The principal of consistency in the treatment of employees is one of the pillars of
employment law, however, a recent matter in the Labour Court for the first time dealt with
inconsistency as a defence to the enforcing of a restraint of trade.
In the matter of Altron Nexus (Pty) Ltd (Altron) v Fowler and Others, the Labour Court dealt
with an urgent application for an interdict in terms of which Mr Fowler would be interdicted
from working for a competing entity to Altron, namely MST Critical Communications (Pty) Ltd
(MST).
Mr Fowler was employed by Altron as a sales representative and had concluded a restraint
of trade undertaking with Altron.
It was common cause that Altron and MST were competitors.
The Labour Court set out the test to determine reasonableness of enforcing the restraint
agreement as follows:
is there an interest of the one party which is deserving of protection?
is such interest being prejudiced by the other party?
if so, does the interest weigh up qualitatively and quantitatively against the interest of the latter party not to be economically inactive or unproductive?
is there another facet of public policy that requires that the restraint should not be maintained?
The Labour Court concluded that where it is shown that there is confidential information
and/or trade connections to which the employee had access and which he could transmit to
his new employer, the Applicant would be entitled to the protection afforded by the restraint
of trade agreement.
The Labour Court also indicated that the enquiry expected of it is essentially a value
judgement that encompasses a consideration of two policies, namely the duty by the parties
to comply with the terms of their agreement, and the right to freely choose and practice ones’
trade, occupation or profession.
The Labour Court concluded that the reasonableness and enforceability of a restraint
depends on the nature of the activity sought to be restrained, the rationale for the restraint,
the duration of the restraint, the area of the restraint, as well as the parties’ respective
bargaining positions.
The Labour Court continued that the reasonableness of the restraint is determined with
reference to the circumstances at the time the restraint is sought to be enforced.
On the facts the Court concluded that Fowler had knowledge and access to confidential
information obtained during his employment with Altron and that he could exploit such
confidential information to the benefit of MST and prejudice Altron.
But for a defence put up by Mr Fowler that Altron has not historically enforced restraint
agreements, it is apparent from the judgment that Altron had made out a case for the relief it
sought to have Mr Fowler interdicted.
Mr Fowler raised a defence that Altron had not enforced restraint of trades historically.
Altron countered this with the contention that its historical conduct in enforcing restraints was
completely irrelevant.
In the papers filed by Altron, it indicated that the new managing director of Altron revised its
policy on the enforcement of restraints of trade and decided to actively enforce these
provisions where appropriate, particularly in relation to the protection of confidential
information and the safeguarding of customer relations.
It appears that the Labour Court took issue with Altron for not advising its employees of the
change of stance that occurred when a new managing director was appointed.
On the facts of the matter, Mr Fowler was advised that the Company would enforce the
provisions of the restraint concluded between Altron and Mr Fowler when he tendered his
resignation. The Court found that to inform him at that stage was too late. It is difficult to
understand why it was too late to inform Mr Fowler that Altron would seek to enforce its
rights flowing from his resignation, when he tendered such resignation.
The Court held that it was not unreasonable for Mr Fowler to expect, based on Altron’s
previous conduct or practice as it existed at the time of his resignation, that Altron would not
enforce the restraint of trade agreement.
On the basis of the failure to inform Mr Fowler during the discussions when it sought to
persuade him to stay that it would enforce the restraint, the Court concluded that it would be
unreasonable to enforce the restraint agreement against Mr Fowler.
The Court criticised Altron for being content with at least two former employees joining a
competitor without any consequence. The Court held that Mr Fowler expected the same or
similar treatment and that that expectation was not unreasonable. On that basis, the Court
held that enforcing the restraint of trade would be unreasonable. As such, the urgent
application for the enforcement of the restraint was dismissed.
This is the first time that inconsistency has been successfully raised as a defence to the
enforcing of a restraint of trade.
Restraints of trade and the law applicable to it is based in contract law. Principles of labour law such as inconsistency of treatment should not be a defence where the applicant for
protection has complied with all of the requirements for the enforcement of a restraint of
trade. Sight must also not be lost of the fact that the Labour Court dealing with labour or
employment matters is a court of equity where fairness is paramount. Fairness has no part
to play in courts of law.
It is difficult to understand that it was not open to Altron to change its mind about the
enforcements of restraints of trade particularly in relation to the protection of confidential
information and the safeguarding of customer relations. Does this mean that Altron is now
precluded from enforcing restraints of trade indefinitely? Moreover, the confidential
information and the positions held by employees in a large corporate entity differs markedly
and, on this basis, also an inconsistency challenge would be inappropriate as one would not
be comparing apples with apples.
Moreover, a particular employee who is subject to a restraint may not be seen as a threat to
the organisation or their access to confidential information was not as pronounced as that of
Mr Fowler. If an employer decides not to enforce a restraint against such an employee, it
could never be precluded from enforcing restraints against other employees.
In conclusion, it appears to me that the defence put up on behalf of Altron that an enquiry
into consistency is legally irrelevant, accords with the legal position as applicable to
restraints of trade before this judgment.
It is unclear at this point whether Altron intends to lodge an appeal in this matter but as
things stand, this judgment of the Labour Court stands as a precedent until set aside by a
Court of higher authority.
Since the Labour Court assumed jurisdiction of restraint of trade applications in relation to
employees, it has become more convenient to approach the Labour Court for the
enforcement of restraint of trade obligations, than to approach the High Court. It may well be
that had this matter been heard in the High Court, which is a Court of Law and not a Court of
Equity, the outcome may have been different.
