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[2017] ZALCJHB 8
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PB Hairdressing Organisation (Pty) Ltd t/a Carlton Hair International v Vinciguerra and Another (J2948/16) [2017] ZALCJHB 8 (16 January 2017)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Not
reportable
Case
no: J 2948/16
In the
matter between:
PB
HARIDRESSING ORGANISATION (PTY) LTD
t/a
CARLTON HAIR INTERNATIONAL
Applicant
and
JOSEPH
VINCIGUERRA
First Respondent
SIRENE
HAIR SALON (PTY) LTD
Second
Respondent
Heard
:
10 January 2017
Delivered
:
16 January 2017
JUDGMENT
RABKIN-NAICKER
J
[1] This
matter came before me on an urgent basis. The applicant seeks the
following relief:
1.1
Directing First Respondent to cease his employment with Second
Respondent with
immediate effect.
1.2
Interdicting and restraining First Respondent, until 18 November 2017
from,
either directly or indirectly, within a radius of ten
kilometres (as the crow flies) calculated from the front door of
Applicant’s
Hyde Park salon situated in the Hyde Park Shopping
Centre on the corner of William Nicol drive and Jan Smuts Avenue ,
Sandton (“the
Restraint Area”): -
1.2.1
taking up employment with, contracting to or consulting to, being
associated or concerned with or interested or
engaged in any hair
styling, hairdressing or related activities in any capacity
whatsoever; and
1.2.2
in any manner assisting in the activities of, or taking part in, any
undertaking in the Restraint
Area which carries on any business
activities which are directly competitive with those of Applicant;
1.3
in any manner assisting in the activities of, or taking part in, any
undertaking
in the Restraint Area which carries on any business
activities which are directly competitive with those of Applicant;
1.4
Directing First Respondent to pay the costs of this application.
1.5
In the event of Second Respondent opposing the application, directing
it to
pay the costs of the application, jointly and severally with
First respondent, the one paying the other to be absolved.
[2] At
the commencement of proceedings before Court the first respondent
brought a successful application to have certain annexures
and
paragraphs related thereto struck out of the replying papers on the
basis that they were hearsay evidence. The said material
was
unsupported by confirmatory affidavits or a statement by the deponent
that he believed the hearsay evidence to be true and
correct.
[3] The
applicant (Carlton) is a group of companies established in 1968, and
currently operating 23 branches nationwide. It has
four hairdressing
academies, which it operates throughout the country, training
learners as well as already qualified hairstylists.
Carlton’s
Hyde Park salon commenced trading in 1990. Carlton’s stylists
are trained to establish niche personal relationships
with particular
clients, in order to incentivise the client to return to the salon
because of the relationship established with
the stylist.
[4] The
deponent to the founding affidavit avers that it is a common feature
of Carlton’s business model (and that of the
hairdressing
industry at large) that customers return every 6 to 8 weeks to the
hairdressing salon at which they will be serviced
by the particular
stylist with whom they have established a personal relationship of
trust and who knows and understands their
unique needs and desired
results. This means according to Carlton that the goodwill and
relationships established between its employees
and clients is a
valuable proprietary asset deserving of legal protection. This is the
rationale behind Carlton requiring its stylists
to enter into a
restraint of trade in terms of their employment contract. The
restraint is somewhat lengthy but bears recording
as follows:
“
15.
Restraint of trade
15.1
In this clause, the following words and expressions shall carry the
following meaning-
15.1.1.
“
Client”
means
any client/customer of the Company or Group Company who visited on at
least 2 (two) occasions within a 6 (six) month period
prior to the
Termination date, the salon at which the Employee rendered services
as at the Termination Date;
15.1.2.
“
Restraint Area
”
means a radius of 10 (ten) kilometres (as the crow
flies) calculated from the front door of the solon at which the
Employee rendered
services as at termination date and any other salon
at which the Employee may have rendered services in a 6 (six) month
period
to the Termination Date;
15.1.3.
“
Restraint Period”
means a period of 1 (one) year immediately
following the Termination Date;
15.1.4.
“
Restricted Business”
means that business and those activities conducted
by the Company (and any Group Company) including hairstyling,
hairdressing and
related activities;
15.1.5.
“
Termination Date”
means the date upon which the Employee’s
employment with the Company is terminated for any reason whatsoever;
15.2
It is recorded and agreed that-
15.2.1
The Restricted Business is highly competitive;
15.2.2
the Employee shall, in the course of her employment with the Company-
15.2.2.1
at the expense of the Company, receive extensive and on-going
training enabling the Employee to initially qualify and thereafter
earn living as a stylist;
15.2.2.2
repeatedly and on an on-going basis be exposed to clients of the
Company on a personal level, enabling the Employee to
forge and
maintain a personal relationship with each client that she services;
and
15.2.2.3
have access to the Company’s client database.
