Restraint of Trade: Are Non-Compete Clauses Enforceable in South Africa?

What is a Restraint of Trade?

A restraint of trade (also called a non-compete clause or covenant not to compete) is a contractual agreement that restricts an employee from working for a competitor or starting a competing business after leaving their current employment.

These clauses are extremely common in South African employment contracts, particularly for senior employees, salespeople, IT professionals, and anyone with access to confidential business information or client relationships.

Typical Restrictions

Restraint of trade clauses usually prevent you from:

Working for a competitor within a specific geographical area for a set period.
Starting your own competing business in the same industry.
Soliciting or doing business with your former employer's clients.
Poaching employees from your former employer.
Using or disclosing confidential information (trade secrets, pricing strategies, client lists).

Are Restraints of Trade Enforceable in South Africa?

Yes, they are enforceable—but only if they meet strict legal requirements. South African courts apply a balancing test between two competing principles:

Pacta sunt servanda (Agreements must be kept): Contracts should be honored.
Public policy and constitutional rights: Everyone has the right to choose their trade, occupation, or profession freely (Section 22 of the Constitution).

A restraint of trade is presumed to be valid unless the employee can prove it is unreasonable.

Legal Requirements for Enforceability

For a restraint to be enforceable, it must satisfy the following:

1. Protectable Interest

The employer must have a legitimate proprietary interest that deserves protection. This typically includes:

Confidential information: Trade secrets, pricing strategies, business methodologies, supplier lists, marketing plans, technical know-how.
Customer or client connections: The goodwill and relationships built through the business (client lists, contact details, preferences).

What employers CANNOT protect:

General knowledge and experience you gained on the job.
Generic skills that are transferable across industries.
The right to ordinary competition in the marketplace.

Important: The employer does not need to prove that confidential information was actually disclosed. The risk or potential for disclosure is sufficient if you had access to such information during your employment.

2. Reasonableness

The restraint must be reasonable in scope, duration, and geographical area. Courts evaluate:

Duration (Time Period)

Up to 12 months: Generally considered reasonable.
12-24 months: May be enforceable if justified by the employer's need to protect confidential information or client relationships.
More than 24 months: Usually viewed critically and often reduced by courts unless there are compelling reasons (e.g., specialized industry knowledge with a long commercial lifespan).

In a 2024 Labour Appeal Court case, a two-year restraint was reduced to one year because the employer could not justify why two years was necessary.

Geographical Area

The area must be limited to where the employer actually operates:

Reasonable: Restraining you from working in Gauteng if your employer only operates in Gauteng.
Unreasonable: A nationwide or international restraint when the employer only has a small regional footprint.

Scope of Activity

The restraint must be narrowly tailored:

Reasonable: Preventing you from selling the same products to the same clients.
Unreasonable: Preventing you from working in the entire industry in any capacity, even in roles unrelated to your previous position.

3. Not Unduly Preventing You from Earning a Living

Courts carefully balance the employer's interest in protecting their business against your constitutional right to work and earn an income.

If a restraint would effectively render you unemployable or force you into a completely different industry where your skills are useless, courts are likely to reject it or reduce its scope.

4. Seniority and Access to Information

Restraints are more likely to be enforced against:

Senior employees (managers, executives, directors).
Employees with direct access to confidential information (finance, R&D, strategy).
Employees with significant client relationships (sales, account management).

Junior employees or those without access to sensitive information have a stronger case for challenging a restraint.

How Employers Enforce Restraints

If you breach a restraint of trade, your former employer can take legal action:

Step 1: Letter of Demand

The employer typically sends a formal letter (often through their attorney) demanding that you:

Immediately stop working for the competitor.
Cease soliciting or doing business with clients.
Comply with the restraint within a set deadline (usually 7 days).

