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Labour Court Rules on Garden Leave & its Applicability in SA

By Varusha Pillay, Associate in the Employment Law team, Shepstone & WylieAttorneys

 

Until now, South African Labour Courts have not had the opportunity to consider what impact, if any, a ‘garden leave’ clause contained in a contract of employment may have on the enforceability of a restraint of trade. In a landmark judgment, the Johannesburg Labour Court, on 9 February 2016, confirmed that garden leave does form part of South African law.

 

As stated in the judgment, Judge Van Niekerk provides the following insight into garden leave:

 

"To the best of my knowledge, the concept of garden leave and its relationship, if any, with a restraint of trade agreement has not been the subject of consideration by the South African labour courts.  I was not referred to any authority, but a garden leave clause is understood to typically provide that if an employee gives notice, the employer may require the employee to spend a whole or part of the notice period at home, thus allowing confidential information to which the employee had access to become stale and keeping the employee out of the clutches of a competitor. (See Harvey on Industrial Relations and Employment Law A11-90 para 251.  Whether the employee elects to do any gardening, it would seem, is a matter of personal inclination). The advantage for the employer, of course, is that the employee is rendered commercially inactive because he or she remains in employment, in circumstances where there is no risk to a reasonableness challenge that a restraint undertaking might otherwise attract. Of course, the disadvantage for the employer is that the employee remains entitled to remuneration for the notice period"  

 

In the case before the Labour Court, a senior employee resigned from the employ of Vodacom on 23 December 2015 and indicated that his resignation would be effective 1 January 2016.  Soon after his resignation, it was brought to Vodacom's attention that the senior employee intended to commence employment on 1 January 2016 with its competitor, MTN.

 

Having caught wind of the appointment, Vodacom launched an urgent application and sought to enforce the garden leave clause as well as the restraint of trade clause for a further six months thereafter.

 

The Labour Court held that as a consequence of his seniority, the employee had access to and was privy to strategic business decisions. These decisions also included Vodacom's strategic plan for the forthcoming three years and as such Vodacom clearly had a proprietary interest worthy of protection.

 

In arriving at this conclusion, the Labour Court issued an order in terms of which the employee must serve six months garden leave until the expiration of his notice period in June 2016. Furthermore, he may only, in terms of the restraint of trade clause, commence his employment with MTN or a competitor from 1 January 2017.

 

For more information kindly contact Varusha Pillay at

Article published with the kind courtesy of Shepstone & WylieAttorneys for more information please visit http://www.wylie.co.za

 

 

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