Investing in your employees doesn’t make them yours

For years, employers have sought to protect their businesses from the loss of confidential information and client connections, by inserting restraints of trade into their employees’ contracts. These will generally protect against such risks. However, the days of employees working their life-long careers for a single employer is something we seldom see these days and a variety of questions arise when those trained up employees resign and leave, together with the substantial investment made in them.

The question that is then often asked, is whether the employer is at liberty to restrain the employee from utilising the skills and training at their new employer. Put differently, are skills and training ever protectable under restraints of trade agreements?

This principle was addressed in the case of Aranda Textile Mills (Pty) Ltd v Hurn and another [2000] JOL 7350 (E). In this case, the employer sought to enforce its restraint of trade provisions against its employee who had resigned, and to prevent him from taking up employment with a competitor company. The contention, however, was that enforcement of the restraint would protect the employer’s investment, money and training which had been expended on the employee.

Importantly and aside from confidential information and client connections which are generally protectable under restraints of trade, the court commented that an employee’s skills and abilities are a part of the employee himself and that the employee cannot ordinarily be precluded from making use of them by a contract in a restraint of trade.

As such, where employers have gone to the trouble and expense of training an employee in a particular field of work (thereby equipping the employee with skills he/she may not have gained elsewhere) the court confirmed that the law does not vest the employer with a proprietary interest in the employee, his know-how or skills. The court went on to record the following important principle:

“Such knowhow and skills in the public domain become attributes of the workman himself [and] do not belong in any way to the employer and the use thereof cannot be subjected to restriction by way of a restraint of trade provision”

The court ruled that such a restriction would impinge on the employee’s ability to compete freely and fairly in the marketplace and would be unreasonable and contrary to public policy. Furthermore, to enforce a restraint of trade purely on the basis of protecting skills and know-how which is already in the public domain, would offend against these principles.

When considering whether to enforce restraints of trade, employers should be aware that only confidential information (including trade secrets) and client connections are protectable, not the training and skills that the employer has armed the employee with and at its expense. The latter the employee takes with them when they leave.

In order to ensure that employers are not left out of pocket, training agreements with pay back clauses can be entered into, which provide for instance that the company will fund your short course, but that if you leave within 12 months thereafter, the employee agrees to pay the cost thereof back to the employer either in its entirety, or on a pro-rata basis.

Restraints are thus not the appropriate means to protect against such risks.