The economic costs of restraint of trade agreements: modest lessons for South Africa from Germany and other selected jurisdictions

This paper considers the current legal position in South African labour law where employees subject to a restraint of trade agreement are not paid anything during the restraint's subsistence and face financial difficulties. When employees sign restraint of trade agreements, they undertake to surrender their ability to earn a living and not take advantage of other employment or commercial opportunities for a specific period, without getting any financial compensation as a means of survival during the subsistence of the period of restraint. After a detailed exposition of Germany's legal position and references to other similar jurisdictions, we recommend that South Africa learn from Germany and consider introducing mandatory compensation for employees who may find themselves rendered economically inactive by restraint of trade agreements.