Case Comment: The enforceability of restraint of trade provisions within a wrongfully terminated contract of employment

• Jurisdiction: South Africa
• Published date: 25 May 2019
• Citation: (1998) 10 SA Merc LJ 383
• Date: 25 May 2019
• Pages: 383-391
• Author: Tamara Cohen

THE ENFORCEABILITY OF RESTRAINT OF TRADE PROVISIONS

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383

The Enforceability of Restraint of Trade

Provisions within a Wrongfully Terminated

Contract of Employment

TAMARA COHEN

University of Natal, Durban

1 Introduction

Every employee has the right not to be unfairly dismissed. This right is

entrenched by both s 23 of the Constitution of the Republic of South

Africa 108 of 1996 and and s 185 of the Labour Relations Act 66 of 1995.

In the event of the dismissal of an employee, which is either substantively

or procedurally unfair, the Labour Relations Act provides for the Labour

Court or arbitrator to order the reinstatement, re-employment, or

financial compensation of the employee (s 193). Reinstatement or re-

employment is the primary, preferential remedy available to the unfairly

dismissed employee (s 193(2)). However, it will be deemed inappropriate

if the relationship between the employer and employee has broken down

and the circumstances are such that a continued employment relationship

would be intolerable, as so often happens in labour disputes

(Mondi

Paper Co Ltd v Paper Printing Wood and Allied Worker's Union & another

(1994) 15 ILJ 778 (LAC)), or if it is not reasonably practicable to

reinstate or re-employ the employee (s 193(2)(a), (b), (c) and (d)). In these

instances the Act recognizes the inadvisability of enforcing reinstatement

and recommends financial compensation instead. The net result is that

while the victim of an unfair dismissal may be financially compensated,

subject to the limits prescribed by the Act (s 194), the employee is

rendered jobless, an unenviable position to be in in present-day South

Africa where unemployment rates are currently estimated to be at

approximately 33 per cent

(CDE Debates No 4 Unemployment—the

Numbers and Implications for South Africa

30 September 1996). This

dismal situation facing the jobless, unfairly dismissed employee may be

exacerbated if the employee has signed a contract in restraint of trade, if

one were to follow the recent decision of

Reeves & another v Marfield

Insurance Brokers CC & another

1996 (3) SA 766 (A).

In this decision, the first appellant, Reeves, sold his insurance broking

business to Glenvaal (Pty) Ltd, which later became known as Marfield

Insurance Brokers (Pty) Ltd. A condition of the sale agreement required

Reeves to sign a service agreement which contained a restraint of trade

clause with the following relevant provisions:

'14.4 The employee undertakes to Glenvaal that during his employment and for a

period of three years after the date upon which he ceases to be employed by

Glenvaal . . . for any reason whatsoever, he will not, within a radius of 350

kilometres from the City Hall in East London, either alone or jointly . . .

14.4.1 be engaged, interested or concerned, whether financially or otherwise and

whether directly or indirectly, in or

(1998) 10 SA Merc LJ 383

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