15.3
The Employee acknowledges that-
15.3.1
the client relationship(s) referred to in clause 15.2.2.2 above
constitutes a proprietary and protectable interest of the
Company;
15.3.2
the Company’s client database referred to in clause 15.2.2.3
above constitutes a proprietary and protectable interest
of the
Company;
15.3.3
should the Employee leave the employ of the Company and continue to
render services as a hair stylist within the Restraint
Area, there
exist a reasonable apprehension on part of the Company that the
Company’s clients shall follow the Employee to
her new place of
business, to the clear detriment and prejudice of the Company;
15.3.4
it is accordingly necessary for the Parties to conclude an agreement
in order to protect the Company’s legitimate protectable
interest for the duration of the Restraint Period and within the
Restraint Area;
15.4
In light of the foregoing, the Employee warrants and undertakes that
she shall not at any time during the Restraint Period-
15.4.1
In any capacity whatsoever (including that of principal, proprietor,
agent, broker, partner, representative, assistant, trustee,
or
beneficiary of trust, manager, member of close corporation, member of
a voluntary association, shareholder, director, employee,
consultant,
contractor, advisor, financier, demonstrator), directly or
indirectly, take up employment with, contract or consult
to, be
associated or concerned with or interested or engaged in any
Restricted Business or entity carrying on any Restricted Business
in
Restricted Area;
15.4.2
solicit, interfere with or entice or endeavour to entice away from
Company or any Group Company any client(s);
15.4.3
employ, offer employment to or cause employment to be offered to any
employee of the Company or any Group Company;
15.4.4
communicate with or furnish any information or advice to any employee
of the Company or Group Company or to any prospective
employer as
such employee for the direct or indirect purpose of inducing or
causing the said employee to leave the employ of the
Company or any
group Company and/ or become employed by or in any way directly or
indirectly interested in or associated with any
Restricted Business;
15.5
The Employee, after due consideration, agrees and acknowledges that-
15.5.1
having regard to the damages that will result from a breach of any of
the restraint undertaking given herein, the restraint
and
undertakings imposed upon the Employee in terms of this Agreement are
fair and reasonable and are necessary as to subject matter,
area and
duration and are reasonably necessary in order to preserve and to
protect the proprietary interests of the Company and/
or Group;
15.5.2
she has entered into this Agreement freely and voluntarily and that
no circumstances exist for her alleging either now or
at any future
time that she was at a disadvantage in agreeing to the restraint
undertakings contained herein or was in anything
other than an equal
bargaining position with the Company in agreeing to such restraint
undertakings;
15.2.3
notwithstanding the manner in which the restraint in this clause 15
and the area comprising the Restraint Area have been
grouped together
or described geographically, each of them constitutes a separate and
independent restraint, divisible and severable
from each of the other
restraints and separately enforceable, in regard to all aspect
thereof including-
15.5.3.1
each month of the Restraint Period;
15.5.3.2
each state, province, division or council area, municipal area,
magisterial district, town, locality falling within the
Restraint
Area;
15.5.4
no restraint or combination of restraints shall be limited by
reference to or inference from any other restraint or combination
of
restraints, provided however that the invalidity or unenforceability
of any one or combination of the restraints contained in
this
Agreement shall not affect the validity and enforceability of the
other restraints contained in this Agreement or any combination
of
such restraints.
15.6
The Employee has given the restraint undertaking herein contained
notwithstanding that the Employee acknowledges
that those restraints
may limit the employment opportunities available to him, thereby
potentially limiting her income earning
capacity.
15.7
The Employee agrees that should she at any time dispute the
reasonableness of the restraint undertakings
herein contained, then
the onus of proving such unreasonableness will be on her.
15.8
The undertakings given by the Employee in clause 9 and in clause 15
shall also be the benefit of and may be enforced by any
Successors-in-title and/ or any Group Company. The undertakings shall
be deemed to have been imposed as
stipulation alteri
for the
benefit of any Successor-in-title and/ or any Group Company at any
time.
15.9
The Employee agrees that irreparable damage would occur if any of the
restraint undertakings recorded herein were not fully
complied with
in accordance with its specific terms or were otherwise breached. The
Employee accordingly agrees that the Company
and/ or Group Company
will be entitled to apply for and be granted an interdict or an order
for specific performance, in addition
to any other remedy to which it
may be entitled in law. The provisions of this clause 15.9 shall be
without prejudice to the right
of the Company or Group of Company to
claim whatever additional damage may be sustained by it in
consequence of such breach.
