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Legal Talk - The thorny issue of enforcing a restraint of trade against a former employee

Legal Talk - The thorny issue of enforcing a restraint of trade against a former employee

Author: Fawzia Khan
Date: 2023-03-07
Can an employer prevent an employee from moving over to its competitor? A former headmaster of a leading private independent school in the North Coast of KwaZulu Natal was interdicted in December 2022 by the school for having breached a restraint of trade agreement. Mr. E took up employment as the headmaster of another private independent college, also in the north coast to commence in January 2023. The former employer based its claim on the agreement that he would not take up employment with a competitor for a period of eight months, with effect from 15 December 2022, within a 50 km radius.

The former employer said that the other college was a trade rival which offered the same services and that both colleges ?competed in the same community for student attendance and against each other in sporting events?. The aggrieved college claimed that it had its own special curriculum which was known to Mr. E and that he had developed relationships with the school?s strategic partners and has access to names of customers, parents of students and suppliers.

The court found however that the school?s curriculum was available to any parent who was considering sending a child there. On the issue of deciding whether a restraint of trade was contrary to public policy, the court said that ?agreements which have been freely concluded must be honoured? and that ?a person must be free to enter into business, a profession or trade in the manner they deem fit?.

The restraint agreement in question was extremely poorly drafted. The court called it a ?cut and paste? one as there were several clauses which did not make sense. The court cautioned that it cannot come to the aid of parties if the court is ?unable to ascertain the intention of the parties.

Apart from the poor wording of the restraint agreement, the court also said that the former employer was unable to prove that there was a ?protectable interest?. These would include goodwill such as trade connections, trade secrets and confidential information.

The court used the following illustration to drive its point. ?.. where a salesperson in a shoe shop is offered a better salary by a competing shoe shop he will ordinarily not be bound by a restraint clause in favour of his previous employer, because there is nothing to protect.

There is no protectable interest. The only purpose of the restraint will be to prevent a competitor from acquiring his salesperson. The fact that the salesperson may be experienced and competent does not justify restraining him from changing his employment. Public policy demands that businesses should be allowed to compete and individuals to work and ply their trade freely, wherever they choose.

This is why the law requires a protectable interest for a restraint clause to be enforceable. It is to protect the employer?s confidential information from falling into the hands of a competitor?. In the present case the restraint clause was found to be against public policy and unenforceable as its sole aim was to stifle competition. The application was dismissed with costs.

Know your rights! The Law Desk of Fawzia Khan & Associates. Giving YOU the Power of Attorney. Email fawzia@thelawdesk.co.za or call 031-5025670 for legal assistance at competitive rates.