Various types of post-employment restraints and restrictions have been used in employment contracts and are sculpted to fit the specific needs of the employer. The drafting of these restraint and restriction phrases determines the extent and scope. Generally, restraint of trade clauses take two (2) facets;
(i) A non-compete clause; in the context of drafting a contact of employment, a non-compete clause is aimed at restricting an employee’s ability to compete for business with their former employer once the employment ends. This clause geared towards protecting the legitimate business interests of the employer. This clause precludes a former employee from:
• Establishing a competing business; or
• beginning employment with a competitor of the business
(ii) A non-solicitation clause; simply put a non-solicitation clause is addresses the employers concern in protecting the business’ proprietary interests in the event of a former employee setting up or joining a competing business. This clause comes in play in instances there was regular interaction between the business’s clients or service providers and the employee. The relationship between the employee and the business’s clients or service providers may lead to the presumption that the employee is in-charge of the day to day running of the business and therefore easy for the clients or service providers to “move” with employee. This may non-solicitation clauses may include prohibitions on:
• poaching or enticing former colleagues away from their employment
• seeking our clients of the former employer with the intention to entice them to use their services; and
• approaching suppliers to provide them with goods or services.
Section 2 of the Contracts in Restraint of Trade Act, CAP. 24, Laws of Kenya stipulates that a contract in restraint of trade is valid for as long as it is particular in;
(i) scope of time;
(ii) Geographical location; and
(iii) Scope of services restricted
Restraint of trade clauses are valid in Kenya. However, like other contractual stipulations, they are unenforceable when they go against the additional provisions of Section 2 of the Contracts in Restraint of Trade Act with further provides that the High Court (and case law as established the “High Court” to mean the Employment and Labour Relations Court) shall have power to declare the provision or covenant to be void where the court is satisfied that the provision or covenant is not reasonable…or in the interests of the public…or covenant is injurious to the public interest”
Conversely a restraint on trade is only reasonable and enforceable if it serves to protect an interest which requires and deserves protection. The test on whether restraint of trade clause is unreasonable will be determined with reference to the particular circumstances of the case.
Basson v Chilwan and Others 1993 (3) SA 742 (A) at 767E-I and Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 406 (SCA) established the parameters to test for the reasonableness and enforceability of a restraint of trade clause as;
(i) Whether the party who seeks to restrain has a protectable interest;
(ii) Whether there is a likelihood of being prejudiced by the party sought to be restrained.
(iii) if there is such an interest – to determine how that interest weighs up, qualitatively and quantitatively, against the interest of the other party to be economically active and productive.
(iv) Whether the restriction is injurious to the public interest if enforced
It is an established principle of law that the employee cannot be interdicted or restrained from taking away his or her experience, skills or knowledge, even if those were acquired as a result of the training which the employer provided to the employee. It is accepted that an employee cannot be prevented from using what is in his, or her, head. However, as was held in Paul Njaga Kihara Vs. Chase Bank (Kenya) Limited in Receivership & another [2018] eKLR.
“When parties contract on specific contractual terms, they bind themselves to honour and perform their respective obligations in terms of that contract. Each party is entitled to expect that the other party has carefully looked into the future and has satisfied itself that it can meet its obligations for the entire term of the agreement. Accordingly, no party is entitled to later seek to escape its obligation in terms of the contract on the basis that its assessment of the future had been erroneous or had overlooked certain things. This is simply because the employer is free not to enter into an agreement. Not to hold the Respondent to contract law obligations it voluntarily and carefully imported into an employment relationship would be to introduce a grave level of uncertainty into a range of similar commercial arrangements.”
This write-up is for informational purposes only and should not be construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact Gregory Makambo, Partner, (gmakambo@makambolaw.com), Kelvin Mwaniki, Associate, (kmwaniki@makambolaw.com) or your usual contact at our firm, for legal advice.