G4S Security Solutions, one of the largest private security companies in South Africa, has lost a labour court application seeking to have one of its former managers barred from working for a competitor.
The court found that Justin Cornelius Chetty was entitled to keep his position at his new employer, Bidvest Protea Coin, despite G4S arguing that he was restricted from working for any of their competitors in terms of a restraint of trade agreement.
Chetty had been employed at G4S Secure as a business development manager in Durban when he resigned and served out a month’s notice in August last year. He then joined Bidvest Coin as a regional manager.
The court heard the Chetty had originally joined G4S in 2019 as a regional technology manager, and in that position was required to sign a restraint of trade and confidentiality clauses.
However, he resigned from that position. In November 2021 he transferred within the company to Durban, where he was the business development manager — a position he held for a year and nine months. His resignation was mutually agreed upon and amicable at the time.
The court was told that while at G4S, Chetty at no time performed any adverse act or conducted himself in bad faith, and gave the business no reason to believe he intended to breach the restraint of trade or confidentiality clauses enforced by G4S by approaching or soliciting any of their secure clients.
“In other words, he had not been in breach of the terms nor had G4S Secure suffered any actual or perceived harm in their operations or profitability after he joined Bidvest Coin, nor have they proven to have lost the clients with whom Mr Chetty was working with since he left G4S Secure’s employ to Bidvest Coin,” said acting labour court judge LM Morgan.
He explained that G4S’s urgent application aimed to prevent the possibility of losing clients that Chetty had worked with, and sought to enforce the restraint of trade agreement for a year to restrain Chetty from working with any competitors within the country.
Not privy to confidential information
Chetty argued that he was not privy to any of G4S Secure’s confidential information nor was he in a position to poach or take away G4S customers. He said G4S had failed to demonstrate in its papers that it has any proprietary interests worthy of protection in the context, role and occupation Chetty had been in.
Chetty also told the court that his predecessor, who had held the exact position at G4S, had also left the position to join Bidvest Coin. However, in that case, G4S had not enforced the same contractual terms of restraint of trade it sought to be enforced in this application.
“This argument seems to me as if Mr Chetty contends that G4S unfairly discriminated against him and did not exercise its discretion consistently,” Morgan said.
Morgan said South African contract law recognised restraint of trade clauses limiting an employee’s ability to resign and immediately take a similar job with a direct competitor and was generally upheld in terms of the principle under which agreements must be kept. However, the enforceability of terms hinge on reasonableness.
“Courts apply a proportionality test, balancing the employer's legitimate protectable interests, such as confidential information or client relationships, against the employee's right to earn a livelihood. The restraint's geographical scope and duration must be narrowly tailored to the specific interest protected, ensuring it is no wider than necessary,” Morgan said.
“The aim of a restraint of trade clause is to protect the economic interests of an employer after an employment contract has been terminated. These economic interests can range from trade secrets, confidential information, client lists and strategic business plans.”
Determining the reasonableness, the judge said, involved the nature of the activity being restricted, the geographic scope of the restriction and the duration of the restriction.
This meant that G4S was required to demonstrate that the restraint of trade was valid and applicable in the situation, and that Chetty had breached the terms of the agreement. They also had to show that Chetty had been given access to secret information which he was able to share with his new employer.
Chetty on the other hand, was required to prove why enforcing the restraint would be unreasonable. And regarding allegations relating to confidential information, he had to prove he lacked access to such information, or never acquired significant knowledge of the G4S's customers during his employment.
G4S argued that it had a protectable interest in both its confidential and proprietary information and consumer connections. They alleged that Chetty had access to the protectable interest that carried an economic value and that was exposed to confidential business information.
Industry-specific
G4S argued that this information was industry-specific, not in the public domain and therefore could be of value to Bidvest Coin, who could use it to lure and win over customers.
Chetty argued he was not exposed to or in possession of any special knowledge, and that the technology system used by Bidvest Coin was different to the one used by G4S, and that he did not work on or sell these systems and so confidentiality was not an issue.
He said G4S’s business was largely based on formal tender processes, and they had not proven that he “automatically carries the customers with him in his pocket”.
“I find that even though G4S Secure could have been believed to possesses protectable interests [which I find it doesn’t], Mr Chetty has established that he does not currently possess any trade secrets or hold exclusive customer connections that could potentially prejudice these interests,” Morgan found.
“Therefore, in light of Mr Chetty’s lack of access to confidential information and demonstrably non-exclusive customer relationships, I conclude that enforcing a restraint of trade in this instance would not be warranted. It would not serve the legitimate purpose of safeguarding G4S Secure's proprietary interests.”
He dismissed the G4S application with costs.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.