Restraint of trade clauses are often included in employment contracts as a standardized inclusion – this is a process which we hope will halt, as standardised clauses in this regard are most often unenforceable.
Restraint of trade clauses must be specific, reasonable and worded in an unambiguous manner.
Our Court’s (to include the High Court) have been approached on numerous occasions to enforce restraint of trade clauses.
The aforesaid requirements, to name but a few, have accordingly become commonplace to provide for actual enforceability of such clauses.
In breaking down the aforesaid, the following can be noted:
Restraint clauses must be specific:
- Dependant on the type of employment, restrain clauses should not only specify the job title, or position, but should specify the specific terms of the employee’s responsibilities and/or functions – this prevents an employee simply making use of a different job title, whilst carrying on the same work;
- A reason for the restrain should be included – this reason can be anything reasonable, such as a limited client base, personalised services, extreme competition, or industry leading standards;
Restraint clauses must be reasonable:
- Restraint of trade clauses cannot act to prohibit an employee from again being gainfully employed;
- This aspect should balance the employer’s need for protection, against the employee’s rights to employment, as well as choosing their profession;
- The area in which the restrain applies should accordingly be as reasonable as possible, in a large metropolitan area a restraint for a radius of 20 kilometres may be deemed reasonable, however, in a small town, such a radius may entirely prevent employability;
- As with each test herein, our Court’s look at the merit of each matter independently, however, these aspects should definitely be taken into account when establishing a restraint clause;
- This will of course also be applicable to the duration of such restraint;
Restraint clauses must be unambiguous:
- As with all contractual disputes, interpretational issues favour the party that did not draft the agreement – in employment scenarios, this means that any ambiguous wording will favour the interpretation of the employee;
- Restraint clauses should accordingly be as specific as possible, with no room provided for any interpretation save for the standard reading thereof;
- Restraint clauses should be worded in a manner that is understandable to an average reasonable person, and not necessarily in a manner only understandable to those in the legal sphere;
- We advocate the inclusion of a separate signature position just below the restraint clause, where the employee can accept the reasonableness of the clause, agree to its enforceability specifically, and acknowledge the employer’s reasons for such a clause;
The aforesaid should allow for the greatest chance of success in enforcing a restraint of trade clause.
We note, in closing, that the enforcement thereof is to be borne by the employer, and not the employee – an employer will be required to approach Court to obtain an order enforcing the restraint.
Should you have any queries, require advice, or require assistance with a related matter, feel free to contact our office.
Written by Keegan Elliott (Attorney)