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RESTRAINT OF TRADE

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 Article by listed attorney: Fawzia Khan         

Restraint of trade agreements are contracts usually signed between an employee and employer, in which the employer sets out certain work restrictions which will come into effect, in the event of the employee leaving its employment. Not all employment contracts will contain restraints of trade. Employers will normally require a restraint of trade to be signed in instances where there exists a shortage of specialized skills, or where it’s likely that the employee will gain first hand knowledge of a range of key information such as trade secrets, confidential company information, the date base of customers, pricing, marketing strategy and others. Often the employee may also have built up relationships with customers and this could understandably prove disastrous if the employee leaves, taking these customers with him.

Our courts will enforce a restraint of trade agreement provided the restraint is not considered unreasonable. In order to decide reasonableness or not, the court will firstly, assess whether it is in the public interest that both parties comply with their agreement and secondly, the court will consider the right of all persons to be able to generate an income. In making its decision, the court will consider the duration and scope of the restraint. A restraint for a period of between 6- 24 months may be regarded as reasonable in terms of duration, the courts may reject anything longer.  Off course each matter will be considered on its own merits and there are no hard and fast rules which apply.

The only way to enforce a restraint of trade is to approach the court for relief. The court will decide whether or not a restraint is unreasonable, unenforceable or against public policy. It is the employee who bears this onus of proof to the court.

What if an employee claims that he or she had no alternative and was forced to sign a restraint of trade agreement or risk losing the job? Well, in this case, the employee will bear the onus to prove that he or she signed the restraint under duress.

Know your rights! Email fawzia@thelawdesk.co.za or call 031-5025670 for any legal assistance.