Page 50 - Q&A 2019/2020

How enforceable is that restraint of trade
really?

Linki Scholtz
August 2019

“We recently interviewed a software engineer for a position at our company.
In the interview it came to light that the engineer had just left the employ of
one of our main competitors and that he was bound by a restraint of trade
in terms of his previous employment agreement with the company. We really
want to appoint him because of his skills but are wary of the restraint. Is there Commercial
any way around this?”

To answer this question, it is firstly necessary to unpack the reasons why an
employer would have a restraint of trade provision included in an employment
agreement. The predominant reason is to prohibit employees whose
employment has been terminated from disclosing confidential and valuable
information which they obtained by virtue of their employment, to competing
parties. Restraints also seek to protect a company’s client base, customer
relations as well as supplier connections and avoid having those exposed or
passed on to a competitor. Lastly, restraints can also be used to prevent a direct
competitor from employing a person who has been trained and skilled by his
previous employer and so protecting the investment made in the employee by
the company.

Immediately though it raises questions about the freedom of employment of a
person bound by a restraint of trade and whether such is legally enforceable.

Under South African law, a restraint of trade is valid and enforceable, except
when its enforcement would be contrary to public policy, in which case such a
restraint of trade will not be upheld, either fully or in part.

Another question relates to how a restraint of trade clause is enforced?
Usually, what happens is that when the employer in whose favour the restraint
has been created becomes aware that the employee who is subject to the
restraint is seeking employment in breach of the restraint provisions, will inform
the employee of the provisions of the restraint and request them to desist from
breaching the restraint. This employer may also go a step further and inform
the potential new employer that the employee is subject to a restraint and the
employer should desist from appointing such employee.

Should the employee ignore the request, the previous employer can opt
to approach a competent court for an order enforcing the provisions of the
restraint. Typically, this will be in the form of an interdict prohibiting the employee
from taking up employment in breach of the restraint. However, in this application
the employee will have to demonstrate the unreasonableness of the restraint in
order to avoid the enforcement thereof.

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