Abstract
Restraint of trade agreements play an important role in the regulation of the workplace. In order to protect their information from landing on their competitor‟s tables, employers often include restraint of trade clauses in their employment contracts to protect their clientele base from being poached, especially those formed through the employer‟s connections. Despite the inclusion of these agreements, they are not enforceable if they only exist to stifle competition. Restraint of trade agreements are therefore historically controlled by judge decisions.
In most jurisdictions, there is no legislation governing restraint of trade agreements. Without legal precedent, a vacuum emerges leading to differing opinions from judges which in turn creates legal uncertainty. This system also has further inadequacies in enforcing employment contracts. The question is then, should restraint of trade agreements be enforced through legislation or common law that has been developed to include adequate protection to the employees? In order to ensure efficient regulation without any legal uncertainty, it is time that legislation is enacted to regulate restraint of trade agreements. It is of paramount importance to keep in mind the inequality of bargaining power between the employer and the employee.
This dissertation begins with consideration of South African law pertaining to the regulation of restraint of trade agreements in South Africa. This dissertation will look at the two conflicting approaches adopted by our courts before the decision of the AD in the Magna Alloys case, the current position and the influence of the Constitution of the Republic of South Africa, 1996.). However, employees are still not given sufficient protection from the common law (courts). This is particularly the case in instances where the enforcement of a restraint of trade agreement is sought where the employee is not to blame for the termination of the employment contract. Our courts have not yet reached a consensus on the above issue. In some instances, the courts have wrongly relied on the presence of the Covid 19 pandemic to refuse enforcement. These decisions were later declared incorrect and overturned by subsequent decisions. Therefore, this means that employees dismissed without fault on their part are left without a remedy when enforcement is sought.
Additionally, this dissertation compares our legal position with that of Australia. Like our jurisprudence, Australian jurisprudence is influenced by English law. However, Australian courts have ruled on enforcement in cases involving no fault dismissals (redundancy). In the Ecolab case, the court refused to enforce an agreement in restraint of trade where an
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employee was made redundant by the employer. This discussion reaches the conclusion and recommendations that South African courts should follow Australian jurisprudence in this regard and refuse to enforce an agreement in restraint of trade where the employee‟s employment contract is terminated through no fault of his own. This will ensure adequate protection for employees. The ILO should take a stand and introduce treaties/conventions and recommendations aimed at regulating restraint of trade agreements. It is further recommended that legislation regulating restraint of trade agreements is enacted. The common law principles should now be tested against section 22 of the Constitution