What the Labour Appeal Court decided in the Backsports case – and what it means for your business
Written by Roy Bregman,
an admitted attorney with decades of experience in employment and commercial
law.
If you run a
business, a restraint of trade clause is one of the most useful ways to stop a
departing employee from taking your clients, your staff or your trade secrets
straight to a competitor. But a question comes up again and again: if you
dismiss an employee for misconduct, does the restraint still count – or does
firing them let them off the hook?
In a recent
judgment, the Labour Appeal Court gave a clear answer. In this article we
explain that decision in plain language, set out the legal principles behind
it, and draw out the practical lessons for both employers and employees.
The short answer: Yes. Dismissing an employee does not automatically
cancel a restraint of trade. As long as you acted lawfully and in good faith,
the restraint can still be enforced – and the courts will protect genuine
business interests like your customer relationships and goodwill.
The case at a glance
The judgment is
Backsports
(Pty) Ltd v Motlhanke and Another [2026] 1 BLLR 8 (LAC). The Labour
Appeal Court (LAC) had to decide a single, practical question: is a restraint
agreement still enforceable if the employee was dismissed for misconduct? The
court confirmed that it can be.
Key takeaways
•
A restraint of trade can still be
enforced even if the employee was dismissed for misconduct.
•
Courts will enforce a restraint
where the employer can show a genuine interest worth protecting – such as
customer connections, goodwill or confidential information.
•
Dismissal on its own does not
cancel a restraint. The exception is where the dismissal was fraudulent or in
bad faith.
•
A court can also step in to stop
harassment, threats or sabotage that are linked to a restraint dispute.
The law behind restraints of trade
What is a restraint of trade?
A restraint of
trade clause is a term in an employment contract that limits what an employee
can do after they leave. It usually stops a former employee from:
•
working for a competitor;
•
approaching or poaching your
customers;
•
recruiting your other staff;
•
using your confidential
information; or
•
setting up a competing business in
a particular area for a set period of time.
When will a court enforce one?
South African
law recognises and enforces restraint agreements – but only if they are
reasonable and they protect a genuine business interest. A restraint cannot
simply be used to stop someone from earning a living or to punish competition
for its own sake.
Two competing rights
When a
restraint is challenged, the court has to weigh up two principles that pull in
opposite directions:
Agreements
should be honoured. If two parties freely sign a contract, they should
generally be held to it. (Lawyers call this pacta sunt servanda.)
Everyone has
the right to work. The Constitution gives every person the right to choose
their trade, occupation or profession freely.
So, the court
asks whether enforcing the restraint would unfairly stop someone from making a
living – while also asking whether the employer has a real business interest
that deserves protection.
The test the courts use
The leading
case, Basson v
Chilwan and Others, set out four questions a court works through:
•
Does the employer have an interest
worth protecting?
•
Is that interest actually being
threatened by the employee?
•
Do the employer’s interests
outweigh the employee’s right to work?
•
Does public policy support
enforcing the restraint?
Interests worth
protecting typically include confidential information, trade secrets, customer
connections, supplier relationships and goodwill.
Does being dismissed cancel a restraint?
Generally, no.
An earlier case, Reeves and Another v Marfield Insurance Brokers CC and
Another, established that a restraint can still apply even when employment
ends in dismissal. The restraint stays in force unless the employer acted
fraudulently or in bad faith – for example, by firing someone purely to trigger
the restraint and shut them out unfairly. The Backsports judgment reaffirmed
this principle.
What happened in Backsports
The background
Backsports
operates in the internet, communications and technology sector. It employed the
worker as a senior stream lead. His contract included restraint terms that, for
12 months after he left, prevented him from competing with the company,
soliciting its customers, recruiting its staff, or working in the same field.
The restraint applied across South Africa and other territories where the
company did business.
The dismissal
The employee
faced disciplinary proceedings on several misconduct charges. He pleaded guilty
and was dismissed. He initially took an unfair dismissal dispute to the CCMA
but later abandoned that claim.
