South Africa’s Mining and Natural Resources Sector has, for decades, been the largest employer, and the backbone of South Africa’s economy.
The Mining and Natural Resources Sector not only provided direct jobs but also supported a parallel service provider infrastructure, creating even more jobs.
The Mining and Natural Resources Sector was able to attract the best skills and talent for various reasons including extremely generous bursaries for students to study at premier institutions, higher than usual remuneration packages, better benefits than other employers, good promotion prospects, and the potential for long-term job security.
In addition, to attract talent and skills to the often remote working areas where mines are located, the Mining and Natural Resources Sector provided additional benefits such as job opportunities for partners and spouses, top schooling for children, subsidised transportation and accommodation, and other benefits which made working for the Mining Sector, very attractive.
Even if persons did not want to stay in the Mining Sector for a long period, the opportunities to learn unique skills, and obtain good experience, across the spectrum from rock engineering, geology, engineering and management, meant that there were, historically, often more applicants for positions, than jobs available.
This has changed over the last few years for various reasons, including a change in attitudes by different generations to working for the Mining and Natural Resources Sector (whether on moral or other grounds), a focus on work-life balance, which does not always align with the arduous working regime at mines, and the isolation of the mine, from large cities such as Johannesburg and Pretoria. Shift work can play havoc with social and home lives, and working in remote areas does not always bode well for relationships.
As a result, the Mining and Natural Resources Sector has had to look at innovative ways to attract top talent and skills to the Mining Sector, particularly in relation to technical skills and the engineering discipline. These initiatives have included providing for family accommodation, working weeks which are shortened, at regular intervals, so that persons can return home, charter flights, etc.
One of the key initiatives is paying persons higher remuneration packages and benefits, which often includes “golden handcuffs”, where sign-on bonuses or retention bonuses are paid, with the requirement that if the employee leaves the services of the mining company within a defined period, either the whole amount or a pro-rata amount becomes repayable. Another initiative that employers in the Mining and Natural Resources Sector have been implementing are confidentiality and restraint of trade agreements (restraint agreements).
The obvious questions are whether restraint agreements are enforceable and, if so, do they achieve their intended purposes, namely, to retain employees within the Mining and Natural Resources Sector?
There have been a number of recent judgments on the enforceability of restraints of trade in South Africa. In these judgments, both the High Court of South Africa and the Labour Court have upheld the principle that persons must honour their contractual obligations including confidentiality and restraint agreements.
Typically, there are three elements to the enforceability of a restraint, namely whether the employer has a protectable interest, and, if so, whether the restraint is reasonable in relation to both its duration and its scope of application (usually geographic).
One of the more interesting recent judgments was handed down in the case of GILBARCO AFS (Pty) Ltd t/a GILBARCO MEA v Hattingh and Others (J1134/2023) [2022] ZALCJHB 149 (22 October 2022).
In this case, GILBARCO, the employer, approached court to enforce a confidentiality and restraint of trade agreement concluded with its former employee, Hattingh. Hattingh had joined a competitor to GILBARCO. Hattingh argued that he had not breached the confidentiality and restraint undertakings, and that, in any event, the restraint of trade was unreasonable because GILBARCO did not, at the time of his employment, have a clean fuel solution and therefore that the company that he had joined, did not compete directly with GILBARCO’s business. The court rejected Hattingh’s arguments, and re-enforced the key question, namely whether, by working with the new company, Hattingh was engaged in a business similar to or competing with that of his ex-employer. The court found that, while Hattingh’s new employer was not a competitor before him joining the new employer, his new employer had become a competitor, after he had joined the new employer.
This means that a new employer that was not a competitor before an employee joins the new employer, may become a competitor, after an employee (or a team of employees) joins the new employer.
The court also indicated that a restraint would be unreasonable if it does not protect a legally recognisable interest, and that an employer’s proprietary interest would include confidential information which goes to the heart of business and other relationships which make up an employer’s trade connections and relationships.
The court held further that it is not necessary for an employer to demonstrate that an employee has actually used confidential information, but rather that confidential information is available to an employee which could be exploited if employed by a competitor.
The court therefore reconfirmed the principle that proprietary interests of an ex-employer can justify the enforcement of a restraint of trade.
Senior employees in the Mining and Natural Resources Sector are often exposed to confidential information, which go to the heart of the proprietary interests of an employer, including operational and capital costings, expansion programmes, market intelligence and related information.
The Mining and Natural Resources Sector is currently in dire straits, with some of the mining companies announcing potential large-scale retrenchments. In these circumstances, the mining companies are likely to be even more sensitive to confidential information being shared with competitors.
Mining companies have, historically, tended to focus on positive mechanisms to attract and retain top talent within the mining industry, but taking into account the extremely challenging circumstances facing the mining industry, mining companies may be more inclined to enforce confidentiality and restraint agreements to protect their proprietary interests. Whether this works or not remains to be seen, but the courts have made it clear that the trend is towards enforcement of restraint agreements, and employees would need to think very carefully about the consequences of breaching confidentiality and restraint agreements.