[Question] Restraint of Trade against a member of a cc

[Kewlcat]

Hi I am a member of a cc. and entered into 3 year restraint of trade agreement which covers the Republic of South Africa. I am considering resigning from the company and selling my member's interest to the other members as the trust relationship between the members have been broken. I have been approached by competitors to join them, because of the good standing relations I have with them. I am not intending to disclose any company confidential information to these competitors. Please advise whether this restraint is reasonable as I have been with this company for more than 20 years and do not have any other skills or know how in a different line of business. Please advise on my options to to get out of this restraint as I cannot continue being a member of this company any longer and would rather go work somewhere else as an employee.

[AndyD]

It's always touch and go if restraint of trade agreements will stand up in court. If they're unreasonable in their scope or time frame or even their geography they'll often be deemed as unreasonable and invalid when it comes to a court case.

I would approach someone in the legal profession and get an opinion, it would be difficult to comment further without seeing the whole agreement.

[sterne.law@gmail.com]

After a few court cases it was decided that sanctity of contract prevails. that is the restraint stands until challenged.
It can be challenged if it against public morals. This is determined, inter alia, by the afore mentioned criteria such as time, scope and area.
Without all the info at hand such as type of business and the actual agreement, you might have some movement in that it extends across the country. If the company does no business outside of the current province, restraining someone nationwide ha sno foundation. There are no interests to protect.
You will neeed to seek a legal opinion. Thereafter you may consider the restraint in terms of negotiating the payout for your shares.

[Dave A]

Thereafter you may consider the restraint in terms of negotiating the payout for your shares.

Ditto my thinking. Make the restraint issue part of the exit negotiations. Giving a discount in return for a release from the restraint clause may do the trick.

[Kewlcat]

Thanks guys for the valuable feedback, as I mentioned previously relations are very strained between us and I have a feeling that they will not be willing to negotiate because of the possible damage I can do if I do go to a competitor or start up myself. I will consult a lawyer though, so thanks again.

[Onweb]

Hi Kewlcat
In 2001 - I know it's awhile ago but maybe you will find my experience to be of interest - I managed a branch of a national personnel agency in port elizabeth. All of the staff signed a mandatory two year restraint. One of the consultants resigned to join a competitor and so of course the whole legal machinery went to work. The end result was that it took the agency 23 months to get a court ruling. The court decided that she was in breach of the restraint - which she clearly was as she directly approached her old client base - and that she was not allowed to work for a competitior until her restraint was up. Did you notice that it took 23 months to get this ruling on a 24 month restraint? So even though the agency 'won', it came at a price in excess of R200000-00 for legal fees ( don't forget this was in 2001) and that is not taking all of the man hours into account, nor the travel expenses, staff morale - we won't even go there - etc. And what did we win? She sat at home for one month while the time period of the restraint played out and then went back to work. So in my opinion a restraint isn't worth the paper it is written on. I might also say that the only reason we did win was because she had been a secretary before she joined as us a personnel consultant. This was relevant as the court decided she did have other skills.
Good luck! It is never pleasant to be in that sort of conflict situation
Kind regards
Chantell

[Dave A]

And what did we win? She sat at home for one month while the time period of the restraint played out and then went back to work.

You didn't sue for damages?

[Onweb]

Hi Dave
We were advised to but at that stage we had to look at what we stood to lose against what we stood to gain. She was a salaried employee and to take it further we would have had to involve our clients and very probably jeopardise relationships with them. It was an enormous waste of time and resources. I hate to say it and with respect to all the legal folk here but the only winners were the lawyers.

[Blurock]

I have been with this company for more than 20 years and do not have any other skills or know how in a different line of business. Please advise on my options to to get out of this restraint as I cannot continue being a member of this company any longer and would rather go work somewhere else as an employee.

I suggest you discuss this with a good labour lawyer as you can not be prevented from earning a living in your profession. Who was responsible for the breakdown of the trust relationship? This may also be an issue.

However, going to the opposition may be a hard nut and will have to be negotiated. I do not think that you will be allowed to take your mailing list and other client information with you. You may also be restrained from dealing with existing customers.

Best is to get legal advice and negotiate from there.