by Aleshia van der Ploeg, Founder of VDP Legal Consulting
Many Employees are so eager to be employed, that they simply sign an employment contract without giving a second thought to the contents thereof. Many Employers are including Restraints of Trade in their employment contracts these days in order to protect their proprietary interests.
Employees need to be careful to ensure that restraint clauses do not negatively impact their future employment prospects. A Restraint of Trade needs to balance an Employer’s right to protect its business interests against an Employee’s right to earn a living.
WHAT IS A RESTRAINT OF TRADE?
A Restraint of Trade is a clause in a contract of employment that states that in the event of termination of employment, the Employee is restricted in the work he can perform in that he will be restrained from performing similar work in competition with his/her former Employer, for a prescribed period of time and in a specific geographical area.
SOUTH AFRICAN LAW
The general principle is that restraints of trade undertakings are not unconstitutional and every restraint agreement signed by an Employee is assumed to be lawful and enforceable.
A restraint of trade agreement is enforceable unless it is shown to be unreasonable - and the onus of showing that it is unreasonable rests upon the Employee.
Factors a court looks at when deciding if a restraint is reasonable:
The length of time for which the restraint operates;
The geographical area to which the restraint applies;
Whether a restraint payment was paid to the employee;
Whether the employee still has the ability to earn a living;
The proprietary interest or capital asset that the employer seeks to protect.
In the situation where an employee only possesses the skills of the job which he is restrained from performing, the consideration of the employee’s ability to continue to earn a living may pose a problem for the enforceability of the restraint. All persons should, in the interests of society, be permitted earn a living.
It will generally be contrary to the public interest to enforce an unreasonable restriction on a person’s freedom to earn a living. However, where the proprietary interest of the company which needs protection outweighs the employee’s interest in continuing his trade, such a restraint will be reasonable and enforceable.
An employee who wants to be released from a contract in restraint of trade must be able to persuade the court that his or her right to work outweighs the potential prejudice his ex-employer could potentially suffer if the employee leaves and competes with the ex-employer in the open market.
**This article is for information purposes only and is not intended to provide legal advice or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein.**
Please email us at aleshia@vdplegal.co.za for legal assistance and advice in this regard.
Aleshia van Der Ploeg LLB (RAU) was admitted as an Attorney of the High Court in South Africa in 2006. She is a member of the Law Society of the Northern provinces. She has 10 years post-qualification experience in corporate, commercial, labour and general law. She practised as an attorney and served as a Director before forming her own consulting firm. www.vdplegal.co.za | Email aleshia@vdplegal.co.za
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