Restraint of Trade Enforceability: What South African Employers Need to Know

Restraint of trade enforceability is an important consideration for employers seeking to protect legitimate business interests following the termination of an employment relationship. These interests may include confidential information, trade connections, customer relationships and other proprietary information. However, a restraint also limits an employee’s ability to pursue employment after termination and must therefore be reasonable and consistent with public policy. A recent Labour Court judgment, Vanhattan Lifting CC v Herselman and Another (2026/106176) [2026] ZALCJHB 206 (7 July 2026), provides useful guidance on the enforcement of restraints of trade where an employee moves to a direct competitor while having access to confidential information and established customer and supplier relationships.

The Legal Position 

South African law does not regard restraints of trade as inherently invalid. Following Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A), a restraint is generally valid and enforceable unless the party seeking to escape it establishes that enforcement would be unreasonable and contrary to public policy. This principle was reaffirmed in Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA). The enquiry requires the Court to balance the competing interests of the parties. In Basson v Chilwan and Others 1993 (3) SA 742 (A), the Court identified relevant considerations, including whether the employer has a legitimate interest deserving of protection, whether that interest is threatened, whether the employer’s interest outweighs the employee’s interest in being economically active, and whether the restraint goes further than reasonably necessary to protect the employer’s interests. Importantly, a restraint may protect legitimate interests such as confidential information and trade connections, but it may not simply be used to prevent ordinary competition.

Case Study

In Vanhattan, the employee had been employed by the employer since 2021 and was promoted to Operations Manager in 2025. His position gave him access to commercially sensitive information and involved relationships with the employer’s customers and suppliers. His employment contract contained confidentiality and restraint of trade provisions, including a two-year restriction against working for competitors. Following the termination of his employment in February 2026, a separation agreement reiterated these obligations. The now ex-employee subsequently commenced employment with a direct competitor of his previous employer, in a comparable position. The ex-employer approached the Labour Court on an urgent basis in a matter concerning restraint of trade enforceability, relying on the employee’s access to confidential operational, pricing and customer information, as well as his established relationships with customers and suppliers.

The Labour Court’s Findings

The Court found that the company had established legitimate interests deserving of protection. These included confidential commercial information and the employee’s relationships with customers and suppliers, which constituted protectable trade connections. The Court further recognised that the company did not have to prove that actual financial loss had already occurred. The relevant question was whether its legitimate interests were threatened. The employee’s senior position, access to commercially sensitive information and established customer and supplier relationships, together with his employment by a direct competitor in a comparable role, created a sufficient risk that those interests could be exploited to the company’s detriment. The Court nevertheless found that the two-year restraint was excessive in duration. In considering restraint of trade enforceability, although the restraint was enforceable in principle, the Court reduced its duration. The absence of a geographical limitation was not considered unreasonable, having regard to the company’s national operations.

Practical Implications for Employers

The judgment reinforces that a restraint of trade will not necessarily be enforced merely because an employee has signed the agreement. Restraint of trade enforceability will depend on the circumstances and the interests the employer seeks to protect. Employers should be able to identify the specific legitimate interests requiring protection, such as confidential information, pricing information, customer relationships, supplier arrangements or other proprietary information.

The scope and duration of the restraint should also be appropriate to the employee’s role and the interests being protected. Employers should therefore avoid relying solely on generic restraint clauses and should ensure that restrictions can be justified by reference to the particular circumstances of the business and employee. At the same time, employees should not assume that a restraint is unenforceable simply because it limits their ability to join a competitor. South African law recognises that legitimate proprietary interests may justify restrictions on post-employment competition, provided that the restraint remains reasonable and consistent with public policy.

Conclusion

The decision in Vanhattan reinforces the principle that the enforceability of a restraint of trade depends on a careful balancing of competing interests. Restraint of trade enforceability therefore requires consideration of both the employer’s legitimate interests and the impact of the restraint on the employee. Where an employee has access to confidential information and established trade or customer connections, and subsequently joins a direct competitor, the employer may have a legitimate interest deserving of protection.

However, the restraint must remain reasonable in its scope and duration and must not go further than necessary to protect that interest. In Vanhattan, the Court recognised the company‘s legitimate interests and enforced the restraint but reduced the two-year period to a shorter period. Employers should therefore ensure that restraint of trade agreements arecarefully drafted and appropriately tailored to the employee’s role and the legitimate interests they are intended to protect.