The labour appeal court refused to enforce a restraint of trade agreement against former employees of a second-hand vehicle business because the facts advanced did not prove that the employer held a protectable interest. There was no evidence of confidential information, trade secrets or trade connections held by the former employees to warrant protection.

The facts are not especially important. It is worthwhile reminding ourselves of the principles.

The employer seeking to enforce a restraint of trade must establish an interest worthy of protection and that the other party is threatening that interest. The employee or new employer resisting enforcement must prove that it would be unreasonable to do so. The test for determining the reasonableness of a restraint of trade agreement turns on (a) whether one party has an interest that deserves protection after termination of the agreement; (b) whether that interest is threatened or being prejudiced by the other party; (c) if so, whether that interest weighs qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive having regard to the Constitutional right to freely choose ones trade, occupation or profession; and (d) whether there is an aspect of public policy that requires the restraint to be maintained or rejected. The restraint must not go further than necessary to protect the employer’s interest.

A protectable interest in the context of a restraint of trade agreement constitutes confidential information and trade secrets, trade connections, or both. The confidential information, whether information, know-how, technology or a method, must be objectively worth protection and have a value in the sense that it concerns matters such as business opportunities, customer information, proposals, marketing, price or pricing arrangements, product specifications, know-how, technology or manufacturing details which are unique to the business and not generally available to third parties nor public knowledge, public property or available in the public domain.

In order to find that trade connections exist as an interest worthy of protection, the employee must be found to have had access to customers and customer relationships which could be used by the employee to induce customers to follow the employee to the new business. Whether the employee has the ability to exert this kind of influence, depends on the seniority, position and duties of the employee, the nature and extent of the employee’s contact with customers, and their knowledge of the particular requirements of the customer in contrast to rival businesses.

None of these elements was proved by the employer and the restraint was not enforced.

[Venter and Others v Twenty Four Motors CC t/a Ford Ermelo Labour Appeal Court case no JA 34/2024 (28 June 2024)]