Employers often include a “Restraint of Trade” clause in an employment contract, and it happens, from time to time, that employers appoint employees who are still bound to a “Restraint of Trade” clause from a previous employment relationship. The question however is, how enforceable are these clauses?


As a point of departure, let us determine what purpose a Restraint of Trade clause serves. A Restraint of Trade is a clause inserted in a contract of employment, which states that should employment be terminated, the employee is restricted in the work which they can perform in that they will be restrained from performing similar work in competition with their former employer, for a certain period of time and within a specified geographical area.


A Restraint of Trade clause is inserted in certain employment contracts in order to protect the employer’s proprietary interests such as:

  • Confidential information,
  • Trade Secrets, and
  • The employer’s client base.


It seems relatively straightforward that an employer should be entitled to insert provisions within a contract of employment in order to safeguard their interests, however, the question that often arises is, “What about an individual’s Constitutional right to freedom of trade, occupation and profession?”


It is important to keep in mind that every Restraint of Trade clause is treated differently, this is due to the fact that employers are involved in various industries and have different trade secrets and different suppliers.


In Basson v Chilwan & Others 1993 (3) SA 472 (A) the test for determining the reasonableness or otherwise of the restraint of trade provision, was set out as follows:

  • Is there an interest of the one party, which is deserving of protection at the termination of the agreement?
  • Is such interest being prejudiced by the other party?
  • If so, does such interest so weigh up qualitatively and quantitatively against the interest of the latter party that the latter should not be economically inactive and unproductive?
  • Is there another facet of public policy having nothing to do with the relationship between the parties, but which requires that the restraint should either be maintained or rejected?


In Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A), the court said that:

“In South African Law, an agreement in restraint of trade is, on the face of it, valid, and hence enforceable and will only be invalid and unenforceable if it is contrary to public policy on account of it unreasonably restricting a person’s right to trade or to work.”


Article by: Wesley Field

Dispute Resolution Official – Bloemfontein