Step 2: Urgent Application to the Labour Court

If you don't comply, the employer files an urgent application (interdict) in the Labour Court, seeking:

An interim order: Temporarily preventing you from breaching the restraint until a full hearing.
A final order: Enforcing the restraint for its full duration.
Damages: Compensation for losses caused by the breach (though this is difficult to prove and claim).

Restraint of trade matters are heard in the Labour Court, not the CCMA. The CCMA only gets involved if the restraint is part of a settlement agreement for an unfair dismissal or unfair labour practice dispute.

How to Challenge a Restraint of Trade

If you believe a restraint is unreasonable or unenforceable, you can challenge it.

Before You Breach It

The safest approach is to apply to the Labour Court before starting your new job, asking the court to declare the restraint invalid or reduce its scope. This is called a declaratory order.

After a Breach (If Your Employer Takes Legal Action)

If your employer files an urgent application to enforce the restraint, you can oppose it by filing an answering affidavit arguing that:

The restraint is unreasonable in scope, duration, or geographical area.
The employer has no legitimate protectable interest.
Enforcing the restraint would unfairly prevent you from earning a living.
You are not using or disclosing confidential information.
You are not soliciting your former employer's clients.

Burden of Proof

Critical: In South Africa, the employee has the burden of proving that the restraint is unreasonable. Restraints are presumed to be valid. This means you need strong evidence and legal arguments to challenge them successfully.

What the Court Considers

When deciding whether to enforce a restraint, courts evaluate:

The employer's protectable interest: Does the employer have confidential information or client connections worth protecting?
The employee's seniority and access: Did you have access to sensitive information or significant client relationships?
The reasonableness of the restraint: Is the duration, geographical area, and scope proportionate to the interest being protected?
The balance of harm: Would the employee suffer greater hardship than the employer if the restraint is (or is not) enforced?
Public policy: Does the restraint unfairly limit competition or the employee's constitutional right to work?

Can Courts Reduce a Restraint?

Yes. Courts have the power to partially enforce a restraint by modifying its terms to what is considered reasonable.

Example: If your contract includes a 2-year nationwide restraint, but the court finds this excessive, it may reduce it to 1 year in Gauteng only.

This is called severance or reading down the restraint.

Recent Case Law (2024-2025)

In SMD Technologies (Pty) Ltd v Tavares (2024), the Labour Court reaffirmed that restraints are enforceable when they protect legitimate business interests. The court held that the potential for harm (not proven actual harm) is sufficient to justify enforcement if the employee had access to confidential information and could use it to benefit a competitor.

In a 2025 Labour Court decision, the court granted a two-year restraint but limited the relief to specific conduct: the employee was prohibited from soliciting clients and disclosing confidential information, but was allowed to work in the industry in a different capacity. This shows courts' willingness to tailor restraints to balance both parties' interests.

Restraints After Unfair Dismissal

This is a complex and evolving area of law.

General Rule: Most restraint clauses are enforceable regardless of the reason for termination, unless the restraint agreement explicitly states that it does not apply if the employee is unfairly dismissed.

Recent Developments: Some courts have shown reluctance to enforce restraints when the employer unfairly dismissed the employee, reasoning that it is unjust to prevent someone from working when the employer breached the employment relationship. However, this is not yet a settled principle, and many restraints are still enforced even after unfair dismissals.

Tip: If negotiating a restraint clause, consider including a clause that states: "This restraint shall not apply if the employee is unfairly dismissed or retrenched."

CCMA Settlements and Restraints

If you settle an unfair dismissal or labour dispute at the CCMA, ensure that your settlement agreement explicitly addresses the restraint of trade.

In a Labour Appeal Court case, the court found that a CCMA settlement agreement disposed of an employer's rights under a restraint of trade because the employer did not explicitly preserve those rights in the settlement. This means that if the settlement agreement is silent on the restraint, you may be able to argue that the restraint was waived as part of the settlement.

For employees: When settling at the CCMA, try to get the employer to waive or reduce the restraint.

For employers: Explicitly state that the settlement does not affect the restraint of trade.

