As a general rule, every individual has a right to choose their trade, occupation and profession freely and this right is enshrined in Section 22 of the Constitution of the Republic of South Africa. However, there are limits to enjoying this right.
In this article, we will focus on ‘restraints of trade’. One of the areas in which unlawful competition receives much attention is with the ‘employer and employee’ relationship. This relationship exists when a person performs work or services under certain conditions in return for remuneration. It is through the employment relationship, however defined, that reciprocal rights and obligations are created between the employee and the employer.
The relationship involves the imparting of training and know-how as well as the disclosure of confidential information (“proprietary interests”) by the employer to the employee. The employer will attempt to protect their proprietary interests as well as their right to fair trade and/or competition, by including a restraint of trade agreement or include provisions to their employees’ contracts of employment.
A restraint of trade agreement is used to restrict an employee’s freedom of trade and is usually applicable to a specific subject matter, in a specific area and for a specific time period.
It usually restricts the employee from, amongst other things:
- Disclosing the employer’s confidential and/or proprietary information to third parties to the detriment of the employer
- Soliciting, with the intent to circumvent, the employees or customers or business associates and/or their business from the employer
- Working for a competitor of the employer
- Setting up a competing business to that of the employer
Even though, employers are allowed to require their employees to conclude restraints of trade, the employer will only be able to enforce the restraints if they are reasonable as to the subject matter of restraint, area of restraint and duration of the restraint.
In addition, the courts will also consider whether the employer has interests which are protectable in terms of law. This proprietary interest and the alleged infringement must be weighed up against the freedom of the other party to be economically active. These interests may include client lists, trade secrets and know-how. In instances where the restraint provisions are found to be unreasonable towards the employee, the agreement will not be enforceable.
As an employer, it is vital that an experienced intellectual property law attorney assist in regularly reviewing your contracts of employment in order to ascertain whether you have a restraint of trade in place for your employees. If you already have an established restraint of trade, it should be reviewed to ensure that the provisions thereof are reasonable and capable of being enforced. Where the provisions are found to be unreasonable and/or unenforceable, it is imperative to draft a new restraint of trade that is not only in line with the applicable laws of the country but also mitigates any risk.
The process must also assess whether you have protectable interests which deserves protection by law and if these exist, you have, at the instance of infringement upon your protectable interest, the remedy to institute legal proceedings on the basis of unlawful competition.
By Stefaans Gerber
Senior Associate | Intellectual Property Law Practitioner
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