Safeguarding your competitive | A practical overview of restraints of trade in South Africa

A restraint of trade is a contractual clause that restricts one party’s freedom to work or compete in certain ways, after a specific relationship ends. Most commonly, it appears in contracts of employment to prevent a departing employee from joining a competitor or starting a rival venture. Think of it as akin to an antenuptial contract: while it may be signed at the start of the relationship, it only truly takes effect once the relationship is over.

Restraints of trade are used to protect key business interests such as customer goodwill, confidential information, and trade secrets. By briefly limiting a former insider’s ability to compete, an employer gains the breathing room needed to maintain client loyalty and to prevent sensitive data from being exploited unfairly.

When and why are they used?

Most employers reserve restraint of trade clauses for employees or partners who have meaningful access to valuable knowledge or relationships. Typical examples include:

• Senior managers, sales executives, and specialists: Individuals who know strategic plans, unique processes, or confidential pricing structures.

• Employees with solid client relationships: For instance, a sales manager who cultivated close personal relationships with your major clients.

• Business sellers or partners: When someone sells their business or exits a partnership, they may undertake to refrain from immediately setting up a competing entity that could undermine the value of what the buyer just purchased.

The goal is straightforward: give the employer (or buyer) a buffer period to secure existing customer relationships, preserve trade secrets, and prevent an ex-employee or former owner from using inside knowledge to gain an unfair competitive edge.

Validity and enforceability under South African law

South African law presumes that a freely signed restraint of trade is valid and binding. The onus usually rests on the departing individual (the one being “restrained”) to prove that enforcing it would be unreasonable or contrary to public policy. Essentially:

• Employers do not need to prove the restraint is fair; they simply show that it exists and that the ex-employee is bound by it.

• Departing individuals must show that it goes too far—such as covering too wide an area, lasting too long, or restricting them from ever earning a livelihood in their chosen field.

If a court finds the restraint is targeted at a genuine “protectable” interest (such as a valuable client base or confidential know-how), it is more likely to uphold it. If the restraint looks overly broad or punitive, a judge will either reduce its duration or scope, or dismiss it entirely.

Striking the right balance: Reasonableness

Courts use a balancing exercise to decide whether a restraint of trade is enforceable. We typically see them ask the following questions:

• Does the employer have a legitimate interest worth protecting (for example, customer connections or trade secrets)?

• Is that interest truly under threat if the ex-employee goes to a competitor or sets up shop nearby?

• How severely does the restraint affect the ex-employee’s right to earn a living?

• Is the restraint proportionate in terms of duration, geographical reach, and scope of prohibited activities?

A narrow, well-aimed restraint—like preventing a former sales manager from soliciting the employer’s specific clients for six to twelve months—has a solid chance of being upheld. A nationwide ban spanning multiple years for a low-level employee with no real trade secrets will likely fail.

Drafting and enforcing restraints of trade: Key principles

At Ackermann Attorneys, we recommend the following best practices to maximise enforceability:

• Define the Protected Interests: Clearly articulate what you’re safeguarding. For instance, specify that an employee handles sensitive pricing information or cultivates key accounts. This lays the groundwork for showing why any competition poses a real threat.

• Keep It proportionate: Courts often look for restraints lasting between 6 and 12 months. If you require a longer period, be ready to justify it (example, you have a two-year business cycle with clients). The same principle applies to geographic scope: limit it to the regions where the individual can tangibly harm your interests.

• Distinguish different restrictions: Combine a non-compete clause (not joining a direct competitor) with a non-solicitation clause (no poaching clients or staff) and a confidentiality clause (no misuse of proprietary data). Even if the broad non-compete is trimmed by the court, a narrower non-solicitation or confidentiality clause may still stand.

• Be consistent in application If you have restraint clauses in your contracts, do not enforce them selectively. Sudden changes in enforcement policy can undermine your credibility and may result in a court refusing relief.

• Act swiftly if there’s a breach If you suspect a departing employee is about to breach—or has breached—a restraint, consult legal counsel quickly. Urgent court proceedings to obtain an interdict are more effective when there has not been a lengthy delay.

Conclusion: A strategic tool for protecting competitive advantage

Restraints of trade can be highly effective in preventing unfair competition and preserving your market position, provided they are drafted with care and enforced in a fair, consistent manner. Think of them as strategic safety nets that operate only when your working relationship ends—much like the antenuptial contract analogy.

At Ackermann Attorneys, we strive to ensure that every restraint clause we draft or enforce stands up to judicial scrutiny and balances the needs of businesses with the fundamental rights of individuals. When approached methodically, restraint of trade agreements give you the peace of mind that your confidential information, hard-earned client relationships, and unique competitive strengths will not be lost to a departing insider.

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