What are the legal ramifications of working on your startup on the side while working a full-time job in Singapore?

legality of juggling startup with full time job singapore

The startup world is rife with arguments over whether you should or should not build your startup on the side while working a full-time job. Some consider working on a side project inappropriate while others have no qualms about doing so whatsoever. Others, such as James Altucher, suggest that you have at least six months worth of salary in the bank before quitting your job.

At first glance, the bulk of what’s written online seems to gravitate towards the romantic notion of the “solopreneur”, the tireless entrepreneur who takes the morning train to his 9 to 5, before coming back to “hustle” on his startup for a few more hours. However, while there are numerous articles debating this point, few writers seem to concern themselves with the legal aspect of doing so.

This is not an article on the pros and cons of juggling a full-time job and a startup on the side. Instead, the focus is going to be on the legal issues you should be aware of if you do decide to do so.


Non-compete clauses / Non-solicitation clauses

For the uninitiated, a non-compete clause is a restrictive covenant in most employment contracts stating that the employee agrees not to compete with the employer within certain parameters.

Non-solicitation clauses and non-compete clauses (generally referred to as “restraint of trade” clauses) are often mistakenly used interchangeably by entrepreneurs but there’s actually quite a large distinction between the two. Whereas the non-compete clause defines the boundaries in which the employee can compete with the company, the non-solicitation clause restricts employees from soliciting employees, customers, or business opportunities from another company or organization for a period of time.

As an employee, you should be aware of how the non-compete and non-solicitation clauses are defined in your contract, and whether there will be any possible fallout from working on a side project.

What you don’t want to see in your employment contract is a non-compete provision that explicitly forbids you from being the owner of another business or moonlighting on the side while you’re employed with that company. Vague and broadly worded provisions are not great as well.

Of course, the best case scenario would be one in which there is no non-compete clause in your employment contract but the odds of a reasonable employer leaving this out is next to zero. A decent scenario would be one in which the employment contract states that the employee cannot set up a competing business, and where the definition of “competing business” is precisely defined (this assumes that you’ll be creating a startup in a different vertical from your current employer).

Depending on the severity of the wording, non-solicitation clauses can come into play if you have co-workers helping you on your startup as well.

In Singapore, the position on these restraint of trade clauses is that all restraint of trade clauses are prima facie void unless they are not unreasonable.

If you’re concerned about your employment contract and would like to have a lawyer conduct a comprehensive review of it, get in touch with us here.

Examples of a Non-compete and Non-solicitation clause

Non-competition: The Employee acknowledges that he performs services of a unique nature for the Company that are irreplaceable, and that his performance of such services to a competing business will result in irreparable harm to the Company. Accordingly, during the Employment Term and for the one (1) year period immediately thereafter, the Employee shall not, directly or indirectly, own, manage, operate, control, be employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation) or render services to any person, firm, corporation or other entity, in whatever form, engaged in any business of the same type as any business in which the Company is engaged on the date of termination.

Non-solicitation: You hereby agree that during your employment with the Company and for one (1) year thereafter, you either directly or indirectly will not contact or provide any assistance to any other person or organization which seeks to contact any person, who during your employment with the Company, was or is employed by the Company, for the purpose of soliciting, inducing or attempting to induce any such person to terminate their employment with the Company.