Restraint of Trade and ‘Full and Final’ Settlements

Dec 20, 2023

In the case of Wheelwright v CP de Leeuw Johannesburg (Pty) Ltd, the Labour Appeal Court (LAC) had to determine whether a Restraint of Trade Agreement could be enforced despite a ‘Full and Final’ Settlement Agreement reached between the parties.

The parties involved in the case had a dispute over unfair dismissal and severance pay. They reached a settlement agreement at the Commission for Conciliation, Mediation and Arbitration (CCMA), consisting of a standard form and an additional document called Annexure A.

 

Full and Final Settlement

The  CCMA standard form agreement stated that it was a full and final settlement of the dispute and all statutory payments. Annexure A further emphasised that it was a full and final settlement of all claims between the parties.

 

Restraint of Trade Agreements

The employee had given restraint undertakings to the employer during their employment. After the settlement agreement, the employee breached these undertakings, and the former employer sought to enforce them.

 

Interpretation of the Settlement Agreement

The question before the LAC was whether the settlement agreement included future breaches of the restraint undertakings. The employee argued that Annexure A indicated an intention to settle all disputes, not just those referred to the CCMA.

 

Court’s Interpretation

The LAC emphasised the importance of carefully examining the wording of the agreement. It found that clause 5 in Annexure A extended beyond the CCMA dispute, covering all claims between the parties. Since the former employer was aware of the restraint undertakings, the court concluded that these were also settled.

 

Lesson Learned

Parties should be cautious when entering into ‘full and final settlement’ agreements. It’s crucial to clearly specify what is being settled and what rights or causes of action are not intended to be settled. When presented with a standard form agreement, it is important to read and understand its terms.

 

Conclusion

This case highlights the need for caution when entering into settlement agreements. Parties must be clear about what is being settled and what is not. Carefully reading and understanding the terms of any standard form agreement is also crucial.

The content does not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Kindly contact us on info@labourman.co.za or 021 556 1075 to speak to one of our consultants.

Author:

Wallace Albertyn

Wallace Albertyn is a Senior Associate and Legal Advisor at LabourMan Consultants.

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