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Are Restraints of Trade Enforceable? Ivan Israelstam Gives Key Answers

If an employee resigns to move to a rival business, can you get a court interdict to prevent them from working for the competitor?

Monique Verduyn

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  • Company: Labour Law Management Consulting
  • Player: Ivan Israelstam
  • Contact: +27 (0)11 888 7944
  • Visit:  www.labourlawadvice.co.za

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Are you adequately protected against the threat posed by employees who leave to join competitors?

There are few things more annoying than employing a new staff member, training them to do the job, and having them resign just as they start to earn their keep. What’s worse is when they leave to join a competitor.

Related: 9 Reasons to Quit Your Job As Soon As You Can

Many employers try to prevent this by making new recruits sign a restraint of trade agreement in which they agree that, should they resign, they will not take up employment with a competing business in a defined geographical area for a specified period of time.

These agreements have proved to be a vexing issue. The validity and enforceability of restraint agreements requires consideration of a few key aspects. Issues such as the duration and scope of the restraint are areas of concern for the courts.

To ensure that a restraint of trade is enforceable, it should go no further than what is reasonably required to protect the company’s proprietary interests. We asked Ivan Israelstam, CEO of Labour Law Management Consulting, to explain.

1. When is a restraint of trade enforceable?

The two primary criteria for enforceability are firstly, whether the restraint agreement has the effect of providing a real and material protection for the employer.

The second is whether the former employee’s compliance with the restraint will result in their being unable to earn a living. It’s vital that these agreements are limited to no more than what it is absolutely necessary to protect the employer.

2. What period should the restraint be for?

There is no statutory rule on this but a period of between one and two years is most common practice. The restraint of trade conditions need to be fair.

The shorter the period, the better, and the more likely it is to obtain a favourable ruling. If a company goes too far, the judge may simply find it unenforceable in totality.

3. Does an employer need to compensate an employee for a restraint?

While this is not a legal requirement, it serves to strengthen the validity of the restraint especially if the compensation covers the remuneration that the employee would have earned during the restraint period.

4. What if a business unwittingly hires a candidate who is operating under a restraint of trade?

The previous employer would have the right to send letters of demand to the former employee and new employer requiring that the new employment be terminated. Should they not comply, the old employer could sue both of them in civil court.

5. How can employers guard themselves in future to avoid such situations?

Ask all potential employees to show you all contracts signed with their previous employers. Get sworn statements from them in respect of their legal obligations.

Get signed indemnities from all new employees undertaking to pay all costs of any legal actions by former employers which are caused by the employee.

Protectable proprietary interest: It’s not unreasonable for a company to want to prevent its competitors from gaining an unfair advantage. Generally, a restraint of trade is not about preventing an employee from moving on.

Instead, the goal is to stop them from passing on sensitive inside information on customers, strategy methodologies, pricing and more.

To be effective, restraint of trade contracts must therefore set out why the company has a protectable proprietary interest in the information that the employee has access to. That’s why careful drafting of the agreement is critical to ensure successful enforcement.

Related: Hustling on a Side Business? How to Find the Time.

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

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Why Your Employees’ Health Is Your SME’s Wealth

Absenteeism costs R16 billion annually, according to Stats SA. That’s a lot more than it costs to sign up for a group offering that is specifically designed for small to medium enterprises.

Fedhealth

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Fedhealth’s Commercial Executive, Michelle Morton explains the importance of group health cover to keep your SME’s pulse strong.

1. Why is it important for a SME to care about the health of its employees?

First, when an employee in a critical role within the SME falls ill, there’s often nobody else to fill the skills void created by his or her absence. This can have a detrimental effect on the daily operations and business output.

Second, offering sound medical aid may attract and retain the right talent to the business.

Third, choosing a medical aid like Fedhealth, which places a big emphasis on preventative health and wellness, can also assist the SME owner in cultivating a healthy culture in the workplace.

Related: Fedhealth Brings Healthy Benefits to your Staff

2. What should business owners consider when looking for a group medical plan?

Apart from factors like affordability, a good reputation, and ability to pay claims, look for schemes that offer value-added services, such as wellness days where staff can undergo crucial health screenings, and programmes to address specific health issues.

3. What are the top health concerns for today’s workforce?

Back and neck pain are second to headaches when it comes to painful conditions affecting humans — especially office workers, who are often desk-bound for hours on end. Fedhealth offers qualifying members a 12-week Conservative Back and Neck Rehabilitation programme to help correct the problem through exercise and behaviour.

Diabetes and hypertension are also on the rise, while some employees face HIV/Aids, weight issues or struggle to quit smoking. Fedhealth provides assistance for all these diseases and health concerns.

4. How will the employees benefit from working for a company with a great group medical plan?

I believe it makes the business a more attractive place of work for employees, as medical aid is a much-needed benefit and costly if one has to pay for it out of one’s own pocket.

Related: Why Fedhealth Believes In The Power Of The SMME Sector

5. Please explain the importance of the SOS Corporate Wellness benefit

The Sisters-on-Site service (SOS Corporate Wellness) is a value-add as it brings basic healthcare to the office. This means that staff can regularly see a qualified nursing sister at their place of work for minor health issues, instead of having to take time off work to visit the doctor or clinic.

Employees build a rapport with the sister, as they see her on a frequent basis. Through the SOS Corporate Wellness benefit, they can also conduct important health screenings that might flag serious health issues of which the employees might be unaware. Sisters-on-Site can also facilitate monthly health themes to raise employee awareness on issues like breast cancer.

