Will the Narrowing of Restraints of Trade Become a More Likely Outcome?

In the recent case of Torrente and Another v Grant Monaghan and Associates Incorporated [2024] ZALAC 3 (23 January 2024) (LAC), the Labour Appeal Court had to determine whether a restraint of trade clause should not have been enforced because the respondent in the matter did not possess any legitimate protectable interest and accordingly whether the applicable restraint clause was contrary to public policy.

Written By of Cowan-Harper-Madikizela Attorneys

Grant Monaghan and Associates Incorporated (“the Practice”) was registered as a medical orthotic, prosthetics and podiatry practice and commenced business in 2013. The Practice’s Head Office is based in Sandton but it also has operational offices in Parkwood and Mayfair.

In 2017, Ms Yovanka Torrente was employed as a student intern in order to be trained to be a proficient practitioner. In 2018, she was employed by the Practice as a qualified orthotist and prosthetist. In this position, she would be exposed to its patient database, trade secrets, business know-how and confidential information. She would also attend consultations with clients to ensure that the correct device fit properly.

In December 2022, Ms Torrente resigned with notice from her employment. Her last day being 23 January 2023. Following her resignation, the Practice investigated her conduct during the latter part of 2022 and discovered the following:

  • Ms Torrente received a WhatsApp message from a patient of the Practice enquiring about the date upon which she would be opening her new practice in Bedfordview;
  • Ms Torrente submitted a prescribed minimum benefit application, under her practice number, to Discovery for, a patient of the Practice;
  • Ms Torrente provided her personal number, instead of the Practice’s number, to a patient;
  • Ms Torrente approached referring doctors and informed them that she was opening new rooms for her practice in Bedfordview, Petervale and Bryanston in January 2023;
  • Ms Torrente provided her own practice number to Discovery, a medical aid service provider, in relation to a claim concerning a patient of the Practice; and 
  • Ms Torrente submitted claims under her new practice number.

Ms Torrente was subject to a restraint of trade, which stated, inter alia, as follows:

“Restraint of Trade: By the employee’s signature hereto, she undertakes that from the date that her employment is terminated with the company, the employee shall not directly or indirectly at any place within the greater Gauteng, for a period of two years (from termination date of 20 January 2023 to 19 January 2025), whether for her own account or as a principal, employee, agent, partner, representative, shareholder, consultant, advisor, or in any other similar capacity whatsoever in relation to any person, syndicate, partnership, joint venture, corporation or company, and whether of the first respondent’s direct or indirect benefit or otherwise, and whether for reward or otherwise, and whether formally or otherwise:…” (Emphasis added.)

The Court a quo had found that the Practice had established a protectable interest in relation to the potential inducement of its customers and employees by Ms Torrente. The Court however sought to limit the duration and range of the restraint clause and found that as Ms Torrente’s new practice was based in Bedfordview, some 27 kilometres from the business of the Practice, it was a reasonable distance from the Practice.

On appeal, although not one of the factual findings challenged, the Labour Appeal Court found that the Court a quo had correctly crafted a narrow restraint, in that the period of the restraint had been reduced to one year and the restricted area had been reduced from Gauteng to 27 kilometres from the Practice. The Labour Appeal Court further found that the Court a quo gave due weight to the importance of the freedom of trade and achieved a balance between the competing interests by restricting the restraint. The appeal was dismissed.

The narrowing of restraints of trade is nothing new. In this case, however, the Courts appeared to place more weight on the importance of freedom of trade and a person’s right to be economically productive in circumstances where the restraint of trade was not necessarily far-reaching to begin with. This may be due to the difficult economic circumstances faced by South Africans as a whole. Accordingly, it should be borne in mind that even if a protectable interest is proven to exist, the Courts may still not fully restrain a former employee in terms thereof.

Jessica Fox

Jessica Fox
Partner in Employment

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