SINGAPORE: E-commerce giant Lazada is under fire after some of its laid-off employees revealed that the extensive non-competition clauses in their contracts have severely curtailed their job prospects.
The affected workers fear breaking the contract as it would result in the forfeiture of vested shares that they were promised, in exchange for receiving lower pay when they were employed.
One retrenched employee, Timothy, disclosed to CNA that he initially accepted a pay cut upon joining Lazada because the company offered him restricted stock valued in six figures.
These shares, designed to motivate employees, are conditionally given and fully vest over a four-year period.
Timothy, who had already acquired part of the shares after years of service, was taken aback when he received a layoff notice during the recent holiday season.
The non-competition clause is being viewed as inethical given how broad it is, as it not only encompasses Lazada’s main competitors like Shopee, but also Grab, TikTok, NTUC FairPrice, Giant, Amazon, and retailers and logistics companies.
Employees are now faced with the dilemma of choosing between job opportunities and the vested shares they sacrificed for.
When some asked if the company could buy back their shares, Lazada reportedly told them to wait for the company’s upcoming initial public offering.
Since Lazada is not yet profitable, employees who hold shares cannot receive any dividends yet. Timothy also said the value of his shares had plunged since he was hired by the company.
He lamented to CNA, “The worst part is that the restricted stock is still in trust funds controlled by Lazada or Alibaba Group. They also want to use it to threaten us not to join the competitor’s company.”
Singapore’s Food, Drinks & Allied Workers Union (FDAWU) has criticised the retrenchment exercise, revealing that it was not notified of the latest tranche of job cuts. Lazada apologised for this failure and FDAWU said it will strive to secure additional benefits for eligible employees, with the Ministry of Manpower continuing to promote negotiations between the two parties.
Experts weighing in on the fairness of the non-competition clause stressed that such clauses should be reasonable in scope and protect the legitimate rights and interests of the employer to be enforceable.
If the terms are not enforceable, Lazada may be barred from confiscating employees’ vested shares.
Pointing out that the non-competition clause may be unfair given how extensive it is, one HR expert told CNA, “They’re laying people off on redundancy grounds, so people have no chance to find work, and then you’re limiting their options. So it’s very unfair and I think it’s very unethical.”
This is not the only Lazada retrenchment practice that has drawn scrutiny, with the uncommonly short notice period drawing criticism from observers. The severance benefits for the laid-off employees, a meager two weeks’ salary after one year of service, have also intensified the discontent.