The underlying concept of restraint of trade agreements is that an employee is ‘placed on the sidelines’ for an agreed period so that the former employer’s proprietary interests may be protected. As the employee sits on the sidelines, the value of the confidential information should diminish or become stale. The ‘customer connections’ formed should also be replaced, or at least diminish to such an extent that the customer will not follow the restrained employee to their new employer.
An interesting question that arises is whether a restraint period can only operate from the date on which the restrained employee’s employment is terminated, as is ordinarily provided for in the restraint agreement.
The Labour Court recently dealt with this issue in the matter of Future Packaging and Machinery (Pty) Ltd v Polti and Others (Case No.: 2025-034079) (14 July 2025) (LC).
In this matter, the employee was employed for 27 years prior to his dismissal. During his employment he concluded a restraint of trade agreement which would operate for a period of three years from the date of the termination of his employment.
Polti was placed on precautionary suspension during December 2023. Following a disciplinary enquiry, the employee was dismissed in May 2024, some almost six months later.
After his dismissal, the employer believed that the employee was breaching his restraint of trade obligations and approached the Labour Court on an urgent basis, seeking to hold the employee to his undertakings.
In response to the application, the employee alleged, amongst other things, that the restraint period of three years was unduly onerous and that the restraint period should be calculated from the date on which he was placed on precautionary suspension, and not the date of dismissal.
The Labour Court found that the employee had breached his restraint obligations and enforced the agreement. However, the Court was of the view that the period of three years was unreasonable, and reduced the period to two years.
The remaining issue was the date from which the restraint period should operate.
The Labour Court relied on a previous judgment in Vodacom (Pty) Ltd v Motsa & another (2016) 37 ILJ 1241 (LC) in which the Labour Court found:-
‘[26] … Put another way, any period of enforced commercial inactivity prior to the termination of employment is relevant to the assessment of the reasonableness of any restraint that applies post termination.’
In Motsa, the Labour Court held that the period for which the employee was placed on gardening leave was relevant to the restraint period. In this matter, the Court adopted the same approach and found that the period for which the employee was placed on precautionary suspension (i.e. the period of the employee’s commercial inactivity) was relevant to the restraint period.
On this basis, the Court held that the restraint period of two years would operate from December 2023 (i.e. the suspension date), and not May 2024 (i.e. the date of dismissal). In the final analysis, the employee would be restrained for effectively only four months after the date of judgment was given.
The Court’s approach aligns with most of the judgments issued by the Labour Court in recent years on restraints of trade, confirming that when seeking to enforce a restraint agreement, employers must carefully consider the circumstances and whether its proprietary interests justify the enforcement of the restraint fully, or at all.
