This blog was co-authored by Tasmia Immam Alli, Candidate Attorney
In a February 2023 Labour Appeal Court (LAC) case Wheelwright v CP De Leeuw Johannesburg (Pty) Ltd, the LAC held that a restraint of trade agreement pursuant to an employment contract can be extinguished by a full and final settlement agreement which does not preserve the restraint obligation.
The employee ‘s contract of employment included an annexure containing a provision restraining the employee from becoming a proprietor of any business or firm conducting the business of quantity surveying or project management within 100 kilometres of the employer’s offices for three years and from conducting any business with the employer’s clients.
During the Covid-19 pandemic the employee was dismissed due to operational requirements. By then, the restraint agreement had been extended to five years. Following an unfair dismissal referral to the CCMA by the employee, the parties entered into a settlement agreement in October 2021 which consisted of the standard CCMA settlement clause which recorded that the agreement was “is in full and final settlement of the dispute referred to the CCMA” and a bespoke annexure which recorded that the agreement was “in full and final settlement of all and any claims which the parties may have against each other whether such claim arises from contract, delict, operation of law, equity fairness or otherwise“.
In January 2023, the employee was appointed as quantity surveyor for a major project in Nigeria, which had already been awarded to his previous employer, based on the employee’s assurance that the settlement agreement had released him from the restraint agreement. The previous employer sought to enforce the restraint agreement by bringing an urgent application to the Labour Court wherein it contented that the settlement agreement was only meant to settle the dispute referred to the CCMA which it alleged did not affect the restraint. Conversely, the employee asserted that that the employer had waived its rights when it concluded the CCMA settlement agreement.
The LAC held that the settlement agreement included a dispute that might arise from the restraint agreement.
The LAC noted that, at the time of entering into the settlement agreement, the previous employer was aware the employee may not adhere to the restraint of trade agreement and nevertheless chose not to specifically include a clause keeping the restraint of trade operative. The LAC held that the only sensible conclusion was that the settlement agreement could not be confined to the specific claims referred to the CCMA and extended beyond the referred dispute finally settling all claims between the parties.
This judgment highlights the importance of the wording utilised in settlement agreements because a settlement agreement extinguishes all claims compromised according to its terms. It confirms that caution must be taken by parties when utilising their own wording instead of utilising the CCMA standard settlement form. If a party wishes to exclude specific issues which may otherwise fall into a scope of a settlement agreement, they must use specific wording that cannot be misinterpreted.