Automated Summary
Key Facts
Viscol CC employed Chantel van den Berg as a Sales Representative from October 2015. She agreed to a two-year restraint of trade clause post-employment in the Gauteng region. After resigning in June 2021 and joining competitor Techoil, Viscol sought enforcement of the restraint. The Labour Court found the restraint valid but unenforceable in its original two-year form due to lack of empirical justification. The restraint was read down to one year (1 July 2021 to 30 June 2022). Chantel was ordered to pay 60% of Viscol's taxed costs on the High Court scale. The application was heard virtually due to COVID-19 lockdown restrictions.
Transaction Type
Employment contract with restraint of trade clause
Issues
- Whether the restraint of trade clause in Chantel's employment contract is enforceable, considering her role as a sales representative, access to confidential information, and the reasonableness of the two-year restraint period in the context of the oil industry.
- Application of the costs following the result principle under section 162 of the Labour Relations Act (LRA) in a civil matter heard by the Labour Court, balancing fairness and the successful party's entitlement to costs.
Holdings
- The court held that the restraint of trade is enforceable but reduced its duration from two years to one year to protect Viscol's proprietary interests. The restraint is limited to the Gauteng province, allowing Chantel to work elsewhere. The court also concluded that the restraint is not punitive and that the applicant (Viscol) achieved partial success in proving the reasonableness of the restraint period.
- The court ruled that Viscol is entitled to 60% of its taxed costs on the High Court scale of party and party, as the ordinary rule of costs following the result applies to contractual disputes in the Labour Court. Punitive costs were not granted since Viscol did not achieve full success in its application.
Remedies
- Chantel is interdicted and restrained for a period of one year commencing 1 July 2021 and ending 30 June 2021 throughout the Gauteng province from being employed by Techoil or directly or indirectly engaged in, or concerned with, or interested in, any business of Techoil.
- Techoil is ordered to forthwith terminate its employment relationship with Chantel.
- Chantel is ordered to pay 60% of the taxed costs of Viscol on the High Court scale of party and party.
- Chantel is restrained for a period of one year from being directly or indirectly engaged in, or concerned with, or interested in any business of any other kind which engages in a business similar to that of Viscol, or which competes with Viscol in the Gauteng province.
- Techoil is interdicted from employing, engaging, or consulting Chantel.
- Chantel is restrained from deriving any benefit directly or indirectly from Viscol's confidential information.
- Chantel is restrained from in any manner or form poaching or influencing the customers of Viscol to move to any other entity.
- Chantel is restrained from disclosing, whether directly or indirectly, any confidential information relating to Viscol to any natural or legal person.
Legal Principles
- The court emphasized the principle of 'pacta sunt servanda' (agreements must be kept) in enforcing the restraint of trade clause, balancing it against the employee's freedom to work. This principle was central to the court's decision to uphold the enforceability of the restraint despite its restrictive nature.
- The court applied the ordinary rule of costs following the result (as per civil jurisdiction) and considered the fairness principle under section 162 of the LRA. Viscol was awarded 60% of its costs due to partial success in enforcing the restraint.
Precedent Name
- Reddy v Siemens Telecommunications (Pty) Ltd
- Inter-waste (Pty) Ltd v Smith and another
- UPSCO v SACM (Pty) Ltd
Key Disputed Contract Clauses
The employment contract included a two-year restraint of trade clause restricting Chantel from working in the oil industry in Gauteng and surrounding regions for 200 kilometers. The court evaluated its reasonableness, enforceability, and scope, ultimately reducing the duration to one year due to lack of empirical justification for the two-year period while upholding the core terms of the restraint.
Cited Statute
- Basic Conditions of Employment Act
- Constitution of the Republic of South Africa, 1996
- Labour Relations Act
Judge Name
G. N. Moshoana
Passage Text
- [19] In summary, the conclusion this Court reaches is that there is a valid and enforceable restraint of trade, which protects the proprietary interests of Viscol. There is no basis to conclude that Chantel must not be held to the terms of the pacta. However, the period of two years is too wide to protect the proprietary interests of Viscol. There is no empirical evidence to support a conclusion that the period of two years is reasonable. Thus, the period is read down to a period of one year, which period is reasonable for the interests of Viscol and Chantel.
- [18] ...a period of two years is in the circumstances of this case unreasonable and unenforceable. Such of course does not imply that this Court must throw the baby out with the bathwater. The Court must in this regard perform a beneficial surgery for the parties. In all the circumstances, a period of one year is reasonable.
- [23] This Court must assume that the rule of no automatic cost orders does not find application in contractual disputes. What obtains is the ordinary rule of costs following the results... Viscol is not entitled to a 100% recovery of its litigation costs.
Damages / Relief Type
- Chantel is interdicted from being employed by Techoil in Gauteng for one year.
- Techoil must immediately terminate Chantel's employment.
- Chantel is ordered to pay 60% of Viscol's taxed costs on the High Court scale.
- Chantel is restrained from engaging in businesses similar to Viscol in Gauteng for one year.
- Chantel must not disclose Viscol's confidential information.
- Techoil is interdicted from employing Chantel.
- Chantel is prohibited from poaching Viscol's customers in Gauteng for one year.
- Chantel cannot derive benefit from Viscol's confidential information.