A restraint of trade clause can affect your ability to accept a new job with a competitor. Here is what South African employees need to understand about when these clauses are enforceable — and when they are not.
Image: Supplied
You have just been offered your dream job. It comes with a better salary, a senior title and strong prospects.
There is only one problem: your new employer is a direct competitor of your current one, and buried deep in your employment contract is a restraint of trade clause.
Are you legally trapped?
Many South Africans believe a persistent myth — that restraints of trade are unconstitutional because they restrict the right to work and will therefore be dismissed by the courts.
This is incorrect. In South African law, restraint of trade agreements are presumed to be valid and enforceable. If you sign one, the law expects you to honour it. If you wish to challenge it, the burden rests on you to show that the clause is unreasonable.
Here is what you need to know before signing — or attempting to challenge — such an agreement.
Courts recognise that employers cannot use contracts simply to eliminate fair competition. An employer cannot prevent you from working elsewhere merely because you are highly skilled or valuable to competitors.
To enforce a restraint of trade clause, the employer must demonstrate a protectable interest. In South African law, this generally falls into two categories:
Trade secrets and confidential information
This includes proprietary formulas, pricing strategies, unreleased software code and sensitive business plans. If you have access to confidential information, an employer may restrict you from using it to benefit a competitor.
Customer connections (trade connections)
If your role involves building strong relationships with clients who are likely to follow you when you leave, an employer may seek to protect that customer base through a restraint clause.
If neither applies, the restraint is likely to be viewed as an attempt to limit fair competition and may be declared unenforceable by a court.
Employers cannot prevent employees from using their general skills, experience and knowledge in future roles.
For example, if you developed professional expertise as a marketing manager or mechanic while working for one company, those skills remain yours to use elsewhere. The restriction applies only to confidential and proprietary information belonging to the employer.
Even where a protectable interest exists, the restraint must still be reasonable in scope.
Courts generally assess two key factors:
Duration (time)
Restraints lasting between three and 12 months are commonly enforced. A restraint lasting five years will usually be considered excessive unless it applies to a narrowly defined executive context.
Geographical area (space)
The restriction must be appropriate to the employee’s actual working area. For example, a restraint preventing a Durban-based hairdresser from working anywhere in KwaZulu-Natal would likely be considered unreasonable. A smaller radius — such as 10km — may be regarded as fair.
Importantly, courts do not always invalidate an entire clause if part of it is too broad. They may reduce the scope — for example, shortening a 24-month nationwide restraint to six months within a specific city.
If you have signed a restraint and intend joining a competitor, do not assume the clause will be ignored. An employer may approach the High Court or Labour Court for an urgent interdict preventing you from taking up your new role. This could jeopardise your employment and expose you to significant legal costs.
Be transparent
In some cases, negotiating with your employer may resolve the issue. Employers may agree in writing to waive the restraint, particularly if you undertake not to solicit specific clients.
Get expert advice
Before resigning — or ideally before signing a contract containing a restraint clause — consider obtaining legal advice. A legal professional can assess whether the restriction is likely to be enforceable in your particular role and industry.
Legal insurance services such as Legal Leaders provide contract review support and access to professional legal guidance, helping employees manage employment-related risks more confidently.
** Aslam Moolla is the founder and director of Legal Leaders and co-founder of Legal Leaders Insurance. He is a passionate labour lawyer with over 14 years of experience. Moolla and the Legal Leaders have become a prominent voice for workplace fairness and a commitment to ensuring every South African knows their rights and how to defend them.
***The views expressed here do not necessarily represent those of Independent Media or IOL.
IOL Opinion