Restraints of trade: enforceable unless unreasonable
A restraint of trade is a promise not to compete with you, work for a competitor or approach your customers for a period after the employment ends. For decades South African courts followed the English approach and treated such promises as unenforceable unless the employer proved they were reasonable. In 1984 the Appellate Division reversed that.
So the starting point is that the restraint stands, and the onus is on the employee.
Reasonableness is a value judgment between two public interests: that people keep the bargains they make, and that everyone should be free to work and trade — a freedom the Constitution protects in section 22. The Supreme Court of Appeal in Reddy tied the first of those to the constitutional values of dignity and autonomy, and then applied four questions it took from the earlier Basson v Chilwan judgment. In plain terms:
- Does the employer have an interest that deserves protection after the contract ends?
- Is that interest threatened by the employee?
- Does it outweigh the employee’s interest in being economically active and productive?
- Is there some other aspect of public policy that calls for the restraint to be upheld or struck down?
A fifth, implied in the third, is whether the restraint goes further than the interest needs. The first question is where most restraints are won or lost.
Two things qualify: trade secrets and confidential information, and customer connections — the goodwill the employee built with your clients on your time. Two things do not: a bare wish to avoid competition, and the employee’s own skill, experience and general know-how, which belong to the employee. In Reddy itself the restraint was twelve months, one province, and limited to working for a competitor; the court enforced it, and rejected the argument that an undertaking not to disclose confidential information was enough on its own.
The restraint of trade explainer covers drafting in more detail, including restraints in a sale of business, which courts treat more generously than employment restraints.
How long and how wide?
A restraint is measured on three axes — duration, area and activity — and each must be no wider than the protectable interest needs. Our position on duration: most enforceable employment restraints run for six to twenty-four months; twelve months was enforced in Reddy; anything longer should be backed by a protectable interest that genuinely lasts that long, and by a clear reason on the file for why. A three-year restraint on a junior salesperson invites a court to strike it down or cut it back.
| Axis | Ask | What usually survives |
|---|---|---|
| Duration | How long until the secrets go stale or the customer relationships pass to a successor? | Six to twenty-four months; twelve is the common middle |
| Area | Where do you actually trade, and where did the employee actually work? | The province or region served; national only for a national business |
| Activity | What competing work would actually use your secrets or connections? | Competitors in your line; the customers the employee dealt with |
Courts can enforce a restraint to a narrower extent than it was written, so a well-drafted restraint is divided into separate, severable promises rather than one sweeping clause. It should also name the protectable interest, so that the first Basson question answers itself on the face of the document.
Confidentiality: what the clause should cover
A confidentiality clause is not a restraint; it does not stop the person working, it stops them using or disclosing particular information. It is enforceable on ordinary contract principles, and it is the foundation on which a restraint’s protectable interest is built. It should:
- define confidential information by category — customer lists and terms, pricing and margins, supplier terms, product designs, source code, business plans, financials — and say that information in the public domain or already known to the person is excluded;
- cover use as well as disclosure, and survive termination for as long as the information stays confidential, without a fixed end date for genuine trade secrets;
- require the return or destruction of documents and data on exit, including copies on personal devices and cloud accounts;
- deal with personal information: under the Protection of Personal Information Act your business is the responsible party for the customer and staff data the employee handles, and must secure it with appropriate technical and organisational measures. The clause is one of those measures, and it should say that personal information may be used only for the job.
For information shared before a person joins — during recruitment, a pilot or a consultancy — use a stand-alone non-disclosure agreement.
Who owns the work?
For an employee, the Copyright Act answers the question for you. A work made in the course of the author’s employment under a contract of service belongs to the employer — unless the contract says otherwise.
(d) Where in a case not falling within either paragraph (b) or (c) a work is made in the course of the author's employment by another person under a contract of service or apprenticeship, that other person shall be the owner of any copyright subsisting in the work by virtue of section 3 or 4. (e) Paragraphs (b), (c) and (d) shall in any particular case have effect subject to any agreement excluding the operation thereof and subject to the provisions of section 20.
The hard cases are about whether the work was made in the course of the employment. A software developer employed to maintain one system writes a different one at home; a marketing manager writes a book about the industry. The Supreme Court of Appeal in King — where a weather service employee had written forecasting software — said the answer is a question of fact, decided on the contract and on how the work came to be made.
The lesson for drafting is to define the scope of the job broadly enough to cover the work you expect the person to create, and to add an express assignment of anything related to the business, so that you do not depend on the statutory default and the argument about what “in the course of” means.
Inventions: the Patents Act draws a line
Inventions follow the same logic but with a statutory limit on how far a contract can go. An employer may take inventions made within the course and scope of the job; it may not use the contract to grab the rest.
requires an employee to assign to his employer an invention made by him otherwise than within the course and scope of his employment
Note — The section provides that any condition in a contract of employment of this kind is null and void. Paragraph (b) adds the same consequence for a clause that restricts the employee's rights in an invention made more than one year after the employment ends.
So the “all inventions, whenever made” clause that appears in imported templates is void in South Africa. Draft for inventions within the course and scope of employment, with a disclosure duty and a right of first refusal on anything else, and keep any post-employment reach within the one-year limit.
Contractors are different: assign it in writing
Section 21(1)(d) applies only to a contract of service — employment. An independent contractor works under a contract of work, and the default flips: the contractor is the author and the first owner of copyright in what they create for you. Paying for the work does not change that. The only way to move the copyright is an assignment, and the Act is strict about its form.
No assignment of copyright and no exclusive licence to do an act which is subject to copyright shall have effect unless it is in writing signed by or on behalf of the assignor, the licenser or, in the case of an exclusive sublicence, the exclusive sublicenser, as the case may be.
A contractor agreement should therefore carry an assignment clause that covers works created under the agreement (future works can be assigned in advance), a waiver of moral rights so far as the law allows, a fallback licence in case any assignment fails, and a promise to sign whatever further documents are needed. The same applies to a consultant invoicing through a company: the company is the party, and it must sign.
The independent contractor agreements guide lists the other clauses a contractor agreement must contain; the copyright assignment agreement explainer covers stand-alone assignments after the fact; and the employee confidentiality and IP assignment explainer shows how the employee version fills the gaps the Act leaves open.
Frequently asked questions
No. South African law does not require a separate payment for a restraint; it is enforceable as part of the employment contract unless the employee proves it is unreasonable. A court weighs everything, though, and a restraint that was paid for, or that was agreed by a senior person with real bargaining power, is easier to defend than one slipped into a junior contract.
As long as the interest it protects lasts, and no longer. Most enforceable restraints run between six and twenty-four months; twelve months was upheld by the Supreme Court of Appeal in Reddy v Siemens. Anything longer needs a protectable interest that genuinely survives that long — deep customer relationships, long sales cycles, secrets that stay valuable — and the same discipline applies to the area and the activities covered. See how long and how wide.
Only if it was made in the course of his employment. The Copyright Act gives the employer copyright in works made in the course of employment under a contract of service, and the courts treat that as a factual question — what the person was employed to do, and the circumstances in which the work was created — not a question of whose laptop or whose hours. A clear IP clause that defines the scope of the job and assigns work related to the business removes the argument. See who owns the work.
Not unless the freelancer signed an assignment of copyright. Paying for a work does not transfer the copyright in it; an assignment has no effect unless it is in writing and signed by the person assigning. Without that, you usually have an implied licence to use the logo for the purpose it was made for, and the designer keeps the copyright. Get a signed assignment before you build a brand on it — see contractors are different.