An employee committed breach of contract after she resigned. Prior to the commencement of her employment, she signed a contract of employment containing a restraint of trade clause valid for three years. After she resigned with immediate effect, she engaged in conduct contrary to that mentioned in the restraint of trade clause. The Labour Court held that there was a valid, binding and enforceable restraint of trade agreement and the employer was, therefore, successful in its urgent application.

Warwick Wealth (Pty) Ltd v Anderson and Others (C178/2023) [2023] ZALCCT 22 (18 May 2023)

Case summary

Anderson commenced employment with Warwick Wealth (Pty) Ltd on 1 June 2019 as a Client Relationship Specialist. Prior to commencement of employment, Anderson signed an employment contract, which incorporated a restraint of trade clause.

Point 10.5.5 of the restraint of trade clause in the employment contract specifically provides that Anderson “will not, for a period of three years after the date of termination of the employment agreement, either for herself or as an agent of anyone else, persuade, induce, solicit, encourage or procure (or endeavour to do any of the aforegoing) any entities through whom Warwick markets its services and products to become interested in any manner whatsoever in any business, firm, undertaking or company directly or indirectly in competition with Warwick”.

On or about 21 December 2022, Anderson resigned from employment with Warwick with immediate effect.

Thereafter, Anderson breached the restraint of trade clause by approaching Westlake Golf Club and soliciting a sponsorship using confidential information of Warwick, which she obtained whilst in the employment of Warwick.

The employer brought an urgent application to restrain and interdict Anderson. The Court had to consider three questions, i.e., is there a restraint agreement, is the agreement enforceable, and was the restraint breached?

The Court held that as the parties had signed the contract of employment containing a restraint of trade clause, a valid and binding restraint of trade agreement existed. The Court reiterated that there is nothing in our common law which states that a restraint of trade agreement is invalid and unenforceable.

The Court also held that it is in the public interest that agreements entered into freely should be honoured and that everyone should, as far as possible, be able to operate freely in the commercial and professional world. In casu, the enforceability of the restraint of trade had not been challenged. Since the enforceability was not challenged, the answer to this question is that the agreement is enforceable.

In relation to the third question, Anderson only made a bare denial, but did specifically deny that she utilised confidential information in order to solicit sponsorship for, and on behalf of, the second respondent. Clause 10.5.5 defines Warwick’s business network as an extensive network which includes, but is not limited to, amongst others, sports clubs. The Court, therefore, concluded that Westlake Golf Club was part of Warwick’s network.

It was found that Anderson had breached the restraint of trade clause due to the fact that she was explicitly prohibited from persuading and/or soliciting entities within Warwick’s network for three years.

Ultimately, the Labour Court came to the conclusion that there is a valid and enforceable restraint, and that the interest of Warwick is worthy of protection. The Court was satisfied that Anderson was prejudicing such an interest.

Written by Labour Guide