The enforceability of restraint of trade agreements has always been a vexed question in SA, often eliciting heated debate. Any rational business owner has a legitimate interest in restraining a top or highly skilled employee, usually endowed with vast amounts of the employer’s confidential information and know-how, from competing in the same markets.
By contrast, employees seeking to improve their personal circumstances often feel they are entitled to break the agreements intended to restrain them as they believe them to be unfair and even punitive in nature.
Our law has for many decades recognised that employers may enforce restraint of trade agreements if they can prove such an agreement exists and the employee in question has breached it. Unless employees can show the enforcement of the restraint would be unreasonable, they are likely to be restrained according to the terms of the agreement.
However, enforcing the restraint requires employers to enter our court system, where uncertainty, delays and inefficiency have become defining hallmarks. A recent case demonstrates the severity of the problem. In February the labour court found in Backsports v Motlhanke & Another that the employer (Backsports) had waived its right to enforce a restraint of trade agreement because it had dismissed the employee against whom it sought to enforce the agreement after he engaged in acts of misconduct.
The facts giving rise to the application were as follows: after his dismissal for misconduct in October 2024 the employee breached his restraint of trade agreement. In January and February 2025 Backsports discovered he had joined a competitor, contacted Backsports’ clients and engaged in competitive activities. Backsports launched an urgent application to enforce the restraint of trade agreement against the employee.
The application was dismissed by the labour court, which was obviously wrong since it ignored the settled law in Reeves & Another v Marfield Insurance Brokers CC & Another from 1996, which permits employers to enforce restraints of trade regardless of whether the employee has resigned or is dismissed (subject to the proviso that employers should not act improperly).
Courts regularly get their wires crossed though and several months passed as the appeal, which was obviously urgent given the limited duration of the restraint, wound its way through the courts. It was ultimately heard and the error was corrected on July 30. However, by this point only the months of August and September remained of the restraint period, leaving the employer with little more than a pyrrhic victory and a large legal bill.
Despite the employer obtaining an order in its favour, the employee would be able to run out the clock on the remaining two months of his restraint by filing an application for leave to appeal (whether he believed he had any merit or not is mostly immaterial). Any relief the employer may have been entitled to would then have evaporated.
This raises the question: is a restraint of trade still a viable option for adequately safeguarding an employer’s legitimate interests? As the battle for talent in SA’s challenging job market intensifies employers need to adapt their recruitment and retention strategies. Restraints of trade are useful tools, but employers should not be deploying them in isolation.
Employers who place all their proverbial eggs into the restraint of trade basket must realise that once they become litigious, they are bound by the strictures of our court systems, their rules and the delays that inevitably accompany them.
Other, more creative, options are available to employers to minimise their risk when top employees leave their employ. Introducing malus and clawback-type regimes which are tied to sign-on bonuses and imposing restrictive terms on short-term or long-term incentive schemes will assist in reducing the incidence of top employees departing. Pairing these options with existing restraints of trade, nonsolicitation and confidentiality obligations will strengthen an employer’s position further.
⋅ Coetzer is head of employment, and Wingfield partner, at Cowan-Harper-Madikizela.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.