RESTRAINTS OF TRADE
When an employee leaves your company he or she might depart with knowledge of your trade secrets or confidential information about your business. This could be detrimental as the information could land on your competitor’s doorstep. It is therefore imperative to protect yourself as a business owner / employer! Insist that employees who could damage your business in this way sign a ‘restraint of trade’ agreement up front – such restraints are legally binding and enforceable unless they are unreasonable and thus contrary to public policy.
Although in most cases parties are held to their agreements, our law subjects this to the need to balance the competing rights of the employer against the right of the departing employee to work and to earn a living.
In determining the reasonableness of a restraint of trade agreement, three considerations are relevant – namely the nature of the restraint, the period of time that the restraint will endure, and the territory over which the restraint will operate.
The Western Cape High Court, Cape Town, recently confirmed that any restraint of trade that is unreasonably wide – in either geographical area or time – will not be enforced. At best it will be reduced in extent, but, as in the case in question, it could well be totally invalidated. The Court also deemed it inevitable that
“as the values of dignity, equality and freedom which underpin our Constitution take root, greater weight will be given to the right of every citizen to choose their trade, occupation or profession freely and that the courts will look more critically at restraint of trade agreements where, for example, they were concluded between parties whose respective bargaining powers were substantially disparate, where the quid pro quo is either non-existent or no more than the opportunity of employment and, where the attempt to enforce the restraint owes more to an aversion to fair competition than the protection of any legitimate employer interest.”
Therefore, firstly, have your restraint of trade agreements professionally drafted in accordance with those principles. Then, enforce them consistently. In the aforesaid case the Court considered it relevant that the employer had, in previous instances involving other employees who left its employ, not taken any action against them.