A restraint of trade clause is a contractual provision that restricts an employee from competing with their former employer or soliciting its clients and staff after leaving employment. Its purpose is to protect the employer’s proprietary interests — such as confidential information, trade secrets, customer connections, goodwill, and the stability of its workforce.
Requirements for Enforceability
The courts have consistently held that restraints are prima facie enforceable, unless shown to be unreasonable or contrary to public policy. The key requirements are:
- Protectable interest: The employer must demonstrate a legitimate interest (confidential information, trade connections, goodwill, employee stability).
- Reasonableness: The restraint must be reasonable in scope, duration, and geography.
- Public policy balance: Courts weigh the employer’s right to protect its business against the employee’s constitutional right to work.
- Termination context: The restraint applies regardless of how employment ends, unless dismissal was fraudulent or in bad faith.
In the matter of Backsports (Pty) Ltd v Motlhanke, the Labour Appeal Court overturned the Labour Court’s refusal to enforce a restraint against a dismissed employee. The appellant, Backsports, employed Mr Motlhanke as a Senior Stream Lead. His contract contained a 12‑month restraint clause prohibiting competition, solicitation of clients (including SuperSport Schools, Central Gauteng Athletics, and Oban Productions), and solicitation of employees.
After his dismissal for misconduct, Motlhanke was found to have:
- Approached Backsports’ customers for streaming work.
- Collaborated with former colleagues to deliver services to Central Gauteng Athletics.
- Made alleged threats against employees and assets, including sabotage of broadcasting equipment.
The Labour Court initially held that dismissal disentitled the employer from enforcing the restraint, reasoning that it would be unjust to prevent a dismissed employee from earning a livelihood. The Labour Appeal Court disagreed, citing Reeves v Marfield Insurance Brokers which held that restraints apply “for any reason whatsoever” upon termination, unless dismissal was fraudulent or in bad faith.
“In essence, on the authority of Reeves, the restraint of trade agreement is enforceable despite the circumstances that led to the termination of the employment contract.”
Significance of Backsports (Pty) Ltd v Motlhanke
This case is significant for several reasons:
• Dismissal does not negate restraint: The Court confirmed that dismissal — even for misconduct — does not waive the employer’s right to enforce a restraint. This aligns with Reeves and strengthens employers’ ability to protect their interests post‑employment.
• Protectable interests clarified: The Court emphasised that goodwill, customer relationships, and employee stability are legitimate proprietary interests. Even without confidential information, approaching customers and soliciting staff constituted a breach.
• Ancillary jurisdiction affirmed: The Court held that the Labour Court had jurisdiction to consider related interdicts (such as threats to employees and assets) under section 77(3) of the BCEA and section 158(1)(j) of the LRA. This prevents fragmented litigation and ensures effective remedies.
• Balancing interests: The judgment reinforces the Basson v Chilwan test, requiring courts to balance the employer’s protectable interests against the employee’s right to work. Here, the employee’s short tenure did not outweigh the employer’s need to protect its customer base and workforce.
Practical Implications
- For employers: Draft restraint clauses carefully, ensuring they are reasonable in duration and scope. Document proprietary interests (clients, goodwill, employees) to support enforcement.
- For employees: Understand that dismissal does not release you from restraint obligations. Breaching restraints can lead to costly interdicts and damages.
The Backsports judgment strengthens the enforceability of restraint of trade clauses in South African employment law. It confirms that dismissal does not nullify restraints, highlights the breadth of protectable interests, and affirms the Labour Court’s jurisdiction over ancillary interdicts. For employers, it is a reminder to draft robust contracts; for employees, a caution that post‑employment obligations remain binding.
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