Court upholds restraint of trade against former Shoprite employee

Shoprite Checkers has successfully restrained a former employee from working for competitor Clicks after the court ruled the company had the right to protect confidential information the worker would have had access to.

Design planner Tebogo Kgatle’s contract with Shoprite included a restraint of trade clause, which he believed should not have applied when seeking employment at Clicks.

he Western Cape High Court disagreed, ruling on Wednesday that Kgatle’s senior position at Shoprite gave him access to precisely the kind of confidential information that the company had every right to protect.

Before employing Kgatle in 2021, Shoprite had given Kgatle a bursary to obtain an honours degree from Stellenbosch University. He became one of only 14 design planners who reported directly to the department head.

Kgatle resigned in April 2023, stating he was underpaid and saw no prospects for advancing. He obtained an employment offer from Clicks to start shortly after his resignation.

As a result of going to a direct competitor, Shoprite instituted proceedings to restrain him from doing so, pointing to the relevant clauses in his employment contract that effectively restrain him from being employed by any business that sells the same products as Shoprite.

Kgatle argued the restraint was unfair because he had gave an undertaking not to disclose anything to Clicks and that any confidential information he had would not be of commercial benefit to them.

Judge Derek Wille noted that by giving the undertaking, Kgatle had basically “conceded that [Shoprite] gave him access to [its] confidential information”.

Shoprite argued that Kgatle must be held according to his contractual obligations to Shoprite, after it helped to educate and entrust him with information.

Kgatle then argued that it would be against public policy, even if technically the conditions were met to enforce restraint. He said the court should consider he was young, had only worked at Shoprite for a short period, was not a senior staff member and was dissatisfied at work.

The judge said it was notable that Shoprite had indicated to Kgatle another competitor, where his employment would not breach the restraint clause. Shoprite also agreed to discuss his remuneration and other opportunities, to cater to his concerns. Further, Shoprite said he was “welcome to withdraw his resignation until he found alternative employment that would not breach his restraint covenant”.

Wille also said the employment contract and its clauses, which both parties had signed, “served an acceptable employment purpose to the benefit of both parties”. Importantly, the judge said, “the enforceability of contracts is essential both for commerce and fair employment practices”.

The judge also said both parties had equal bargaining power when signing the agreement and there was no need for the court to intervene for Kgatle’s benefit. He confirmed that “a court may refuse to enforce specific contractual terms of an agreement where that term itself, alternatively, the enforcement thereof, would be contrary to public policy”.

However, that not the situation in this case. Kgatle was aware of his rights and agreed to limit his right to work post-resignation when he signed the contract with Shoprite. Indeed, the judge said, it would be against public policy to not enforce the restraint.

As a result, the judge granted the relief to enforce the restraint against Kgatle in favour of Shoprite. In awarding costs, he noted: “I harbour some deep suspicions about the [Kgatle and Clicks’] alleged conduct during this litigation.” He therefore also issued a punitive costs order to be split between Kgatle and Clicks.

Kgatle is therefore unable to work at Clicks for at least a year.

Marthinus van Staden, associate law professor at Wits, said “there has been an uptick in restraint of trade cases recently”, which he added may have to do with “the economic downturn brought about by the Covid-19 pandemic”, where “employers seek to protect their investments”.

Van Staden agreed with the judgment. Kgatle “would only be restrained for a period of one year to be employed by Clicks, while Shoprite could have suffered lasting prejudice”, because of potential information he might have had.

moosat@businesslive.co.za