I was drafting an opinion recently on the enforceability of Restraints of Trade in employment contracts and was reminded that instead of focusing on geographic and time restraints to prevent employees from working for the competition, employers should be focusing on protecting their confidential information.
The reality is that restraint of trade agreements in South Africa are becoming increasingly difficult to enforce. Each case is dealt with on its own merits and consequently no hard and fast rules can be laid down. Even if employers have the best drafted restraint of trade agreement in the world, the courts will look at whether it is in the public policy to allow the restraint to be enforced. This leaves employers exposed and uncertain, with no guarantee that a restraint of trade will be enforced by a court of law.
According to the SCA case of Automotive Tooling Systems (Pty) Ltd v Wilkens [2006] SCA 128 (RSA), the court held that employers have no protectable interest in the general skills and knowledge of former employees and rejected an employer’s request to enforce a restraint of trade. The court was of the view that the mere fact that the two former employees had taken up employment with the employer’s competitor did not in itself entitle the employer to any relief if all the former employees would be doing would be applying their skills and knowledge acquired whilst in the employer’s employ. The court found that there is a distinction between a restraint of trade protecting confidential company information, on the one hand, and a restraint that prevents an employee from utilising his/her experience and knowledge that has been gained while working for a particular employer.
So when next considering a restraint of trade, remember that the true objective of the employer must be the protection of its confidential proprietary information. In fact, by insisting on stringent confidentiality provisions, the employer is in any way restraining employees from divulging confidential information to competitors and clients!
– Article courtesy of Nichola Walker-Woodard, head of commercial department at Hey Walker Dommisse Inc Attorneys