLUDED IN MY REPOSITION LETTER, WHAT I WOULD LIKE TO KNOW IS,DO I HAVE RIGHTS TO BREACH THE ABOVESAID TERM BY THE COMPANY UNDER THE HUMAN RIGHTS/WORKMEN OR EMPLOYEE'S RIGHTS? AS A HUMAN BEING,EVERYONE HAVE THE DREAM TO ACHIEVE SOMETHING IN THEIR LIFE SUCH AS RUNNING A OWN BUSINESS BUT THE ABOVESAID CLAUSE BLOCKING MY FUTURE TO HAVE A OWN BUSINESS ON THE SAME FIELD OF KNOWLEDGE. IS THERE ANYWAY TO FIGHT BACK THE ABOVE SAID CLAUSE??IS ANY REFERENCES IN MALAYSIA BEFORE AND WHAT'S THE RESULT?

PLEASE GIVE ME YOUR PROFESSIONAL ADVICES OR SUGGESTIONS THAT WHETHER THE ABOVESAID CAN BE EFFECTED IN MALAYSIA AND CAN I TAKE AN ACTION TO SUE EMPLOYER TRYING TO UNKINDLY ON EMPLOYEES,THANKS!
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4 Answers
answered on May 17, 2006 at 18:34
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When matter is important to you, best to seek professional advice. I can only comment as a lay person.

My understanding of the law of contract is that it is done willingly by both parties. Furthermore, for an agreement to be enforceable, it requires "consideration", this is the exchange of something useful or promises.

It appears that your original contract does not have such trade restraint clause. This seems to be added on when you are assigned to another position. I wonder what is the consideration the employer provided for this clause. Would it be the offer of a new position? I do not know.

Is trade restraint clause against public policy to make its enforcement null and void? I tend to think it is not so. The employer certainly having some important matter to lose when his employee trading on the company's trade secrets.

I wonder whether you can argue that human rights or workmen/employee rights to get an employee out of the consequences from signing a trade restraint contract.

I tend to favour the frank discussion of this matter by both parties. Litigation should be avoided whenever possible, unless it is totally impossible for any reasonable resolution. I treasure J F Keneddy's saying: Let us not fear to negotiate, or negotiate out of fear.
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answered on May 18, 2006 at 03:43
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Hi,Stanger!Thanks for your professional adviced.Anyone here have such experiences or matters are most welcome to brief or voice up here.As i knew before,that such issue have been rised up and broadcast as a live dicussion forum at Singapore TV programme and this question had been answered by those law professional and the answer is can't be enforceable.My employer added in this clause on reposition letter just want to monopolize or minimize the market competition is not because of some important matter to lose when his employee trading on the company's trade secrets.According to their previous experienced,some ex employee had became a competitor after leaving.Is this against anti monopolization law in Malaysia?
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answered on May 18, 2006 at 17:36
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I am flattered that you regarded my advice as "professional". I am just a lay person.

If you take your matter as purely academic, you may take your own time to study it in satisfying your ego. Important matters generally having great impact to the party and time sensitive. This means the matter would need to be addressed to or else it is barred from raising it after certain period of time. Law is a complex matter. Even top judges with many years of experience still unable to say their judgments would not be over thrown by their brother judges. So when top judges do not know their judgements are right for sure, I need not to think of my comment.

Talk show was on general matter. This may not fit in to your specific situation. From my observation, many lay persons tend to get their material facts wrong. The result is not surprising. Getting your own lawyer, you may need to pay. But you may get the best from your facts of the case.

Decades ago, it was common that ordinary people pull their own loosen teeth. How many people do this by himself now? Many paid a few times more just to get their preferred dentist to do even a simply dental work.
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answered on May 20, 2006 at 05:31
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The problem you are facing is most common issue that most employee headache nowday!I believed after you have been read through the below article,it will make you clear and understanding the whole thing is a trick and your employer is selfish and misused the nature of law to restraint and threated empolyee from join competitor or run own business,so that he/she can minimize the market competition or monopoly the market.

Contracts, trade secrets and restraint of trade

Section 28 of the Contracts Act 1950 provides that every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void unless the restraint falls within one of three stipulated exceptions.

To the extent that one is suppressed from using one¡¦s general skill and knowledge acquired during the course of employment, this could be a restraint of trade if enforced post employment. The leading English case (which has persuasive authority in Malaysia), Faccenda Chicken v Fowler, illustrates this point. It appears from the decision of Faccenda Chicken that an employer cannot restrain an employee from using general skill and knowledge that he has acquired in the course of his employment for his own or for a competitor¡¦s business after termination of employment.

A confidentiality provision or term is usually incorporated in most contracts of employment which specifically creates an obligation on the employee or ex-employee not to divulge confidential information of the employer during and even after leaving the employer¡¦s services.

In the Malaysian case of Polygram Records Sdn Bhd v The Search, the Malaysian courts held that section 28 of the Contracts Act only applied to restraints in the post-contract period. This means that restrictive provisions which are applicable during the currency of the contract would not be a covenant in restraint of trade and would be valid. Any restrictive provisions enforced post contract could be construed as a covenant in restraint of trade and therefore void. In the later case of Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632, the court held that the duty of good faith or fidelity on an employee does not only require that the employee refrain from misuse or disclosure of information while under employment, but that there is also an implied duty that prohibits the employee from using any confidential information obtained during his employment, without the employer¡¦s consent, after the employment contract ends. In this case, it was also held that such a prohibition did not amount to a restraint of trade, as the prohibition did not restrain the defendants from entering into the same trade as the plaintiff, but merely from using and divulging confidential information and trade secrets of the plaintiff to the detriment of the plaintiff.

Whilst in employment, the employee must also observe his "duty of fidelity". But once he leaves his employment the balance rests largely in his favour, when he is entitled to make use of all the skill and knowledge he has acquired.

Skills and knowledge should be distinguished and indeed are distinguishable from trade secrets and confidential information. It is submitted that where such distinction is clear, trade secrets and confidential information protection clauses operating post contract should be enforceable against an employee. Such enforcement is not in restraint of trade but is for the purpose of protecting the trade of the owner of the secrets and information and to encourage scientific development and application (see below for the equitable principles which may apply to bar an ex-employee from using confidential information and trade secrets).
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