Restraints of Trade: Guide for Employers in South Africa
- Jonker Vorster Attorneys
- Feb 12
- 4 min read
In today's competitive business environment, employers invest significant time, resources, and expertise into training employees and growing their businesses. However, the risk of employees leaving and taking valuable knowledge, clients, or trade secrets with them is a major concern. This is where restraint of trade clauses in employment contracts come into play.
A restraint of trade is a contractual provision that restricts an employee from working for a competitor, starting a competing business, or soliciting clients and employees after leaving a company. While these clauses are designed to protect a business's interests, they must be reasonable and enforceable under South African law.
This guide explains how restraint of trade clauses work, their enforceability, best practices for employers, and what to do if a dispute arises.
What Is a Restraint of Trade?
A restraint of trade is a contractual clause that prevents an employee from engaging in certain competitive activities for a specific period after leaving an employer. The purpose is to protect confidential information, trade secrets, customer relationships, and intellectual property from being used by former employees to gain an unfair advantage.
These clauses typically include restrictions on:
Employment with competitors
Starting a competing business
Soliciting clients or employees
Using trade secrets or confidential company data
While restraint of trade clauses are commonly used in employment contracts, South African law follows the principle that all contracts are enforceable unless proven unreasonable or against public policy.
Are Restraint of Trade Clauses Enforceable in South Africa?
The Legal Test for Enforceability
In South Africa, restraint of trade clauses are presumed to be enforceable, but an employee can challenge them in court if they are unreasonable. The employer must demonstrate that the restraint is necessary to protect a legitimate business interest.
South African courts consider four key factors when determining whether a restraint is enforceable:
Protectable Interest – Does the employer have a legitimate business interest, such as protecting trade secrets, client lists, or specialised training?
Reasonableness of Duration and Scope – The restraint should not impose unfair restrictions on the employee's ability to earn a living.
Geographical Limits – The restriction should be relevant to where the employer operates.
Public Interest – The restraint should not unfairly limit economic competition or prevent skilled employees from working.
Recent Legal Precedents
Recent South African court rulings show that courts are reluctant to enforce overly broad restraints. If an employer fails to prove substantial harm from an employee joining a competitor, the restraint may be declared unenforceable.
Key Elements of a Valid Restraint of Trade Clause
Employers should ensure that restraint of trade clauses meet the following legal and practical requirements:
1. Clearly Defined Scope
The restraint should precisely outline:
The activities being restricted.
The industries and roles covered.
The duration and geographic area of the restraint.
2. Reasonable Duration and Geographic Limitations
Restraints longer than two years are often deemed excessive unless justified.
National or international restrictions may be unreasonable if the employer only operates in certain areas.
3. Justification for the Restraint
Employers should be able to prove that the restriction protects:
Confidential business information.
Trade secrets or proprietary systems.
Long-term client relationships that took years to develop.
If there is no legitimate business reason, courts are likely to rule the clause unenforceable.
How Employers Can Ensure Enforceability
To improve the likelihood of enforcing a restraint of trade, employers should:
Ensure the scope is tailored to specific business interests.
Limit the duration to what is necessary to protect the business.
Specify what confidential information or relationships need protection.
Keep records of why the restraint was included in the employment contract.
Employers should also review restraint of trade clauses regularly to ensure they remain relevant and reasonable.
Common Pitfalls That Invalidate a Restraint of Trade
Some common mistakes that make a restraint of trade unenforceable include:
Overly broad restrictions – Trying to block an employee from working in an entire industry.
Excessive duration – Preventing an employee from working for more than two years.
No proof of harm – Failing to show how the employee’s actions could damage the business.
A well-crafted restraint should balance the employer’s right to protect business interests with the employee’s right to earn a living.
What Happens If a Restraint of Trade Is Breached?
If an employer suspects a former employee has breached a restraint of trade, they can:
Send a legal demand letter instructing the employee to stop their activities.
Apply for an interdict (court order) to prevent further breaches.
Claim financial damages if the business suffered measurable losses.
However, if the court finds the restraint unfair or excessive, the employer may not be able to enforce it.
FAQs About Restraint of Trade in South Africa
What Is the Purpose of a Restraint of Trade?
Can an Employer Enforce a Restraint of Trade?
How Long Can a Restraint of Trade Last?
Can an Employee Challenge a Restraint of Trade?
What Happens If an Employee Ignores a Restraint of Trade?
Conclusion of Restraint of Trade
Restraint of trade clauses are valuable tools for employers looking to protect their business, but they must be reasonable and legally enforceable. To ensure the best outcome:
Clearly define the scope of the restraint.
Keep the duration and geographic limits reasonable.
Ensure the restriction protects real business interests.
At Jonker Vorster Attorneys, we specialise in commercial law and contract drafting. If you need assistance drafting, reviewing, or enforcing a restraint of trade, contact us today.
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