15.10
Should any provisions of this clause 15 be breached by the Employee,
then the Restraint Period will be deemed, at the instance
and in the
discretion of the Company and/ or Group of Company, to be extended by
a period equal to the period from the date when
such breach was first
committed until the earlier of the date on which the Employee ceases
to be in breach of this clause 15. If
the Company or Group of Company
exercises its right to extend such period as aforesaid, the
provisions of this clause 15 will apply
mutatis mutandis
in
respect of such extended period. “
[5] The
first respondent studied at the Carlton academy in Greenside. After
completing a year of study, he was required to complete
a practical
year in one of Carlton’s salons as part of his tuition. He
entered into an agreement with Carlton, which included
the restraint
quoted above, on 14 January 2015 and he worked initially as a student
hairdresser (with effect from 14 January 2015)
and thereafter as an
unqualified Junior Stylist (with effect from 22 March 2015). On 13
May 2016 he became a qualified junior stylist
and remained at this
level until he resigned from Carlton’s employ on 18 November
2016.
[6] First
respondent, a 21 year old who suffers from dyslexia and who avers, as
a result, did not obtain a matric certificate, states
in answer that
when he graduated from student hairdresser to ‘junior stylist’
he received a basic salary of R3000.00
per month and was able to
receive limited commission. At Carlton a client is offered the
services of either a junior, senior, executive
or master stylist.
[7] It is
first respondent’s case that as a junior stylist one has a
limited customer base and one generally provides less
elaborate
services. When he qualified as a junior stylist (six months before
resigning) he earned R5320, 72 a month and was able
to perform the
same functions as other more senior stylists but remained the lowest
status classification. He avers that he accrued
some 20 to 30 regular
clients during his time with Carlton and that a more senior stylist
can service between 12 and 20 regular
clients a day. He states that
there is no guarantee that what he refers to as his ‘negligible
customer base’ will follow
him to his new place of employment.
He has furthermore made a written undertaking to not make contact
with any of the clients he
served at Carlton.
[8] It is
submitted by first respondent in the answering papers that the
goodwill of a company is traditionally represented by
inter alia
good customer relations which enhance the company’s brand and
reputation. However, in the hairstyling industry, where clients
are
loyal to their specific stylists, not the companies at which the
stylists work, the good will is established between the particular
stylist and client rather the particular company at which the stylist
works. In other words, the interest sought to be protected
is not one
that resides in the company in this industry. Carlton for its part
submits that it is precisely because of the need
for close customer
relationships between its stylists and customers that a restraint of
this kind is necessary in the industry.
The
applicable legal principles
[9]
The law as it applies to restraints of trade was most usefully
summarised by Mbha J (as he then was) in
Experian
South Africa (Pty) Ltd v Haynes and Another
[1]
as follows:
“
Legal
principles applicable to agreements in restraint of trade
[12]
The locus classicus on this subject is
Magna Alloys and Research
(SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at 897F – 898E,
where Rabie CJ summarised the legal position, inter alia, as
follows:
[12.1]
There is nothing in our common law which states that a restraint of
trade agreement is invalid or unenforceable.
[12.2]
It is a principle of our law that agreements which are contrary to
the public interest are unenforceable. Accordingly,
an agreement in
restraint of trade is unenforceable if the circumstances of the
particular case are such, in the court's view,
as to render
enforcement of the restraint prejudicial to the public interest.
[12.3]
It is in the public interest that agreements entered into freely
should be honoured and that everyone should,
as far as possible, be
able to operate freely in the commercial and professional world.
[12.4]
In our law the enforceability of a restraint should be determined by
asking whether enforcement will prejudice
the public interest.
[12.5]
When someone alleges that he is not bound by a restraint to which he
had assented in a contract, he bears the
onus of proving that
enforcement of the restraint is contrary to the public interest….
[14]
The position in our law is, therefore, that a party seeking to
enforce a contract in restraint of trade
is required only to invoke
the restraint agreement and prove a breach thereof. Thereupon, a
party who seeks to avoid the restraint
bears the onus to demonstrate,
on a balance of probabilities, that the restraint agreement is
unenforceable because it is unreasonable.
[15]
The test set out in
Basson v Chilwan and Others
supra at 767G
– H for determining the reasonableness or otherwise of the
restraint of trade provision, is the following:
[15.1]
Is there an interest of the one party which is deserving of
protection at the termination of the agreement?
[15.2]
Is such interest being prejudiced by the other party?
[15.3]
If so, does such interest so weigh up qualitatively and
quantitatively against the interest of the latter party
that the
latter should not be economically inactive and unproductive?
[15.4]
Is there another facet of public policy having nothing to do with the
relationship between the parties, but which
requires that the
restraint should either be maintained or rejected?
