Thinking of leaving with colleagues to start a competing venture? A recent decision from the Appellate Division of the Singapore High Court, Centricore v ATT Systems [2025] SGHC(A) 17, serves as a crucial reminder of the significant legal duties owed to an employer, even as you plan your exit.
The court largely ruled in favour of the employer, ATT Infosoft, who sued a group of its former senior employees for orchestrating a mass resignation to set up a competing business. The decision reinforces several key principles in employment law.
Key legal takeaways for employees and employers
Duty of loyalty is absolute during employment
The court found that employees breached their duty of good faith by taking "preparatory steps" to compete while still employed. These actions included incorporating a new company (Centricore), signing a lease for its office, and arranging start-up funds. This duty requires employees to devote their full attention to their employer's interests until their very last day and is different from their duty to refrain from competing with the employer after they leave, which is the scope of a non-compete.
Non-compete clauses can cover new ventures
A critical finding was the interpretation of the non-compete clause. The employees argued it only applied to a specific list of competitors named in their contracts. The court disagreed, ruling that the clause's broader language - prohibiting engagement in any "business of a similar nature" - also covered the new competing company the employees formed themselves. This prevents using the creation of a new entity as a loophole.
Coordinated exits can amount to unlawful conspiracy
The court inferred an unlawful means conspiracy from the circumstances. While resigning is legal, the mass resignations in quick succession were seen as evidence of a coordinated plan and using unlawful means with the intention to injure the employer. The "unlawful means" used to further this conspiracy were the employees' various breaches of their employment contracts (like the loyalty and non-compete duties) and misuse of confidential information.
Handling of confidential information
The employees were found to have breached their duty of confidence by retaining company's information after their departure. The court affirmed that even without proof that the information was used, the act of acquiring and retaining it without authorisation can be enough to establish a breach.
This case is a stark warning to departing employees about the risks of coordinated team moves and competing while still on the payroll. For employers, it underscores the importance of well-drafted employment contracts to protect legitimate business interests. If you would like to discuss how this decision may affect you or your workplace, please do not hesitate to reach out to us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
