THE COSTS OF COMPETING WHEN YOU SHOULDN’T

The applicant urgently approached the Labour Court and sought to enforce a restraint of trade against a former employee who resigned and began practicing independently at Rondebosch Medical Centre, allegedly redirecting referrals. The Labour Court upheld the restraint, prohibiting the respondent from providing physiotherapy services at the Rondebosch Medical Centre for one year to protect EDP’s referral networks and patient relationships. The respondent is ordered to pay the costs of the application, including counsel’s fees.

Esmarie Dreyer Physiotherapy Inc v Omar Physiotherapy [2024] ZALCCT 64

Case Summary

The applicant, Esmarie Dreyer Physiotherapy Inc. (“EDP”), owned by Esmarie Dreyer (“Dreyer”), urgently approached the Labour Court (“LC”) to enforce a restraint of trade agreement to prevent the respondent, Shuayb Omar (“Omar”), from competing with it by conducting his own physiotherapy practice.

The applicant operates a physiotherapy practice primarily based at Rondebosch Medical Centre (“RMC”), a private hospital. The majority of EDP’s income stems from services rendered at RMC, facilitated by referrals from doctors practicing at the hospital. Among these, the Integrated Cardiac Care practice (“ICC”) provides approximately 50% of EDP’s patient base, underscoring its reliance on established relationships with referring doctors.

Omar initially joined EDP as a locum physiotherapist before transitioning to full-time employment. Dreyer accommodated Omar’s request for a salary increase and permitted him to see private patients on EDP premises outside regular working hours. Omar’s employment contract included a restraint of trade clause prohibiting him from working for any practice at RMC for one year post-resignation.

Following his resignation, Omar expressed intentions to pursue opportunities at a new clinic and establish his practice. However, Dreyer discovered that Omar was allegedly redirecting EDP’s referring doctors to support his new endeavour. Dreyer alleged that Omar continued offering physiotherapy services at RMC under his name, specifically treating ICC patients in the hospital wards. EDP sought to enforce the restraint of trade clause, arguing that Omar’s actions violated their agreement and posed a direct threat to EDP’s business interests.

Omar contended that the restraint clause applied only if he worked for another practice and did not restrict him from practicing independently at RMC. He also argued that the clause’s language referred to RMC as a legal entity, not the physical premises, allowing him to continue his practice on hospital grounds. A central issue was the interpretation of the restraint provision and whether it extended to self-employed activities at RMC.

EDP highlighted the risk of Omar leveraging connections with referring doctors and former patients, cultivated during his tenure at EDP, to establish competition on the same premises. Dreyer emphasized that the clause aimed to protect EDP from precisely this scenario, ensuring client relationships and referral networks remained intact.

The LC noted that EDP’s services were not confined to RMC as an institution but included broader activities on the premises. The restraint was deemed to cover all physiotherapy services provided at RMC, regardless of whether they involved the hospital directly or other practices, such as ICC. It was held that by limiting the clause to work involving RMC patients alone would undermine its protective intent.

The LC concluded that the clause was drafted to safeguard EDP from competition within the specific geographical context of RMC, encompassing referrals from both hospital-employed and independent practitioners. The LC found Omar’s interpretation of the restraint clause inconsistent with its purpose and the practical realities of EDP’s operations. It upheld the applicant’s position that the clause prohibited Omar from rendering physiotherapy services at RMC for one year after leaving EDP. The LC recognized the legitimate interest EDP had in preserving its client and referral base against potential exploitation by former employees.

Omar is ordered to adhere to the restraint of trade provision, barring him from providing physiotherapy services in any capacity, including through his practice, at RMC for one year following his resignation from EDP. Omar is also ordered to pay the costs of the application, including counsel’s costs.

This article does not constitute legal advice. For an informed opinion and/or assistance with a labour-related matter, you are encouraged to arrange a formal consultation with the author.

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