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Keep these five points in mind when it comes to restraint of trade agreements

by , 06 October 2015
Keep these five points in mind when it comes to restraint of trade agreementsA restraint of trade agreement is an agreement between you and the employee in that the employee agrees, for a certain period of time after the termination of his employment with you, he'll not compete with you.

This restraint may also include measures that the employee won't:

· Encourage clients or customers to take their business away from you;
· Tell your suppliers to stop supplying you or to change the supply arrangement with you; and
· Encourage other employees to leave you and join a competitor.

Having said that, here are five points to consider when dealing with restraint of trade agreements:

1.     Restraint of trade agreements are legal and enforceable. This is unless they go against public policy.
 
2.     If you pay the employee to sign the restraint, it doesn't affect the agreement's validity.  In other words, a restraint against an employee will still be enforceable, even if you were to pay the employee to agree to the restraint.
 
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3.     If an employee is subject to a restraint and he breaches it, you may do the following:
 
o   Issue a letter of demand;
o   Get an interdict; and
o   Sue for damages.
 
4.     The employee's new employer can be included in an application for an interdict or even in an action for damages. And so, if you're hiring a new employee, it's very important for you to check if he's under a restraint with his previous employer.
 
5.     A restraint must be reasonable with the limitations it places on the employee. But it'll be up to the employee to prove that a restraint is unreasonable. If he can do this, you can't enforce the restraint.
 
If you believe an employee needs a restraint, get him to sign an agreement when STARTS working for you and not when he resigns.


So, there are five points to keep in mind when dealing with restraint of trade agreements.
 
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