In a recent Labour Court decision, Altron Nexus (Pty) Ltd v Maurice Fowler and MST Critical Communications (Pty) Ltd (2024/112022) [2024] ZALCJHB 507 (6 December 2024), the Court was required to determine an application initiated by Altron Nexus (Pty) Ltd (“Altron”) in which it sought to enforce a restraint of trade agreement concluded with a former employee which, amongst other things, sought to prevent the employee from being employed by a competitor of Altron following the cessation of the employee’s employment with Altron. This, in and of itself, was not extraordinary, and restraints-based litigation has for some time been a staple of our supreme court urgent rolls.
What is noteworthy about this particular matter, however, is the basis upon which the Court elected not to enforce the restraint.
The Court’s decision was not founded in any unreasonableness in the terms of the restraint itself, or in any perceived lack of a recognised protectable interest on the part of Altron; in fact, the Court found that the employee had failed to persuade the Court that the restraint was unreasonable and contrary to public policy, and therefore unenforceable.
Instead, the Court dismissed Altron’s application on the basis that it had not consistently enforced similar restraints against former employees and further, Altron did not provide adequate justification for its historically inconsistent enforcement of restraints of trade.
For this reason, the Court held, the employee was justified in expecting that his restraint of trade agreement would not be enforced by Altron and that his reliance on this expectation was reasonable.
In this matter, a former sales representative of Altron joined one of its competitors as an employee. Altron sought to enforce a 12-month restraint, arguing that the former employee had access to confidential information and customer relationships which were unique and proprietary to Altron and which could, if exploited, harm its business, thereby rendering the restraint necessary to protect its legitimate business interests.
The employee opposed the application, and argued, inter alia, that Altron had not enforced similar agreements against other employees who had joined its competitors, creating a precedent of non-enforcement.
The Labour Court found that while the restraint itself was reasonable, enforcing it in this case would be unreasonable. This was because:
1. Altron had inconsistently enforced restraints against former employees in the past, and had allowed other employees to join competitors without consequence;
2. the employee’s expectation of similar treatment was reasonable;
3. Altron failed to justify why this case warranted different treatment; and
4. Altron failed to communicate any policy change regarding its enforcement of restraints.
This judgment poses a significant challenge for employers seeking to enforce restraints of trade against former employees as selective enforcement can render a restraint unenforceable, even when the restraint is otherwise reasonable.
Accordingly, and in the event that an employer does apply a policy of selective enforcement of restraints of trade in its operations, it must, at the very least, be able to provide cogent, persuasive and reasonable justification for such a policy failing which its prospects of success in restraints-based litigation will be significantly diminished.
For assistance and/or advice regarding the drafting and/or enforcement of restraint of trade agreement please do not hesitate to engage with our team of attorneys who will happily assist.