Employers should note that restraint of trade agreements are not regulated by labour law, but by the Law of Contract due to the fact that it is a contractual clause, or an agreement entered into, and as such one cannot turn to the CCMA for help once a legal dispute arises out of a restraint of trade agreement which was signed and breached.
Contrary to popular belief, the restraint of trade agreement/clause in employment contracts are legally enforceable, provided that the limitations they impose are reasonable. This was held in the recent case between Shoprite Checkers (Pty) Ltd v Jordaan (2013).
In 2006, Reddy v Siemens Telecommunications (Pty) Ltd further stipulated that a restraint of trade agreement is enforceable unless it is shown to be unreasonable and this must be proved by the person alleging that it is enforceable. It was further held that the reasonableness of a restraint is determined by two principles. First is the principle of public interest, which requires compliance with contractual obligations by the parties. Second, the principle of interest of society – any person must be able to engage in employment in order to make a living.
What does a restraint of trade agreement mean for the employer?
The restraint of trade agreement is entered into and presented to employees to provide protection to the employer against employees taking trade secrets, clients and intellectual property to a competitor when leaving his or her current employment. An employer may, according to John Grogan’s Workplace Law, not compel or force employees to enter into such an agreement after employment has commenced.
What does a restraint of trade agreement mean for the employee?
The restraint of trade agreement entails that an employee is prohibited to reveal confidential information of the employer and that employees are prohibited to recruit the current or previous employer’s clients to do business with a different employer. This does not mean that an employee needs to sign away his or her whole life and certainly does not entail that an employee will have to remain in his current employment for the rest of his or her life.
The restraint of trade agreement is generally beneficial to the employer. It can be legally enforced and although it is not regulated by labour law (and can only be determined in a Civil Court) one must ensure that the limitations imposed by the agreement are in fact reasonable before taking action.
ABOUT THE AUTHOR
Anerike Genis obtained her LLB degree from the North West University and completed her articles at a law firm in Potchefstroom. Anerike was admitted as an Attorney of the High Court of South Africa (Gauteng North Division) in 2015 whereafter she practiced as an attorney in Polokwane. Anerike is currently employed as a SEESA Labour Legal Advisor at our Pretoria office.