Labour Court rules on restraint of trade battle

The Motor Industry Staff Association (Misa), won a restraint of trade dispute on behalf of five of its members after the employer could not prove they had access to confidential information or trade secrets that had to be protected.

“There was no evidence that advanced that repeat customers formed the backbone of the business, nor any dispute that all second-hand vehicle deals rely on the book value of the vehicle as guide for determining the value of the vehicle,” the Labour Appeal Court found in its judgement.

According to the Court, the Labour Court in Johannesburg erred in deciding that it was reasonable to enforce a restraint of trade.

Martlé Keyter, Misa’s Chief Executive Officer: Operations, said that the restraint of trade the Labour Court imposed on Misa’s five members, prevented them from working within a 300km radius from Ermelo for 12 months.

The employer approached the Labour Court after half of its sales team resigned in response to the employer’s unilateral implementation of an amended commission structure allowing for penalty deductions, without the prescribed four weeks’ notice and consultation set-out by the Motor Industry Bargaining Council, Main Collective Agreement.

The employees secured alternative employment with another dealership in town.

The Labour Court interdicted and prohibited the employees for taking up employment within 300 km from their former employer’s main business premises in Ermelo, Mpumalanga.

Tiekie Mocke, Manager of Misa’s Legal Department, says in practise the judgement interdict prohibited the MISA members from earning a living in four provinces, Gauteng, Mpumalanga, Free State and KwaZulu-Natal. Misa appealed against the judgement and brought an urgent application to interdict the employer from enforcing the judgment.

The court found in favour of Misa and prevented the employer from enforcing the judgment whilst awaiting a date from the Labour Appeal Court.

The Labour Appeal Court found the confidential information, know-how technology or a method, must be objectively worthy of protection concerning matters such as business opportunities, customer information, proposals, marketing, price or pricing arrangements, product specifications, know-how technology, or manufacturing details which are unique to the business, not generally available to third parties.

“It must have actual economic value to the party seeking to protect it, in circumstances which the employee is obliged contractually to keep it confidential.

“The respondent only sought enforcement of the restraint agreement in respect of its second-hand vehicle business and not its new vehicle business. The facts advanced did not, however, prove that the respondent held a protectable interest in respect of its second-hand vehicle business.

“It proved no evidence of confidential information, trade secrets or trade connections held by the former employees that warranted protection. There was also no evidence advanced that repeat customers formed the backbone of the business or any dispute that all second-hand vehicle deals rely on the “book value” of a vehicle as a guide to determining its value,” the Labour Appeal Court found.

According to the judgement the information that the employer sought to protect, was far from being unique and the knowledge was widely available in the industry.

The Labour Appeal Court dismissed the judgement of the Labour Court with costs.

Provided by SyndiGate Media Inc. (Syndigate.info).