Consider restraint before employing

2019-10-30 06:00
Linki Scholtz

Linki Scholtz

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Question:

We recently interviewed a software engineer for a position at our company.

In the interview it came to light that the engineer had just left the employ of one of our main competitors and was bound by a restraint of trade in terms of his previous employment agreement with the company.

We really want to appoint him because of his skills, but are wary of the restraint.

Is there any way around this?

Answer:

To answer this question, it is firstly necessary to unpack the reasons why an employer would have a restraint of trade provision included in an employment agreement.

The predominant reason is to prohibit an employee whose employment has been terminated from disclosing to competing parties confidential and valuable information obtained by virtue of his or her employment.

Restraints seek to protect a company’s client base, customer relations and supplier connections, while also ensuring that these are not exposed or passed on to a competitor.

Lastly, restraints can also be used to protect the company’s investment in the employee by preventing a direct competitor from employing a person who has been trained and skilled by his previous employer.

Immediately, though, it raises questions about the freedom of employment of a person bound by a restraint of trade and whether such restraint is legally enforce­able.

Under South African law, a restraint of trade is valid and enforceable, except when its enforcement would be contrary to public policy. If so, a restraint of trade will not be upheld, either fully or in part.

Another question relates to how a restraint of trade clause is enforced.

When the employer in whose favour the restraint has been created becomes aware that the employee subject to the restraint is seeking employment in breach of the restraint provisions, the employer will inform the employee of the provisions of the restraint and request him or her to desist from breaching the restraint.

This employer may also go a step further by informing the potential new employer that the employee is subject to a restraint and the employer should desist from appointing such employee.

Should the employee ignore the request, the previous employer can opt to approach a competent court for an order enforcing the provisions of the restraint. Typically, this will be in the form of an interdict prohibiting the employee from taking up employment in breach of the restraint.

In this application, however, the employee will have to demonstrate that the restraint is unreasonable the unreasonableness of the in order to avoid the enforcement thereof.

Should the court find in favour of the employer and uphold the restraint of trade, the employee will not be able to take up the new employment as it would be in breach of the court order.

Likewise, the potential employer wishing to appoint the employee could be interdicted by the ex-employer if he or she can prove the relevant elements for unlawful competition.

It would therefore be important for your company to have your attorneys assess the restraint of trade and determine whether the previous employer would be able to enforce it.

Should you decide to employ him, consider the potential risks to your company. Then you can make an informed decision on the way forward.

Linki Scholtz, Phatshoane Henney Attorneys

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