Restraints of trade clauses are supposed to stop employees from using their employer’s confidential information, trade secrets and customer connections for their own benefit while they’re still employed and after they leave. But the courts often find that restraint of trade clauses in employment contracts are unenforceable. Why is this so?
Judge Nicolson expressed the Court’s views on the issues in a High Court case in 2008[1]. Altech brought an application for a final interdict to restrain two former employees from breaching certain restraint clauses in their employment contracts. The relief sought to restrain them from being employed by potential competitors and from disclosing trade secrets and confidential information to them.
The Court accepted that confidential information is that which is not in the public domain or public knowledge. It referred to an earlier case which classified information into three categories:-
- Information which is trivial in character or is easily accessible from public sources of information, such as the internet. The employee is free to use this information.
- Information which the employee has been told is confidential – or which from its character is obviously so. The employee must treat this information as confidential while he is still employed. But he may use it when he leaves if his employer has not specifically restrained him from using it within reasonable limits of time and space. If there is no written restraint, the employee can use the information to compete against former employer. The Court reasoned as follows on this:–
“But when he is no longer in the same service, the law allows him to use his full skill and knowledge for his own benefit in competition with his former master; and
It seems to me that to try to restrain him by injunction from using knowledge, which in that way has become his own, is to try to do something which the Court really has no power to do, or rather it has no power to enforce the injunction if one could be granted.”
- There are specific trade secrets so confidential that, even though they may necessarily have been learned by heart and even though the servant may have left the service, they cannot lawfully be used for anyone’s benefit but the master’s.
TIP: Employers should include restraint of trade clauses in their employment contracts. The wording should identify the specific information which it considers to be trade secrets and confidential. The specified information will be protected if it is not in the public domain or if it is obviously confidential because of its unique character.
[1] Arrow Altech Distribution (Pty) Ltd v Byrne and Others ([2008] 1 All SA 356 (D); (2008) 29 ILJ 1391 (D)) [2007] ZAKZHC 60; [2007] ZAKZHC 33 (15 November 2007)
