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CAN A RESTRAINT OF TRADE CLAUSE BE ENFORCED

DURING A PANDEMIC?

Wade Ogilvie, Partner and Adrian Krige, The question, however, is trade clause is enforceable until The Current Circumstances: where it protects those
Candidate Attorney, Corporate & Natural whether a restraint of trade can be proven otherwise – reinforcing COVID-19 proprietary interests without
Resources Team, Cox Yeats Attorneys enforced during a pandemic? our common law principle that According to Stats SA, the South which the business would
all South Africans are free to African economy shed 2.2 million collapse and potentially more
any companies have Principles contract as they see fit. The onus jobs in the second quarter of 2020 jobs would be lost.
limped their way Restraint of trade clauses is therefore on the restrained – the largest quarter to quarter
As a restraint of trade can only
Mthrough lockdown generally have two aspects: a non- employee to prove that the decline since the survey started be enforced when there is an
and have survived by cutting compete clause, which prohibits restraint of trade clause is not in 2008. To state the obvious,
costs, predominantly through the employee from having an only unreasonable, but contrary the pandemic has clearly had a agreement in place, the most
retrenching employees, and interest in or being employed by a to public policy. negative impact. pertinent time to obtain the
developing innovative business competitor, and a non-solicitation In making a determination restraint is when the employee
first concludes the employment
strategies to align with a changed clause, preventing an employee on whether a restraint is Judges will be cognisant of the
market. The net result: companies from taking clients away from the unreasonable and against public shift in the economy and will be contract, alternatively, when an
have let go employees who have employer. policy, the Court will consider loath to enforce restraint of trade employee is promoted as the offer
the know-how to commercially Whether a restraint of trade clauses in circumstances where of promotion will be on new terms
cripple their businesses by clause is enforceable depends various factors including the an employee, due to COVID-19, and conditions between the parties.
duration of the restraint, the
either competing with them, or on several factors. Firstly, the area in which the employee is has been retrenched but is being In the current economic
“stealing” their clients. employer must have a proprietary restrained from operating and prevented from putting bread on climate, it is advisable to review
the table due a restraint of trade.
Companies are now desperately interest worth protecting. These whether the employee is able to So how do companies protect all restraint clauses to align
them with the principles set out
seeking to protect their proprietary interests include trade secrets, earn a living. their proprietary interests in these in the Magna case, including
interests to curtail this undesired know-how and their client base. Importantly, the Court held in trying times?
effect. The mechanism to do so is The proprietary interest to be tailoring them such that they are
a restraint of trade clause in the protected must be weighed up the Magna case that it will look A pragmatic approach to considered to be reasonable and
at all the facts and circumstances
employment contract. against the limitation placed on that are prevalent at the time the restraint of trade clauses not against public policy. 
In order to enforce a restraint the employee’s freedom to trade, in restraint is sought to be enforced, Companies should consider Please contact us should you require
of trade, the company would other words, the employee’s right and not only the commercial constraining their restraint of assistance or advice for your Corporate
generally endeavour to first obtain to earn a living using the skills and climate in which the contact trade clauses to protect only & Natural Resources matters.

an undertaking from the employee expertise of their profession or was originally concluded. The those proprietary interests which Contact us on:
that the employee will abide by occupation. Court acknowledged that the are essential to the success of the Wayne Ogilvie
T: +27 (0)31 536 8527
the restraint. Should the employee In the case of Magna Alloys and circumstances may be drastically business. It would, in the writer’s E: wogilvie@coxyeats.co.za

refuse, court proceedings would Research (SA) (Pty) Ltd v Ellis different from those that were view, be difficult for a Court Adrian Krige
need to be instituted, usually on an 1984 (4) SA 874 (A), the Court relevant when the contract to declare a restraint of trade T: : +27 (0)31 536 8567
urgent basis. confirmed that a restraint of was concluded. unenforceable in circumstances E: akrige@coxyeats.co.za

CORPORATE & NATURAL RESOURCES TEAM

he Corporate and Natural partners, an associate and three Client relationships are viewed The team also offers expertise in: The team has a particular focus
Resources team comprises candidate attorneys. “Together as long term commitments, ■ Corporate Finance on the mining, sugar, banking,
Ta commercial team of we tackle head on the core with the preferred approach ■ Corporate Advisory manufacturing, agribusiness,
lawyers that is optimal for its issues of efficiency, trust, culture being building relationships telecommunications, logistics,
specialisation in the merger, and consistency with a view to and rapport. This approach ■ Competition Law recycling and timber sectors. 
acquisition, amalgamation and creating a truly collaborative allows clients to be confident ■ Empowerment and
restructuring space. Transformation
team of lawyers working with the team’s legal grounding ■ Natural Resources and Energy Contact us on:
Managing Partner, Michael together, to best serve our clients’ and ability to offer pragmatic ■ Dispute Resolution T: +27 (0)31 536 8500
Jackson, heads this team of four needs,” says Jackson. commercial solutions. W: www.coxyeats.co.za

Michael Jackson, Helen Jackson, Jason Goodison, Wade Ogilvie, Benjamin Meadows, Ryan Holtes,
Team Leader, Partner Partner Partner Associate Candidate Attorney
Managing Partner

Adrian Krige, Robyn Bronstring,
Candidate Attorney Candidate Attorney

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