[16]
In
Kwik Kopy (SA) (Pty) Ltd v Van Haarlem and Another
A
1999
(1) SA 472
(W) ([1998]
2 All SA 362)
at 484E Wunsh J added a further
enquiry, namely whether the restraint goes further than is necessary
to protect the interest.”
[10]
The question for this Court to determine is whether on the facts of
this matter, the applicant has an interest which is sufficiently
deserving of protection and if so, whether any of the other enquiries
laid down in
Basson
v
Chilwa
n
would lead the court to find the restraint unreasonable.
[11]
It is well established that the proprietary interests that can be
protected by a restraint agreement are of two kinds. The
first
consists of the relationships with customers, potential customers,
suppliers and others that go to make up what is
referred to as
the 'trade connections' of the business, being an important aspect of
its incorporeal property known as goodwill.
The second kind consists
of all confidential matter which is useful for the carrying on of the
business and which could therefore
be used by a competitor, if
disclosed to him, to gain a relative competitive advantage. Such
confidential material is sometimes
referred to as 'trade secrets'.
[2]
[12]
In
Rawlins
and Another v Caravantruck (Pty) Ltd
[3]
Nestadt JA stated that —
'(t)he
need of an employer to protect his trade connections arises where the
employee has access to customers and is in a position
to build up a
particular relationship with the customers so that when he leaves the
employer's service he could easily induce the
customers to follow him
to a new business'.
[13]
In
Aranda
Textile Mills v Hurn & Another
[4]
the court emphasised that proprietary interests sought to be
protected must be properly described as belonging to the employer.
As
explained by Kroon J:
“
A
man’s skills and abilities are a part of himself and he cannot
ordinarily be precluded from making use of them by a contract
in
restraint of trade. An employer who has been to the trouble and
expense of training a workman in an established field of work,
and
who has thereby provided the workman with knowledge and skills in the
public domain, which the workman might not otherwise
have gained, has
an obvious interest in retaining the services of the workmen. In the
eye of the law, however, such an interest
is not in the nature of
property in the hands of the employer. It affords the employer no
proprietary interest in the workmen,
his know-how or skills. Such
know-how and skills in the public domain become attributes of the
workman himself, do not belong in
any way to the employer and the use
thereof cannot be subjected to restriction by way of a restraint of
trade provision. Such a
restriction, impinging as it would on the
workman’s ability to compete freely and fairly in the market
place, is unreasonable
and contrary to public policy.”
[14]
It was stated in
Rawlins
v Caravantruck
[5]
that establishing customer connections depends on the notion that:-
“
the
employee, by contact with the customer, gets the customer so strongly
attached to him that when the employee quits and joins
a rival he
automatically carries the customer with him in his pocket”.
Evaluation
[15]
Taking the above legal principles into account, I note the following:
15.1
In this matter, the applicant has proved the existence of the
restraint and the breach thereof. I am unconvinced
by the argument by
first respondent that customer connections and goodwill of a brand
such as Carlton do not amount to a proprietary
interest. Part of the
skills for which such a company employs stylists is their ability to
foster customer connections for the
employer.
15.2
There is no evidence on the papers that any of Carlton’s
clients have followed the first respondent
to his new place of
employ, although there is a risk of same. Taking into account the
Plascon Evans rule, I accept the evidence
contained in the answering
papers that first respondent’s client base is in the region of
20 30 persons and that same is
negligible in relation to the entire
client base of the Hyde Park salon of Carlton.
15.3
The fact that the restraint in question appears to be a ‘one
size fits all’ covenant is problematic.
The ambit of its terms
cannot be considered proportional in relation to all of Carlton’s
stylists. It was contained in the
first respondent’s contract
in the same form even when he was an apprentice. There appears to be
no differentiation made
in the wording of the restraint in respect of
different levels of stylists.
15.4
The Court is of the view that the first respondent has established
that it is unreasonable and against public
policy, for such a
restraint to be upheld in respect of a junior employee, qualified for
only 6 months and who is a mere 21 year
old.
Order
[16] I
therefore make the following order:
1.
The application is dismissed with costs.
__________________
H.
Rabkin-Naicker
Judge
of the Labour Court of South Africa
Appearances:
For the
Applicant:
L Stansfield
Instructed
by:
Cliffe Dekker Hofmeyr
For the
First Respondent:
R Blumenthal
Instructed
by:
Bobat Inc Attorneys
[1]
2013
(1) SA 135 (GSJ)
[2]
Sibex
Engineering Services (Pty) Ltd v Van Wyk and Another
1991
(2) SA 482
(T) at 502D – F.
[3]
[1992] ZASCA 204
;
1993
(1) SA 537
(A) at 541C – D
[4]
Aranda
Textile Mills (Pty) Ltd v Hurn and Another
[2000] 4 All SA 183 (E)
[5]
At
541C – D