Practical Steps: What to Do

Before You Sign

Read the restraint clause carefully. Understand what you're agreeing to.
Negotiate. Ask for a shorter duration, smaller geographical area, or exclusions (e.g., if you're retrenched or unfairly dismissed).
Get legal advice. If the restraint seems onerous, consult a labour lawyer before signing.

Before You Leave

Review your contract. Check if you're bound by a restraint.
Don't take client lists, pricing documents, or other confidential information. Courts are far more likely to enforce a restraint if you've misappropriated confidential information.
Consider whether the restraint is enforceable. If you think it's unreasonable, seek legal advice.

If Your New Job Might Breach the Restraint

Seek legal advice immediately. Don't wait for your former employer to sue you.
Consider applying to court for a declaratory order before starting the new job.
Inform your new employer. They need to know about the restraint, as they could also be sued for inducing a breach of contract.

If Your Former Employer Threatens Legal Action

Do not ignore it. Respond through a lawyer.
Assess the merits. Is the restraint enforceable? Are you actually breaching it?
Try to negotiate. Offer not to solicit clients or use confidential information, even if you continue working in the industry.

Frequently Asked Questions

Can my employer fire me and then enforce a restraint?

Yes, unless the restraint clause explicitly excludes enforcement if you are unfairly dismissed. Recent case law shows mixed results, but most restraints are still enforceable regardless of the reason for termination.

Can I work in the same industry but in a different role?

It depends on the wording of the restraint. If it prohibits you from working "in the industry" broadly, this may be challenged as unreasonable. If it only prevents you from soliciting clients or disclosing confidential information, you may be able to work in a different capacity.

What if I move to a different city or province?

If the restraint is limited to a specific geographical area (e.g., Gauteng), moving outside that area means the restraint doesn't apply. However, if it's a nationwide restraint, it will still apply.

Can I start my own business in the same industry?

Only if the restraint doesn't prohibit it or if you successfully challenge it in court. Many restraints explicitly prevent starting a competing business.

What if I didn't sign the restraint clause?

If you never signed a written restraint agreement, it is likely not enforceable. However, if you continued working after being made aware of the restraint (tacit acceptance), courts may still find it enforceable.

Do I need a lawyer?

Yes. Restraint of trade cases are highly technical and fact-specific. Courts require detailed legal arguments and evidence. Representing yourself is not advisable.

How long does a court case take?

Urgent applications for interim interdicts are heard within 1-2 weeks. Final hearings can take several months, depending on the court's availability and the complexity of the case.

Can I counter-sue my employer?

If your employer is enforcing a restraint after unfairly dismissing you, you can lodge a separate unfair dismissal claim at the CCMA. However, this does not automatically invalidate the restraint.

What happens if I breach the restraint?

The employer can obtain a court order forcing you to stop working for the competitor. If you ignore the court order, you can be held in contempt of court, which carries fines or even imprisonment.

Can my new employer be sued?

Yes. If your new employer knowingly induces you to breach your restraint, they can be sued for inducing breach of contract. Always inform your new employer about any restraints before accepting a job offer.

Key Takeaways

Restraint of trade clauses are enforceable in South Africa if they protect a legitimate business interest and are reasonable.
The employee has the burden of proving that a restraint is unreasonable.
Restraints must be limited in duration (usually 1-2 years), geographical area, and scope of activity.
Courts balance the employer's right to protect their business against the employee's constitutional right to work.
Courts can reduce an excessive restraint rather than invalidating it entirely.
Restraints are more likely to be enforced against senior employees or those with access to confidential information and client relationships.
Before leaving your job, review your employment contract and seek legal advice if you're unsure about a restraint.
Do not take confidential information or client lists—this strengthens the employer's case for enforcement.
If facing a restraint claim, respond immediately through a lawyer and consider negotiating.
CCMA settlements should explicitly address whether the restraint remains enforceable.
Recent case law (2024-2025) continues to uphold restraints when properly drafted and justified.