Labour Court restraint of trade ruling hinges on time and territory

Image source: Freepik

A restraint must be balanced against an individual’s constitutional right to practise a profession and to work. It must be reasonable, clear and no broader than necessary to protect a genuine proprietary interest. If you say a restraint is unreasonable, you carry the onus of proving it. That starting point generally places employers in a stronger position at the threshold.

The test for reasonableness

The Strydom case reaffirmed the well-known framework from Basson v Chilwan and later Reddy v Siemens. In plain terms:

1. Does the employer have a protectable interest after termination, such as confidential information, trade connections or trade secrets?
2. Is that interest threatened by the former employee?
3. When the employer’s interest is weighed against the employee’s interest not to be economically inactive, which prevails?
4. Is there any public-policy consideration, unrelated to the parties’ relationship, that dictates for or against enforcement?
5. Finally, does the restraint go further than necessary, or would a less restrictive measure do?

This is the lens through which the court viewed the dispute.

Labour Law

Restraint of trade agreements: Blanket ban backfires in Labour Court

Riona Kalua  4 Jun 2025

Clients, confidentiality and the “springboard” fear

On the facts, the applicant showed a protectable interest in its client data and pricing information housed on its CRM. The court accepted that even if actual misuse is not proven, the risk of disclosure can justify protection where an employee had access to confidential particulars and has shown a willingness to compete (see paragraphs 27-31 of the Strydom case).

Moreover, the judgment also recognises a real-world nuance in the sense that independent overlap of client bases is likely. Strydom said some clients were his own, and he denied using the applicant’s information as a springboard.

The lesson to be learnt is that the mere fact of operating in the same market is not, by itself, a silver bullet for the employer; the gravamen remains confidential advantage, not ordinary professional skill and experience.

The often-invisible tug-of-war over clients

Restraint disputes frequently unfold while clients are blissfully unaware of the behind-the-scenes tug-of-war.

Paragraph 10 of the Strydom case offers a telling moment, when Strydom was asked to cede the clients of the second respondent (HR unscripted – the second respondent and independent business of Strydom – the first respondent) to the applicant. Strydom replied that it was not his decision but that of his (the second respondent’s) clients.

The court did not need to decide client consent questions to resolve the restraint, but that passage exposes a recurring truth that clients are often passengers in these fights, even though their relationships underpin the value everyone is trying to protect.

Labour Law

When do restraint of trade agreements become unreasonable in the eyes of the court?

Jaimé-Lee Jacobs  7 Apr 2025

Time and territory: the heart of this case

Two features made the difference here: time and territory.

1. Time: The contract set a 12-month period. The court accepted this duration in principle. Restraints should always specify a clear and proportionate time limit. One year is common in professional services and, depending on the facts, is often defensible.
   
2. Territory: the contract limited competition within 100km of any location where the applicant conducts business. The applicant asked the court to enforce this at a province-wide level. Effectively, all provinces where it operates, to which the court stated that a blanket provincial (or nationwide) interdict exceeded the contract’s wording and the facts proved. Instead, the applicant had to show the actual locations that triggered the 100km rings since broad assertions that every client sits within 100km of another client were not enough.
   

Reading down to what is reasonable

The Strydom case judgment is most practical since the court read down the restraint to match the contract and the evidence, and then crafted the order to make it both reasonable and enforceable by i) confining the restraint to 100km of the applicant’s Benoni office and 100km of the identifiable clients Strydom serviced in Cape Town, KwaZulu-Natal and Limpopo; and concurrently ii) enforcing the confidentiality undertakings without any geographical carve-outs, because misuse of confidential information is not location-bound.

This approach indicates how a court can tailor enforcement to proportional, evidence-based zones, rather than rubber-stamping blanket geographical bans.

Labour Law

Beware cutting and pasting provisions in settlement agreements

Nonkosazana Nkosi  8 May 2023

The paper trail that wasn’t: variations must be in writing

Perhaps the most practical warning comes from paragraph 23 of the Strydom case. The contract said no variation would be valid unless reduced to writing and signed by both parties. Strydom disclosed his ongoing involvement with the second respondent, HR Unscripted, during the recruitment of the applicant, however, nothing was ever recorded to carve out an exception.

The result was simple: the restraint stood and was enforced as written, subject only to the court’s territorial trimming. Had the applicant secured a written exemption for his legacy clients or for after-hours work, the litigation risk and outcome might have looked very different.

A single, clean clause can save an employee and an employer from costly uncertainty.

Labour Law

Does restraint of trade transfer when a business is sold?

Jacques van Wyk & Andre van Heerden  8 Mar 2023

Key takeaways for both sides

For employers:

1. Draft with precision by identifying the legitimate interests you need to protect;
2. Set a clear time limit and draw territorial boundaries that reflect the footprint of your actual operations or clients. Rest assured, you might be required to prove those locations;
3. Keep confidentiality obligations distinct and expect them to be enforceable beyond geography; and
4. If you agree to any exceptions, record them in writing.

For employees and founders:

1. If you believe a restraint overreaches, remember you must prove its unreasonableness;
2. Focus your challenge on duration, scope and territory, and show how a narrower restraint would still protect the employer’s interests; and
3. Crucially, if you negotiate any permission to maintain a side business or legacy clients, insist on a signed written variation. Without it, your disclosure during interviews will not save you.

The Strydom case underscores the constitutional balance at the heart of restraints of trade. Courts will enforce them where there are real, protectable interest and a measured restriction. They will not, however, permit employers to convert a targeted X km clause into a country-wide embargo without facts.

Reasonableness, clarity and evidence remain the order of the day.