The alleged breaches
The company
then alleged that its former employee had:
•
approached major clients;
•
tried to recruit staff;
•
performed competing streaming
services;
•
threatened company staff; and
•
threatened to sabotage company
assets.
The evidence
included WhatsApp messages and sightings of him working at events connected to
the company’s clients.
The Labour Court said no
At first, the
Labour Court refused to enforce the restraint. It reasoned that the employer
had not proved the employee held confidential information, that he had worked
there for less than 10 months, that the restraint was unreasonable, and that –
because he had been dismissed rather than resigning – enforcing it would
unfairly deprive him of a living. The Labour Court also held that it had no
power to grant interdicts about threats and harassment, because the employment
relationship had already ended.
The Labour Appeal Court disagreed
The restraint still applied
The Labour
Appeal Court overturned that decision. Relying on the Reeves case, it confirmed
that dismissal does not automatically invalidate a restraint. Crucially, there
was no evidence that the dismissal had been fraudulent or made in bad faith –
the employee had pleaded guilty and dropped his unfair dismissal claim. So the
way his employment ended did not affect whether the restraint could be
enforced.
There were real interests to protect
The court found
the employer had genuine business interests worth protecting. The employee had
contacted customers, performed competing work, approached staff to join
competing activities, and tried to exploit customer relationships tied to the
business. The court confirmed that customer connections and goodwill count as
protectable interests – even where confidential information is not the main
issue.
The employee breached the restraint
The court found
that the employee’s conduct directly breached the agreement. By approaching
customers and drawing staff into competing activities, he undermined the
company’s commercial interests. The court therefore interdicted him from
soliciting customers, recruiting staff, threatening employees, harassing the
company, and damaging company property.
The court could deal with the threats too
The Labour
Appeal Court also rejected the idea that it had no power over the threats and
harassment. It held that the Labour Court can decide issues that are bound up
with the main restraint dispute, including interdicts protecting staff and
company assets – especially where that conduct is closely linked to the
restraint dispute itself.
Why this judgment matters
Lessons for employers
•
Draft your restraint clauses
carefully and clearly.
•
Spell out exactly which interests
you are protecting.
•
Keep good records of your customer
relationships and confidential information.
•
Act quickly and decisively when a
breach happens.
The case shows
that courts will enforce a reasonable restraint where you can show real harm –
or a real threat of harm – to your business.
Lessons for employees
•
Being dismissed does not
automatically cancel your restraint.
•
Approaching former clients can
breach a restraint even if you never use confidential information.
•
Courts will look closely at what
you actually do after you leave.
•
Interdicts can go beyond
competition to cover harassment or sabotage.
In summary
The Backsports
decision confirms that restraint of trade agreements remain enforceable even
after dismissal, as long as the employer acts lawfully and in good faith. The
courts will protect genuine business interests – customer relationships,
goodwill and a stable workforce – while still balancing those interests against
a person’s right to work and earn a living.
For businesses,
the message is simple: a well-drafted restraint clause and prompt action when
it is breached can make all the difference. For employees, it is a reminder
that the obligations you sign up to don’t simply disappear when you leave.
Frequently asked questions
Can an employer enforce a restraint after dismissal?
Yes. South
African courts have confirmed that dismissal does not automatically cancel a
restraint agreement, unless the employer acted fraudulently or in bad faith.
What makes a restraint of trade enforceable?
A restraint is
generally enforceable if it protects a genuine business interest and is
reasonable in its duration, geographic area and scope.
What counts as a protectable business interest?
Things like
confidential information, customer connections, goodwill, trade secrets,
supplier relationships and a stable workforce.
Can a former employee be stopped from contacting old
clients?
Yes. Soliciting
former clients or customers can breach a restraint agreement and justify an
interdict.
How long can a restraint of trade last?
It depends on
the circumstances. A court will assess whether the length of the restraint is
reasonable in relation to the interests the employer is trying to protect.
Need advice on a restraint of trade? Whether you are drafting
employment contracts, enforcing a restraint, applying for an interdict or
dealing with a post-employment dispute, Bregman Moodley Attorneys can
help. Email us at info@bregmans.co.za
and we will follow up with a phone call within 24 working hours.
