Restraints of Trade in South Africa: What HR Leaders Need to Know in 2025

The departure of a key employee can send shockwaves through any organisation. When that employee joins a competitor or starts their own venture, potentially taking valuable clients, confidential information, or trade secrets with them, the stakes become even higher. This is where restraint of trade clauses come into play – but are they actually enforceable in South Africa?

Recent court decisions paint a clear picture: restraints of trade remain a viable tool for protecting legitimate business interests, but only when properly crafted and implemented. For HR professionals navigating this complex terrain, understanding the legal framework isn't just about compliance – it's about strategic business protection.

The Legal Foundation: Presumption of Validity

South African law operates on a fundamental principle that may surprise some HR practitioners: restraint of trade agreements are presumed valid and enforceable from the outset. This presumption places the burden on employees to prove that a restraint is unreasonable or contrary to public policy, rather than requiring employers to justify every clause.

However, this presumption comes with significant responsibilities. Courts carefully balance the sanctity of contract with the constitutional right to freely choose one's profession, and they won't hesitate to strike down restraints that overstep reasonable boundaries.

The Four Pillars of Enforceability

For a restraint of trade to withstand legal scrutiny, it must satisfy four critical requirements:

1. Legitimate Protectable Interest: The cornerstone of any enforceable restraint is demonstrating a genuine business interest that requires protection. This isn't simply about preventing competition—courts require concrete evidence of assets worth protecting. Recent case law, including SMD Technologies (Pty) Ltd v Tavares and Another [2024] ZALCJHB 546, confirms that confidential information, customer relationships, trade secrets, and specialised training investments all qualify as protectable interests. The key is being able to articulate and prove exactly what you're protecting and why it needs protection.
   

2. Reasonable Scope and Duration: The 2023 Labour Appeal Court decision in Sadan and Another v Workforce Staffing (Pty) Ltd (LAC, 2023/09) sent a clear message about duration limits. The court reduced a two-year nationwide restraint to just one year, emphasising that duration must be justified by evidence, not wishful thinking. Similarly, geographical restrictions must reflect the actual scope of your business operations and the employee's influence within that territory.
   

3. Public Policy Compliance: Courts increasingly scrutinise whether restraints serve genuine business protection or merely stifle competition. The restraint cannot render an employee "economically inactive" or create unfair barriers to earning a living. This principle reflects South Africa's constitutional commitment to economic participation and fair labour practices.
   

4. Balanced Interests: Perhaps most challenging for employers is demonstrating that their interests genuinely outweigh the employee's right to economic activity. Courts examine whether the restraint protects legitimate interests or simply punishes former employees for leaving.

Strategic Implications for HR Practice

The recent jurisprudence offers several practical lessons for HR professionals:

Tailor Restraints to Specific Roles Generic, one-size-fits-all restraint clauses are increasingly vulnerable to challenge. Different positions require different protection levels. A sales executive with extensive client relationships may justify broader restrictions than a junior administrator with limited confidential information access.

Document Your Rationale The SGS South Africa (Pty) Limited v Pillay and Another [2024] ZALCD 36 decision emphasised that employers must show actual harm or risk to protectable interests, not merely prove a breach occurred. This means maintaining clear records of what confidential information employees accessed, which clients they managed, and how their departure could specifically harm the business.

Consider Graduated Approaches Rather than imposing blanket restrictions, consider graduated restraints that reflect the actual risk posed. For instance, a complete industry ban might be excessive, while restrictions on soliciting specific clients or using particular trade secrets could be entirely reasonable.

Regular Review and Updates Business landscapes evolve rapidly, and restraints that were reasonable five years ago may now be excessive. Regular reviews ensure your restraints remain proportionate to current business realities and legal standards.

The Enforcement Reality

While courts continue to enforce reasonable restraints, the MPU Communications (Pty) Ltd v Griffiths and Others [2024] ZALCJHB 29 case reinforced that enforcement isn't automatic. Employers must actively demonstrate that their protectable interests are genuinely at risk and that enforcement serves broader public policy interests.

This creates a strategic imperative for HR departments: prevention is better than litigation. Well-crafted employment contracts, comprehensive handover procedures, and clear policies about confidential information often prove more valuable than pursuing expensive legal remedies after the fact.

Looking Forward: Practical Recommendations

Conduct regular audits of existing restraint clauses to ensure they reflect current business needs and legal standards. Engage with legal counsel to review restraints whenever business operations change significantly or when key employees are promoted to positions with greater access to sensitive information.

Invest in comprehensive exit procedures that clearly remind departing employees of their ongoing obligations while treating them with dignity and respect. This approach often proves more effective than aggressive enforcement actions in maintaining both business relationships and legal compliance.

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