In a recent case, the court had to determine if a business was to be sold, if an employee’s restraint of trade agreement transferred with their contracts of employment to the new employer.<\/p>\n
Legal experts Jacques van Wyk and Andrie van Heerden at Werksmans Attorneys said that under section 197 of the Labour Relations Act, some rights and obligations transfer.<\/p>\n
One is the undertakings contained in contracts of employment, such as the restraint of trade.<\/p>\n
“To the extent the ‘new employer’ has a proprietary interest worthy of protection, it may seek to enforce the provisions of such a restraint,” said Werksmans Attorneys.<\/p>\n
Employees, in turn, should take note that should they elect to act in breach of such undertakings, they may be held to account for doing so, the firm added.<\/p>\n
Facts<\/strong><\/p>\n In the recent case of Slo-Jo Innovation v Beedle<\/em>, the issue of a restraint of trade came into question.<\/p>\n Slo-Jo Innovation (“Applicant”) launched an urgent application in order to enforce a restraint of trade against Ms Beedle, Werksmans said.<\/p>\n “Ms Beedle opposed the application on the basis that there was no employment agreement between her and the applicant. She, therefore, raised a preliminary point that as the applicant failed to establish a prima facie right to the relief sought, the application should be dismissed on that basis.”<\/p>\n In 2007, Ms Beedle started working as a sales representative at Slo-Jo Trading. Her employment agreement included a restraint of trade provision.<\/p>\n Slo-Jo’s business grew over the years that Ms Beedle was employed by it, said Werksmans. “Ms Beedle was instrumental in this growth.”<\/p>\n Come 2018, there was an internal restructuring where three new companies were established, one being the applicant.<\/p>\n “Each company was responsible for a separate element of Slo-Jo Trading’s overall business and are wholly owned subsidiaries thereof,” said Werksmans.<\/p>\n After the restructuring, certain employees were transferred to the new entities. Ms Beedle was transferred to the applicant, said the firm.<\/p>\n “She was employed on the same terms and conditions she had with Slo-Jo Trading.”<\/p>\n After resigning from her job at Slo-Jo Trading, Ms Beedle got hired by a competitor of Slo-Jo Trading and her previous employer. As a result, the applicant (Slo-Jo Trading) filed an urgent case with the Labour Court.<\/p>\n The Labour court found that:<\/p>\n The court had to also consider the case of Laser Junction v Fick\u00a0<\/em>in relation to Ms Beedle’s argument that, as a matter of law, the restraint of trade agreement would not transfer, only the employment contract.<\/p>\n The Labour Court disagreed with Laser Junction (and, therefore, the argument raised by Ms Beedle’s representatives), said Werksmans.<\/p>\n “First, the facts of Laser Junction (where employees had signed new contracts of employment after the transfer which did not contain restraint of trade provisions) were distinguishable from that of the present case (where Ms Beedle had not signed a new contract of employment).”<\/p>\n “Second, the Labour Court held that a “contract of employment is transferable under the provisions of section 197 of the LRA, including all the terms agreed to between the parties, not only those that are more favourable than the provisions of the BCEA”,” ministers said.<\/p>\n Furthermore, the effect of section 197(2)(b) of the LRA is that “if the obligation was in existence at the time of the transfer, it continued in force beyond the transfer.<\/p>\n\n