The traditional approach taken by employers, when introducing restraints of trade agreements, entailed stifling the competition.
However, legal developments that followed essentially amount to only proprietary interests worthy of protection, such as trade connections and trade secrets, could lawfully be protected by means of restraint of trade agreements.
What are the questions to be answered when determining the reasonableness or otherwise of a restraint of trade, recently referred to by the labour court in Shoprite Checkers v Johnson and Others (2023) 44 ILJ 906 (LC); (2023) 34 SALLR 79 (LC)?
_____________________________________
In the Shoprite Checkers judgment, Le Grange J applied the test determined in Basson v Chilwan and Others 1993 (3) SA 742 (A) and further elaborated upon in Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA) and, in doing so, applied the following relevant questions:
- question 1: did the one party have an interest that deserves protection after termination of the agreement? – referring to a trade secret or trade connection
- question 2: if so, was that interest threatened by the other party?
- question 3: if so, did such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive? – with reference to s22 of the Constitution
- question 4: was there another aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint be maintained or rejected?
- question 5: did the restraint go further than was necessary to protect such interests?
