Understanding Restraint of Trade
We have encountered many cases where Restraint of Trade was implemented and with dire consequences.
What is Restraint of Trade exactly?
This is, generally, where an employer will prohibit an employee/s, whose employment has been terminated, from:
? utilising or disclosing certain valuable and confidential information which they have obtained by virtue of their employment, to competing parties;
? directly or indirectly contacting clients of the former employer;
? directly or indirectly persuading former colleagues to leave the employment of the former employee;
? directly or indirectly competing with the former employer;
Often restraints are set in place to protect a company’s client base, supplier connections, confidential information and protectable interests. This, to avoid exposing the information to a competitor. And, often, restraints can be used to prevent a direct competitor from employing a person who has been trained and skilled by his previous employer, thus protecting the investment made in the employee by the company.
Can this be enforced in South Africa?
This begs the question of whether a company can, essentially, prohibit someone from earning an income, especially if all they know is that one profession.
In South African, the law is clear on restraint of trade, and it is enforceable, however not if enforcing it goes against public policy.
Enforcing the restraint can lead to many hours of mediation and litigation, so it is important to ensure a sound attorney draws up the restraint. All parties signing into the restraint are aware of the legalities and parameters.
We are experts in this field and urge you, should you either be about to set up a restraint of trade with an employee or are on the other side of a restraint and unsure, to reach out to discuss it with us first.
If you need assistance to enforce the restraint of trade or defend the trade restraint, we have successfully represented both sides, the employer or employee, in such Labour Court and High Court applications.