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Restraints of Trade in Employment Contracts.

 

While the competition for skills in the renewables space is intense, there has been a definite trend of Employers resorting to imposing codified employment restrictions on current and potential Employees in the form of a Restraint of Trade in contracts of employment.

EMPLOYERS

So at the outset, in the interests of transparency, I have to make it clear that I do not support generalist and broad “Restraints”. In some instances, where there is a clear competitive edge to be gained from “opening up shop next door”, I would say a restraint may be justified and enforceable, but the restraints that we have seen coming through of late are so generalist and broad in scope, that they have zero chance of being upheld by a court.

Refer: “Hardware Centre versus Vallabh and Another” of March 2019, where the Respondent did in fact open a store next door (800m away) and the restraint was not upheld by the court.

Hardware Centre versus Vallabh (2019)

EXHIBIT A

“The Employee undertakes that he shall not… for a period of 12 months after leaving the employ of the Company for any reason whatsoever directly or indirectly set up in business or form part of any business in competition with the Company and/or which carries on a business similar to the Company”.

Guys, please go and get your lawyers / HR to please do the work that you pay them for. If you are serious that you have a specific service or product that is deserving of protection, the least you can do is specify what it is. This is such a broad clause and so arguable, any lawyer worth his or her fee can sidestep it in an instant.

  1. SPECIFY THE INTEREST DESERVING OF PROTECTION

For example: “Set up a business or work for another Employer in the manufacturing and/or assembly of energy storage components for sale and supply into the renewable energy industry”:  may (I am not saying will) stand up, as long as it is accompanied by a qualifier on the geographical location as well as a time limit.

  1. SPECIFY THE GEO / SCOPE OF THE RESTRICTION

For example: “Set up a business in the manufacturing and/or assembly of energy storage components for sale and supply into the renewable energy industry into the distributed / home PV & storage market in the Western Cape”. Is possibly somewhat more enforceable, but still not enough.

If you are serious about having a service or product that is in some way unique and deserving of protection, then you need to be serious about how you word your restraint.

  1. SPECIFY THE TIME PERIOD

For example: We have seen restraints that are valid for 24 months, in PV component sales, in South Africa – clearly not enforceable! How is it reasonable to prevent someone from making a living in the area of their expertise in such a broad geography for such a long time? It is not, and it won’t be in the eyes of the courts either. The shorter the restraint, the greater its chance of its success. 6 months would perhaps be considered reasonable. 12 months or more, very unlikely, unless you are patenting a new COVID vaccine.

Lastly, take it seriously. If you honestly think that your product/service is worthy of a restraint, then make sure you are prepared to spend a year in court and spend R 100,000 to enforce it and get nothing in return. Are you seriously prepared to do this? if not, then all you are doing is using intimidation to hope that the ex-employee doesn’t come and work in your backyard.

EMPLOYEES

Do not make the mistake of taking a restraint personally. An Employer is also doing no more than trying to make a living and will often feel that need to defend their hard-won gains and turf. And very often, they are poorly advised and do not understand the HR or the law for that matter.

After all, Employers are in the business of doing business and HR and the legalise that come with that are often pretty low on their list in terms of priorities. Yes, yes I hear the coach commentators say, it is an Employers task to understand! After all, they are taking on the responsibility of employing.

But, the Renewable Energy space is by its very nature dominated by start-ups and early adopters, and they, by their nature, do not have the time and capacity for deep HR skills and understanding.

CLOSING

Let it be known: Not once in 8 years of recruitment in renewable energy in South Africa, have we ever had a case where an Employer has successfully defended a restraint of trade that they have imposed on one of our candidates/placements.