South Africa Contract Restraint of Trade: What You Need to Know
Restraint of trade is a common clause found in employment contracts in South Africa. It is a clause that restricts employees from working for competitors or starting similar businesses for a set period of time after leaving their current employer. While restraint of trade clauses are legal in South Africa, they must adhere to certain restrictions and requirements to be enforceable.
In this article, we’ll discuss what restraint of trade means in a South African employment contract, the legal requirements for enforcing it, and what employees should consider before signing such a clause.
What is Restraint of Trade?
Restraint of trade is a clause that restricts employees from working for competitors or starting similar businesses for a set period after leaving their current employer. The purpose of the clause is to protect the employer’s legitimate business interests. This can include protecting confidential information, client relationships, and trade secrets.
Restraint of trade clauses can be found in various types of employment contracts, including permanent, fixed-term, and temporary contracts. The clause can also apply to employees in different roles, including executives, managers, and lower-level positions.
Legal Requirements for Enforcing Restraint of Trade
In South Africa, restraint of trade clauses must adhere to certain requirements to be enforceable. The clause must be reasonable in terms of the duration and scope of the restriction. This means that the restraint period must be for a reasonable amount of time and the geographic scope of the restriction must be reasonable in relation to the employee’s position and the employer’s business interests.
For example, if an employee works in a sales position that has a national sales territory, a restraint of trade clause that restricts them from working for competitors in the entire country for several years after leaving their current employer would likely be unreasonable.
Additionally, the restraint of trade clause must protect the employer’s legitimate business interests. This means that the employer must demonstrate that the clause is necessary to prevent the employee from using confidential information or client relationships for their own benefit or for the benefit of a competitor.
What Employees Should Consider
If you are an employee who has been presented with a restraint of trade clause in your employment contract, there are several things you should consider before signing it.
First, ensure that the clause is reasonable in terms of its duration and geographic scope. If the restraint period is too long or the geographic scope is too broad, the clause may be unenforceable.
Secondly, consider whether the clause will restrict your future career opportunities. If you are planning to work in the same industry or start a similar business after leaving your current employer, a restraint of trade clause may limit your options.
Finally, consider negotiating the terms of the clause with your employer. If the clause is too restrictive, it may be possible to negotiate a less restrictive clause that still protects the employer’s legitimate business interests.
In conclusion, restraint of trade clauses are a common feature in employment contracts in South Africa. While they are legal, they must be reasonable in terms of their duration and scope and must protect the employer’s legitimate business interests. Employees should carefully consider the terms of any restraint of trade clause and negotiate with their employer if necessary.
