Vodacom (Pty) Ltd v Motsa & MTN (J 74/16) [2016] ZALCJHB 53 [2016] 5 BLLR 523 ; (2016) ILJ 1241 (LC) (9 February 2016) per Van Niekerk J.

Employment contracts need to cater for many contingencies and often depend on the seniority of the employee.  Contracts voluntarily concluded will be upheld unless they are regarded as being contrary to public policy.  See Separation agreement: Subject to public policy and control

Restrictions against competition need to be reasonable and balance the interests of society, employees and employers.  A very senior manager and director agreed in his employment contract that he had to give 6 months notice of termination.  If he resigned his employer could require him to take ‘garden leave’.  In other words he had to stay away from the office and refrain from contacting any customers.  He would be paid during the notice period.  He also agreed to certain restrictions concerning confidentiality and competition for 6 months ‘post-termination’.  The Labour Court had to decide when his employment actually terminated.

On the facts it was held that he was effectively restrained from competing for 12 months.  The reasonableness of the restraint was assessed on the assumption that it included the ‘garden leave’.  If he had not agreed to the ‘garden leave’ in his contract it is arguable that by preventing him from working the employer breached the contract and entitled the employee to treat it as a repudiation and cancel the contract.  This is what happened in Stewart Wrightson v Thorp  [1977] 3 All SA 267 (AD).

See also: Gardening leave: Court application reveals all.

Excerpts

[37]      In short: On his own version, Motsa has failed to establish that Vodacom waived its rights to enforce the notice period.  There is no reason why Motsa should not be held to the terms of his contract.  Motsa’s contract expressly affords Vodacom the discretion to enforce the agreed period of garden leave.  Motsa is therefore bound by Vodacom’s election to enforce clause 16.6 of his contract, which terminates on 30 June 2016.

[38]      I turn next to Motsa’s restraint undertakings.  As I have concluded, these stand to be scrutinised in accordance with the ordinarily applicable principles, subject to a reading of the restraint so as to include the period of garden leave.

[39]      Although a garden leave clause might make no express reference to any intention to ‘sterilise’ an employee, that is the effect.  So while clause 16 of Motsa’s contract refers to obligations to ‘assist’ Vodacom and ‘provide a seamless transition of his responsibilities’ (whatever that means), the fact of the matter is that for the period of garden leave Motsa will not have access to any of Vodacom’s trade secrets, whether in the form of confidential information or otherwise, and any trade connections which may have some value to MTN.  Indeed, that is what the wording of clause 16.6 contemplates, to the extent that it expressly prohibits Motsa, during the period of garden leave, from having contact with Vodacom’s customers and clients.

[40] It is not disputed that Motsa was a senior executive, a director of Vodacom and a member of its exco.  It is also not disputed that Motsa is responsible for significant aspects of Vodacom’s commercial business, including sales, marketing, data collection and the management of consumer sales, product strategy, wholesale products and services, community services, customer relationship management, and dealer relationship and supply chain management.

[41]      In this capacity, Motsa is privy to strategic business decisions on a micro-level.  He is also privy to strategic decisions taken and instructions issued by the exco of Vodaphone Pic, at least in respect Vodacom’s South African business.  Motsa does not dispute that he attended a strategy planning meeting for the Vodacom group held in Cape Town in December 2015, where matters of macro-strategic importance were discussed.  He does not deny that at the meeting, the group presented its strategic plan for the forthcoming three years, a plan that covered every aspect of Vodacom’s business.  It would not be an understatement to say that Motsa has intimate knowledge of Vodacom’s short and longer term strategic plans, and it is obvious that this information would be of benefit to a direct competitor.  On this basis alone, and given the useful life of the information to which Motsa has been exposed, in my view, a period of restraint that spans effectively the 12 month period following Motsa’s resignation, is not unreasonable.

[42]      In summary: I am satisfied that Vodacom is entitled to the enforcement of the post termination restraint agreement, on the terms reflected in the draft order.