Singapore High Court rejects S$1.7 million claim for notice pay in lieu of employment lock-in period

This client alert examines the recent Singapore High Court decision in Poten & Partners Pte Ltd v. Lee Won Sang [2026] SGHC 208 and its practical relevance to employers that use lock-in periods in their employment contracts. 

The decision addresses whether a fixed-term lock-in employment period can operate as a multi-year notice period and the financial consequences for an employee who departs without serving notice.

Background

The employer, Poten & Partners Pte Ltd, which provides brokerage services to the energy and ocean transportation industries, sued its former senior liquefied petroleum gas (LPG) broker, Mr Lee Won Sang. Mr Lee had worked for Poten continuously since 2 November 2017, on an annual base salary of S$421,000.

Mr Lee’s employment contract provided for a fixed “Initial Period” from 16 November 2024 to 15 May 2029 (a period of four years and six months) with an indefinite term thereafter. Clause 10.1 provided that either party must give “at least six months’ notice … such notice not to expire prior to the last day of the Initial Period”. The contract also allowed Poten to place an employee on garden leave during the notice period.

On 4 April 2025, Mr Lee resigned by email, stating his understanding that a six-month garden leave period would run until 3 October 2025. He never returned to the office. Poten directed him to return and serve “notice” until 15 May 2029 or make payment in lieu of notice (PILON) of about S$1.74 million. Poten continued to pay his salary for April and May 2025 and then accepted his repudiation of the employment contract on 30 May 2025.

Poten claimed: (1) PILON of S$1,737,433.79, representing salary for the remaining four years, one month, and 12 days of the Initial Period; (2) alternatively, common law damages for lost profits of around S$3.7 million to S$4.1 million; and (3) repayment of S$66,976.03 in salary paid for April and May 2025.

Outcome: Poten established that Mr Lee breached his employment contract. However, it was awarded only S$32,384.62 as the four-week statutory PILON, a further S$32,384.62 in statutory damages under section 16 of the Employment Act (its claim for lost profits having failed for lack of evidence), and S$66,976.03 in salary repayment, totalling S$131,745.27. Costs are to be determined separately.

Court’s key findings

1. No multi-year notice period
   
   The court rejected Poten’s argument that the notice period ran until 15 May 2029. Looking at substance over form, it found that clause 10.1 only operated in the last six months of the Initial Period, so the contract provided no notice period for resignation before then. Any ambiguity was also construed against Poten as the drafting party.
    
   The court therefore applied the statutory default under section 10(3)(d) of the Employment Act 1968. As Mr Lee had more than five years’ service, his notice period was four weeks, and the PILON was computed at S$32,384.62 (S$421,000 ÷ 52 × 4).
   
2. Even on Poten’s reading, the clause would have been a penalty
   

   Although it was unnecessary to decide the point (its comments being obiter), the court considered whether, on Poten’s interpretation, clause 10.1 would have been an unenforceable penalty and found that it would. The court did, however, reject Mr Lee’s alternative argument that the clause was an unreasonable restraint of trade, as it did not restrict his work after leaving.

   In the court’s view, a sum based on salary for the rest of the term, which ignores the time needed to replace the broker, the employer’s ability to mitigate, and fluctuations in the LPG market, is not a genuine pre-estimate of loss.

3. Poten’s lost-profits claim failed for lack of proof and poor mitigation
   
   Poten argued that by refusing to attend work, Mr Lee breached his contract under both section 13(2) of the Employment Act and common law. The court agreed that he was in breach, but held that Poten failed to prove its lost profits. Its projections simply extended Mr Lee’s past profits to 2029, ignoring LPG market volatility, and there was no evidence that his clients would have stopped dealing with Poten. Poten also called no industry expert.
    
   In any event, Poten had failed to mitigate. It never asked for Mr Lee’s client list and hired two replacements without cargo broking experience and without properly researching the market. On the damages claim, Poten recovered only the statutory sum under section 16 of the Employment Act (S$32,384.62), which does not require proof of loss.
   
4. Salary paid during unauthorised absence was recoverable
   
   Poten recovered the salary payments as an unjust enrichment claim. The court rejected Mr Lee’s claim that he was on garden leave (a point his counsel ultimately conceded): garden leave is a contractual right for the employer to invoke, and Poten never did so. As Mr Lee did no work after 4 April 2025, there was a total failure of consideration, and the court awarded Poten S$66,976.03, being the salary paid to Mr Lee from 4 April 2025 until Poten terminated his employment on 30 May 2025.

Practical takeaways for employers

Lock-in periods are commonly used to retain key hires, particularly where employers have invested in sign-on payments, retention bonuses, training, or client relationships. This decision shows that such arrangements must be drafted and enforced with care:

• Check notice clauses. A clause that prevents notice expiring before the end of the lock-in may leave the employer with only the statutory default notice (four weeks for an employee with five or more years’ service) if the employee resigns early. Employers should ensure the contract specifies a notice period that applies throughout the lock-in.
• Do not rely on “salary for the balance of the term”. A PILON tied to remaining salary over a lock-in is likely to be struck down as a penalty. To protect an investment in a hire, employers may instead use clearly drafted repayment obligations, such as for sign-on loans. For instance, in BGC Partners (Singapore) Ltd and another v. Sumit Grover [2024] SGHC 206, the High Court allowed two broking companies to recover loans advanced to a broker on hiring (including a sign-on bonus structured as a loan), which became immediately repayable when his employment was validly terminated. Any agreed exit payment should also reflect a genuine pre-estimate of loss, such as replacement time, business disruption, and client attrition.
• Invoke garden leave promptly and in writing. Where an employee holds key client relationships, the risk on resignation is that clients follow the employee to a competitor. Garden leave does not arise automatically. Employers must formally exercise their contractual rights to keep a departing employee away from clients and counterparties.
• Mitigate actively. On resignation, ask for a handover of the employee’s client and counterparty list and promptly reassign key accounts. Run a documented search for experienced like-for-like replacements. The court criticised Poten for hiring, through friends’ introductions and without such research, two replacements with no cargo broking experience.
• Build a robust evidential case. Lost-profit claims based on an employee’s historic revenue will face close scrutiny, particularly in volatile markets. In this case, the court noted that it was unfortunate Poten did not call an industry expert. Employers should consider independent expert evidence and evidence of actual client losses.

Conclusion

This decision makes clear that while the Singapore courts will generally hold parties to their contractual bargain, they will not allow a fixed-term lock-in to operate as a disguised multi-year notice period or a salary-based exit penalty. Employers that use lock-in periods should review their employment contracts, garden leave practices, and departure protocols now, both when hiring and before the next resignation occurs.

Disclaimer: This alert is for general informational purposes only and does not constitute legal advice. Please consult qualified legal counsel for advice on specific situations.

Client Alert 2026-199