In South Africa’s competitive recruitment landscape, one of the complexities that recruitment agencies face is the issue of restraint of trade agreements that candidates may have with their current or previous employers. These agreements are intended to protect the legitimate business interests of employers but can significantly impact the recruitment process and placement success of the recruitment agency.

A restraint of trade agreement is a contractual provision in an employment contract that restricts an employee's ability to work for competitors or start a similar business for a specified period after leaving an employer. In South Africa, these agreements are governed by the law of contract and can be enforceable if they meet certain legal criteria. The key elements of enforceability which a court will consider include the necessity to protect a legitimate business interest of the employer, the reasonableness of the restraint in terms of geographic scope, duration, and the nature of the work being restrained, all balanced against the employees right to work and earn an income. Restraint of trade agreement enforceability was again illustrated in the recent case of Commercial Mobile Truck and Trailer Alignment Services Pty Ltd v Harmse and Another [2024/007833] ZAGPPHC 772, where the court upheld a restraint of trade agreement, affirming the protection of trade connections and goodwill linked to customer relationships established during employment.

For recruitment agencies, candidates with restraint of trade agreements can complicate placements. A candidate may be an ideal fit for a role, but if they are bound by such a contract, accepting a new position could lead to legal action from their current employer. Upholding ethical standards is paramount for recruitment agencies and they must avoid encouraging or assisting candidates in breaching restraints, as this could damage their reputation and lead to legal implications for the agency.

When a recruitment agency discovers that a candidate is subject to such an agreement, it must take several key steps to navigate the situation both legally and ethically:

Conduct a thorough assessment: Recruitment agencies should incorporate a thorough assessment of candidates’ employment agreements during the initial stages of the recruitment process. The agency must request a copy of the restraint of trade agreement from the candidate. This is necessary for the agency to have a thorough understanding of the terms and to assess its reasonableness and enforceability.

Legal consultation: Agencies should consider consulting legal professionals to better understand the nuances of the restraint of trade agreements and their implications. Legal experts can provide insights into whether the restraint is enforceable or not and potential grounds to challenge the validity. They can also assist with drafting candidate contracts that respect existing restraints while safeguarding the agency's interests.

Collaborate with clients: The recruitment agency must immediately inform their client of the restraint as transparency is critical. This openness fosters trust and allows the client to evaluate potential risks and implications associate with hiring the candidate. Recruitment agencies can negotiate terms that accommodate both the employer's needs and the candidate’s legal obligations, fostering a collaborative approach to placements.

Advise candidates: It is essential for recruitment agencies to advise candidates about the enforceability and potential consequences of breaching the restraint, which could include legal repercussions.

Record-keeping: Keeping detailed records of candidate communications regarding restraints can be crucial. In the event of a dispute, documentation can serve as evidence that the agency acted in good faith and provided candidates with the necessary guidance.

Alternative solutions: If a candidate is indeed bound by a restraint, agencies can explore alternatives such as mediation between the candidate and their former employer to resolve any dispute amicably leading to satisfactory solution for all parties.

Restraint of trade agreements pose a significant challenge in the South African recruitment sector. However, by understanding the legal obligations, assessing candidates thoroughly, and fostering transparent communications, recruitment agencies can navigate these complexities effectively. Ultimately, a proactive approach not only protects the agency from potential legal repercussions but also enhances the overall candidate experience, leading to successful placements and long-term relationships within the industry.
...
Danielle Statham