- South Africa’s Labour Court Rules Garden Leave and Noncompetition Clauses Enforceable
- March 3, 2016 | Author: Diana J. Nehro
- Law Firm: Ogletree, Deakins, Nash, Smoak & Stewart, P.C. - Boston Office
- On February 9, 2016, in a victory for South African employers, South Africa’s Labour Court in Johannesburg addressed for the first time the applicability of garden leave in assessing the reasonableness of a post-termination noncompetition covenant (called a “restraint of trade undertaking” in South Africa).
In Vodacom v. Godfrey Motsa and MTN Group (J74/16), an employee of mobile telecommunications company Vodacom Group Limited, Godfrey Motsa, resigned with immediate effect from his position as Vodacom’s chief officer for consumer business in order to take a position with rival MTN Group. Motsa’s employment agreement had required him to give Vodacom six months’ notice, and contained a garden leave clause, essentially requiring him not to work during the notice period. In addition, the agreement contained a six-month post-termination noncompetition covenant. After Mosta refused to comply with the notice period and garden leave obligations, Vodacom filed suit to prevent him from joining MTN for a year, relying on the six-month notice period and garden leave clause and the six-month post-termination noncompetition restriction. Motsa disagreed, claiming that the enforcement of both the garden leave and the noncompetition covenant would be unreasonable and unnecessary to protect Vodacom’s confidential information.
The court held as enforceable the garden leave and noncompetition clauses in Motsa’s employment agreement and required Motsa to wait one year before accepting employment with a competitor. In reaching this decision, the court took into account both the garden leave period and the noncompetition term in order to determine the overall reasonableness and necessity of the noncompetition term. The court focused on Motsa’s access to significant confidential and proprietary information that the court deemed worthy of protection for a period of at least a year.
This decision is a significant positive development for South African employers seeking to enforce both garden leave and noncompetition clauses against executives with significant access to confidential company information.