In a pivotal judgment handed down by the Johannesburg Labour Court in SMD Technologies (Pty) Ltd v Tavares and Another ([2024] ZALCJHB 546), the Court reaffirmed that restraint of trade clauses, when reasonably framed, remain enforceable under South African labour law. The ruling serves as a critical reminder for both employers and employees about the legal weight such contractual provisions continue to carry.
Background of the Dispute
Tavares was employed by SMD Technologies from December 2019 until she resigned in September 2024. As a Key Account Manager, she had access to sensitive commercial information and was responsible for managing relationships with high-value clients, including large retailers such as Makro, Game, and Vodacom. After her resignation, she immediately took up employment with Syntech Distribution, a competing firm in the same industry.
SMD, concerned about the risk to its client base and proprietary information, sought urgent relief to prevent Tavares from continuing her new role. The company approached the Labour Court to enforce the restraint of trade agreement she had entered into upon joining the company.
Key Legal Issues Considered
Existence of a Protectable Interest
The Court carefully evaluated whether SMD had legitimate interests worthy of protection, concluding that it did. Tavares had direct and sustained interactions with major clients, developing trust and fostering loyalty over a significant period. Her involvement included sales oversight, strategic relationship-building, and participation in nationwide store launches, activities that placed her in a strong position to influence client decisions.
The Court noted that actual harm to the former employer need not be proven. The mere potential that Tavares could entice clients away, based on her prior role and influence, was sufficient to justify enforcement of the restraint. The risk, not the realisation of harm, is what matters in assessing breach of such agreements.
Assessment of Reasonableness
The restraint clause prohibited Tavares from engaging in competitive employment for a 12-month period. The Court found both the duration and the geographical scope of the restraint to be reasonable, considering the extent of the risk to SMD’s proprietary interests and the nature of her former position.
Public Policy and Constitutional Rights
Drawing on the seminal case of Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A), the Court reaffirmed that restraints of trade are enforceable unless they are unreasonable or contrary to public policy. Tavares failed to convince the Court that the clause unfairly restricted her ability to work or that it imposed undue hardship. The agreement was not found to violate her constitutional rights to dignity or to freely choose her trade or profession.
Outcome and Implications
The Labour Court granted the interdict, preventing Tavares from continuing her employment with Syntech for the remainder of the restraint period.
This decision reiterates the principle that restraint of trade clauses are not inherently invalid. They are legitimate tools that employers can use to protect customer relationships, confidential business information, and competitive advantages, provided they are narrowly tailored and do not impose disproportionate burdens on former employees.
Practical Takeaways
- Employers should ensure that restraint clauses are clearly drafted, specifying the duration, scope, and nature of the restriction. Courts will favour agreements that strike a fair balance between business protection and employee mobility.
- Employees must understand that signing a restraint clause creates enforceable obligations. Breaching such terms, even after resignation, may expose them to legal action and employment restrictions.
Ultimately, the judgment highlights that while freedom of trade is protected by the Constitution, it must be balanced against the legitimate commercial interests of employers, especially where trust-based roles and sensitive information are involved.