 

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Why HR Legislation Compliance Can Curb Business Failure

Don’t let your business reputation get dented due to non-compliance.

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HR Legislation Compliance

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Millennium Support Services is designed to afford all business enterprises the opportunity to have Human Capital Management for their business.

“It is just unfortunate that non-compliance is exactly that “non-compliance” and most small businesses reputation gets dented or even fully destroyed, in the event that they are being accused of non-compliance by employees and statutory bodies” says Sharon Tshabalala CEO of MSS.

“Small businesses have no resources yet at the same time are not exempted from compliance. So, through the use of technology we are able to provide easily accessible HR services across the board.”

Related: Human Resources Management Demystified

Millennium Support Services provides businesses with exclusive distinctions of its service, so that you can ensure that your business remains compliant.

Human Resource Policies

human-resource-policies

The advantage it has over other online HRM systems is that it offers online access to Human Resource policies based on approved legislative framework.

1Independent Representation

In cases where disciplinary proceedings have to be under taken, an independent chairperson will be made available. When disputes have been escalated to the CCMA, a Labour Relations Expert will represent the employer.

2Disciplinary Policy

The primary purpose of discipline is to encourage employees to correct their conduct and/or discourage employees from breaching standards of conduct. Depending on the nature of the breach, there are five forms of disciplinary sanctions taken against employees – either formal or informal.

Namely: Verbal Warning, Written Warning, Final Written Warning, Suspension of Salary and finally Dismissal.

3Grievance Policy

The purpose of this policy is to give guidance and to provide a framework on how to raise and deal with grievances effectively at the earliest possible stage. There are three types of Grievance which have an informal/formal procedure.

Namely: Mild Grievance, Serious Grievance and Sensitive Grievance.

Related: Is Leveraging Your Resources Getting The Job Done Properly?

4Occupational Help Policy

The purpose of this policy is to establish minimum standards and requirements of occupational health and safety for the corporation in order to reduce the risk by:

  • Identifying hazards and possible risks causing incidents and accidents,
  • Setting standards of practice, procedures and accountability,
  • Measuring performance against standards, Evaluating compliance with standards,
  • Correcting deficiencies, deviations, and set standards of procedures to be followed,
  • Creating and maintaining a healthy and a safe work environment.

HR management is a specialist field, with many laws and regulations to navigate. If you don’t have a background in this field and can’t afford to hire a full-time HR specialist, consider outsourcing this function.

Millennium Support Services – Human Capital Management made easy.

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Will A Strike Cripple Your Business?

Strikes can cause a drop in productivity; ensure you have a staffing solution to see you through uncertain times.

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Strikes can cause a drop in productivity; ensure you have a staffing solution to see you through uncertain times.

South Africa’s economy has become very competitive and losing business to a competitor could be a serious blow. When employees strike, your business is likely to lose money due to delayed services and lost production time.

Businesses with advanced strike management policies and planning in place have a higher success rate in avoiding potential losses due to strikes. Workforce Staffing is a staffing partner that protects your Return on Human Investment during these challenging circumstances.    

Related: Finding Your Staffing Partner

Do you have a Strike Contingency Plan?

When 400 staff members unexpectedly decide to strike at dawn, you need a staffing partner that will arrange for capable and reliable staff members to take their place, that same day.

You will need:

  • A reputable staffing provider that knows how to liaise with authorities to establish a safe production environment for your staff.
  • Legal assistance in organising interdicts and disciplinary hearings, making sure you follow due process to shorten the strike period as much as possible.
  • Experienced hands in successful contingency planning and efficiency to keep your business productive even during industrial.

One of the biggest concerns for businesses is the amount of time and money that’s squandered due to absenteeism when employees strike.

Barend Matthee, Northern Cape Regional Director for Workforce Staffing, explains that using contract workers for a project will allow for cost-savings as workers will only be paid for the duration of the project. The principle of “no work, no pay” will apply.

“Optimisation of contract workers through Workforce Staffing’s understanding of various on-boarding processes, including medicals, inductions, etc., allow for quick turnaround times on replacement staff, as well as the opportunity for contract workers to be circulated to various other clients or tasks,” notes Matthee.

Related:Organisational Behaviour Expert Siphiwe Moyo’s Insights Into Keeping Your Employee’s Motivated

This holistic approach allows for good time- and resource management on projects.

Outsourcing staff also provides you with a temporary workforce that has the required skills and experience to meet your company’s changing needs.

An expert staffing provider will ensure that your projects are fully-staffed and up-and-running within a short space of time, saving both time and money. 

Workforce Staffing calms the storm with its: 

  • Critical experience in striking situations
  • Solid infrastructure and resources, mitigating your risk
  • Legal consultation on processes and services
  • Logistics management like transport, labour, compliance, worker induction and contingency sites
  • Provision of ongoing labour to maintain your service levels
  • Facilitation of continuous communication between all stakeholders

Workforce Staffing has the experience and infrastructure to mitigate your risk:

  • Receive Support from its NATIONAL BRANCH NETWORK
  • Enjoy HR AND IR INDUSTRY SPECIALISTS expertise
  • Receive a CONTINGENCY WORKFORCE quickly and effectively

Contact them today to retain maximum productivity. 

087 135 8888  |  info@workforce.co.za  |  www.workforcestaffing.co.za

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