A recent decision by the Labour Court provides guidance on the enforceability of contractual provisions that restrict employees from seeking alternative employment.
In the matter between Lucchini South Africa (Pty) Ltd v CCMA and Others, the Labour Court upheld the decision by the Commission for Conciliation, Mediation and Arbitration (CCMA) that found the employee’s dismissal for breaching such a clause to be substantively unfair. However, the Court reduced the compensation awarded to the employee from 12 months to six months’ remuneration.
Background
The case involved an employee who served as safety, health, risk, and quality (Sherq) manager at a manufacturing company, Lucchini. The employee was dismissed less than six months into his employment, following a disciplinary hearing relating to five allegations of misconduct, including seeking employment with a competitor whilst still employed by the company, alleged extortion, withholding information during retrenchment consultations, insubordination, and dishonesty regarding a relocation allowance.
The employee challenged his dismissal at the CCMA, which found the dismissal substantively unfair.
The employer then launched a review of the CCMA award. The employer’s grounds of review related to the Commissioner’s findings that the employee had not committed any of the alleged misconduct, as well as the maximum compensation that had been awarded. It sought an order that the employee’s dismissal was substantively fair, alternatively, reducing the quantum of compensation that had been awarded.
Andre van Heerden and Hannah Fowler 18 Nov 2025 Contractual prohibition contrary to public policy
In its judgment, the Labour Court addressed each of the misconduct charges, finding the commissioner’s conclusions in each respect to fall within the band of reasonableness. Ultimately, the court agreed with the commissioner that all the allegations made it clear that Lucchini was desperate to get rid of the employee.
Of particular significance was the court’s finding in relation to the first misconduct allegation. In this regard, the employer alleged that the employee had breached a contractual provision in his employment contract that prohibited him from taking ‘any preparatory steps’, at any time during his employment, to become engaged or interested in the business of a competitor.
The allegation arose after the employee sought to negotiate his employment with a direct competitor, Cast Products. The employee had, prior to taking up employment with Lucchini, applied for a job at Cast Products. However, when he received an offer of employment from Lucchini, he terminated his engagements with Cast Products.
A month after the employee took up employment with Lucchini, short time was introduced at the company. Following this measure, and the subsequent commencement of a retrenchment process, the employee reopened negotiations with Cast Products.
The court found that a contractual clause prohibiting an employee from seeking alternative employment with a competitor during employment, without a quid pro quo, impermissibly limited an employee’s constitutional right to freedom of trade, occupation and profession. This was contrary to public policy and therefore unenforceable, particularly in circumstances where the employee had been placed on short time, with the resulting reduction in salary.
The court further found that, as a restraint of trade covenant, a clause that prohibits seeking employment while employed would not pass muster, as there is no proprietary interest worthy of protection. There is also no conflict of interest that arises when an employee looks for ‘greener pastures’, even with a competitor.
On this basis, the commissioner’s finding that the employee had not committed misconduct was reasonable.
Bradley Workman-Davies 6 Oct 2025 Compensation reduced
The Labour Court went on to consider the award of 12 months’ compensation, noting that the employee had secured alternative employment within three months of dismissal.
The court emphasised that compensation for an unfair dismissal must be just and equitable, considering both patrimonial (financial) and non-patrimonial loss, but is not strictly limited to actual financial loss.
In this case, the commissioner erred when he found that the employee was unemployed at the time of arbitration, which justified interference with the quantum of compensation. The court reduced the compensation to six months’ salary, considering both the period of unemployment and the non-patrimonial harm suffered.
Key takeaways
While employers may understandably wish to prevent their employees from seeking greener pastures, it is important to bear in mind the limitations in this regard.
This case suggests that contractual provisions prohibiting employees from seeking other employment opportunities during employment, even with competitors, will generally be unenforceable. Disciplining an employee for breaching such rule, will likely be found unfair. The position may be different, however, in circumstances where the employee is afforded some form of quid pro quo in exchange for this restriction.
On the other hand, a properly constructed restraint of trade, which prohibits an employee from taking up employment with a competitor – both during their employment and within a reasonable period after termination – will be enforceable, provided it is reasonable and the employer has a proprietary interest worth protecting.
