Introduction
Employers who invest resources into their employees for the long-term benefit of their businesses often find themselves in a fix when the relationship abruptly comes to an end. In such instances, employers have relied on non-compete clauses which prevent the employee from using their new skills for the benefit of a competitor. This situation is exacerbated when the employee had access to valuable information like trade secrets which they can use to set up competing businesses or join their competitors and use.
Legal Analysis for Non-Compete Clauses
The General Rule observed by the courts in finding a former employee liable for breaching confidential information or trade secrets are:
Whether the employer can prove that the former employee got the relevant knowledge/information(client names/numbers, client orders/account statements etc) as a result of their employment. This can be done by providing their job description as well as their signed work reports and Internal correspondences.
Whether the former employee has used the information or attempted to use it, to the detriment of their former employer i.e used it to steal clients or shared it with competitors. This can be shown by demonstrating that the former is employee soliciting business from their former employer’s clients using contacts obtained in the course of their job, that they are offering ‘better deals’ to their clients based on their former employer’s prices, and/or that the former employee joining a competitor coincidentally coincides with its clients being poached by the firm’s competitors. It is important to note that simply joining a competitor’s firm is alone not proof of breach of trade secrets or confidentiality. The same goes for a client ceasing doing businesses with a company and working with the competitor/former employee. There must be proof of a link between the two.
Article 20 of the constitution of Kenya 2010 states that all natural and juristic persons shall be bound by the the Bill of Rights (Article 20 (1)) and that Article 20(2) “Every person shall enjoy the rights and fundamental freedoms in the Bill of Rights to the greatest extent consistent with the nature of the right or fundamental freedom”. It also provides that every persons shall have the right to economic and social rights which include the freedom from hunger (Article 43) free freedom from hunger as well as that good labour relations and working conditions (Article 41) which envisions that that a person shall have the right to decent work to earn a living.
The Law of Contract Act governs all contracts including employment contracts and requires that a contract should be signed by both parties in order to make it binding in the eyes of the law.
The Supremacy Clause under Article 2 of the constitution further invalidates any laws or legislative provisions that are in contravention with its own previsions including contracts that are contrary to the law. This means that no contracts, regardless of proper attestation, can have the force of law provided they contradict constitutional provisions.
Trans Mara Sugar Co Ltd & another -Vs- Ben Kangwaya Ayiemba & another [2020] eKLR
In addition, Laws and Regulations passed in accordance with the constitution will invalidate any contractual clauses that are contrary to their provisions. This position was reiterated in Trans Mara Sugar Co Ltd & another -Vs- Ben Kangwaya Ayiemba & another [2020] eKLR where the court held that contracts that violated existing laws were illegal and were thus unenforceable.
Further, Section 2(1) of The Contracts in Restraint of Trade Act Provides that “…Any agreement or contract which contains a provision or covenant whereby a party thereto is restrained from exercising any lawful profession, trade, business or occupation shall not be void only on the ground that the provision or covenant is therein contained: Provided that—
the High Court shall have power to declare the provision or covenant to be void where the court is satisfied that, having regard to the nature of the profession, trade, business or occupation concerned, and the period of time and the area within which it is expressed to apply, and to all the circumstances of the case, the provision or covenant is not reasonable either in the interests of the parties, inasmuch as it affords more than adequate protection to the party in whose favour it is imposed against something against which he is entitled to be protected, or in the interests of the public, inasmuch as the provision or covenant is injurious to the public interest”
The implication of this provision is that not all provisions of contracts regulating how where, with whom they conduct their profession are considered unlawful. It also outlines that for a non-compete to be valid, they must Provide a time span in which they should be in force; Limit the scope of application; Not be injurious to public interest; Be reasonable; and Be limited to a specified geographical area. The threshold employers must meet to have their non-compete clauses upheld is that the non-compete must be on one hand, reasonable, and on the other, that it does not violate public interest.
Bridge International Academies Limited -Vs- Robert Kimani Kiarie [2015]eKLR (Ruling)
The former requirement was highlighted in Bridge International Academies Limited -Vs- Robert Kimani Kiarie [2015]eKLR (Ruling) wherein the court stated that “Contracts in restraint of trade are generally invalid. However partial restraint may be valid in a contract of employment if reasonable in the interest of both parties.” (par 8) The requirement to prove that the non-compete does not violate public interest might be more difficult for employers to prove because they bear the onus of demonstrating that the duration, nature of restraint, as well as geographical location of the restraint, does not violate the rights of the employee, and will not unfairly prevent them from earning a livelihood. (See Credit Reference Bureau Holdings Limited -Vs- Steven Kunyiha [2017] eKLR )
LG Electronics Africa Logistics FZE -Vs- Charles Kimari [2012] eKLR
Further, another aspect that Employers are required to prove as intimated in LG Electronics Africa Logistics FZE -Vs- Charles Kimari [2012] eKLR, is that the knowledge utilized by the employee in their subsequent employment is unique to the original employer and not attributable to the employee.
