RESTRAINT OF TRADES - WHAT YOU NEED TO KNOW & CONSIDER

In the ever-evolving world of hairdressing, cosmetology, and beauty therapy, talent and client relationships are critical to business success. Many salons, spas and beauty clinics in South Africa invest heavily in their employees through training, product education, and marketing support. In return, employers often wish to protect their businesses from losing clientele when an employee resigns or is dismissed—leading to the widespread use of restraint of trade clauses in employment contracts.

However, questions often arise around whether such clauses are enforceable in South Africa’s legal and industrial context—especially within the framework of the Main Collective Agreement for the Hairdressing, Cosmetology, Beauty and Skincare Industry. This article explores the legality, practical implications and best practices for restraint of trade in the beauty industry.

What is a Restraint of Trade Clause?

A restraint of trade clause is a contractual provision that aims to prevent an employee from competing with their former employer for a certain period and within a specified geographical area after the termination of employment. In the beauty sector, this typically relates to stylists, nail technicians, skincare therapists or make-up artists who may attempt to open their own salon or join a competitor close by, potentially attracting existing clients or colleagues.

These clauses are designed to protect:

• Proprietary business interests such as client databases

• Confidential business practices

• Unique techniques or training paid for by the employer

• Investments made in building the employee’s brand within the salon/spa

Is It Enforceable in South African Law?

Under South African common law, restraint of trade agreements are presumed to be valid and enforceable. However, the Constitutional Court and various labour courts have made it clear that these clauses will only be enforced if they are reasonable and not against public policy.

The following legal test applies:

“A restraint will be unenforceable if it is found to be unreasonable and contrary to public interest.”

The courts assess reasonableness by balancing the employer's right to protect legitimate interests against the employee’s right to economic activity and freedom to work.

Courts Usually Consider:

1. Does the employer have a legitimate proprietary interest?

   This could be client retention, trade secrets, or investment in training.

2. Is the restraint reasonable in scope?

   Unreasonably wide restrictions (e.g., covering an entire province) are less likely to be upheld.

3. Is the time period fair?

   Clauses that restrict an employee for more than 6–12 months are often considered excessive unless properly justified.

4. Is the employee economically prejudiced?

   If the clause makes it impossible for the employee to earn a living, the court may invalidate it.

Industry Application: Hairdressing, Cosmetology, Beauty and Skincare

In the hair and beauty industry, where personal client relationships are key, restraint of trade clauses are commonly used. Clients often follow the stylist or therapist, not the brand—making client retention a legitimate concern for salon owners.

Common Scenarios in the Sector:

• A nail technician resigns and sets up shop two blocks away, taking 50% of their clients.

• A hairstylist joins a nearby competitor after receiving months of in-salon training and product sponsorship.

• A beauty therapist begins working freelance from home, advertising directly to the employer’s clientele via WhatsApp or social media.

In all these cases, a well-drafted and legally compliant restraint of trade clause could give the employer legal grounds to prevent unfair competition.

The Role of the Main Collective Agreement

The National Bargaining Council for the Hairdressing, Cosmetology, Beauty and Skincare Industry governs employment standards in the sector. Although the Main Collective Agreement does not explicitly regulate restraint of trade, it requires every employer to issue written contracts that outline all key terms of employment (Clause 4).

This includes:

• Employment start date

• Job title and duties

• Hours of work

• Remuneration

• Notice periods

• Any other material terms and conditions, such as restraint of trade clauses

Failure to include a restraint clause in a signed employment contract may render it unenforceable. Moreover, disputes arising from such contracts fall within the jurisdiction of the Council, which offers dispute resolution and conciliation services to parties in the industry.

Best Practice for Employers

To ensure that restraint clauses are enforceable and ethical:

1. Draft the clause clearly.

   Specify the duration (e.g., 6 months) and area (e.g., within a 5 km radius).

2. Limit the clause to protect real interests.

   Avoid overly broad or generic restrictions.

3. Justify the restraint.

   Especially where you’ve invested in building the employee’s clientele or skills.

4. Keep records.

   Proof of investment in training or marketing can strengthen your legal position.

The inclusion of restraint of trade clauses in employment contracts is a legal and legitimate strategy in the South African beauty, hairdressing, and cosmetology industry. However, both employers and employees must ensure that such clauses are fair, clear, and aligned with the Main Collective Agreement.

As the industry continues to grow in professionalism and regulation, understanding your rights and obligations in respect of restraint of trade is essential for avoiding disputes and maintaining healthy competition.