As a business owner, protecting your business and its interests is paramount to ensuring long-term success in the competitive South African labour market. One of the crucial steps in achieving this goal is having comprehensive employment contracts in place. In this, the first article of our "Mind Your Own Business" series, we will explore the significance of proper employment contracts, with a particular focus on restraint of trade provisions – critical to protecting your business from potential risks posed by departing employees.
Employment contracts serve as the foundation of the employer-employee relationship. They set out the terms and conditions of employment, defining the rights and responsibilities of both parties. Properly drafted employment contracts provide clarity and legal protection, fostering a harmonious work environment and reducing the risk of disputes.
Restraint of trade agreements – one of the commercial considerations within employment contracts – are designed to safeguard your business interests through clauses that will restrict departing employees from engaging in activities that could harm your business, such as working for competitors, soliciting your clients, divulging trade secrets, or misusing confidential information.
Each business is unique, meaning that the employment contracts' restraint clauses should be tailored to suit your specific industry and circumstances to ensure that a protectable interest can be argued based on the prevailing facts, should it be required. Seeking legal advice when drafting these contracts can ensure that they comply with the applicable laws and effectively protect your business interests.
How enforceable will these clauses be? The enforceability of restraint of trade agreements lies in the reasonableness and adherence to public policy. Courts will assess whether the restrictions imposed on employees are justified based on the legitimate protectable interests of the employer. For example, an employer needs to reasonably and justifiably argue that an interest, as described in the restraint provisions, is worth protecting (such as the fact that a departing employee may have had access to trade secrets due to his/her position within the business), and that the employer will lose such protection should the employee join a new employer who will unlawfully gain an advantage – to the detriment of the erstwhile employer, as a result. So, by incorporating reasonable restraint of trade clauses, you can effectively protect your business from potential harm caused by departing employees.
For your business to remain competitive and secure within South Africa's labour market, the importance of well-constructed employment contracts, particularly those featuring restraint of trade agreements, cannot be overstated. These contracts serve as a legal shield, defining the obligations and rights of both employer and employee, and offering a way to lessen possible risks that might arise when employees leave. By including carefully crafted restraint of trade provisions in your contracts, you can maintain a competitive edge and robustly protect valuable assets such as intellectual property, trade secrets, and confidential information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.