In the recent case of Massmart Holdings Limited v Theron (case number JS1043/16), the Labour Court provided guidance regarding the calculation of damages suffered by an employer as a result of a former employee breaching a non-solicitation undertaking.
The applicant employed the respondent, Theron. In terms of his employment agreement, Theron undertook as follows -
"… that throughout the period of my employment with you and after the termination thereof, for any reason, and save as authorised, in writing, by a director or a person delegated by the Board of Directors, …I will not…Nor will I or any company, firm, undertaking or concern in or by which I am directly or indirectly interest or employed within 12 months, directly or indirectly encourage or entice or incite or persuade or induce any person employed by you or any associate and/or subsidiary companies terminate his employment with the group." [own emphasis].
Theron's employment with the applicant terminated on 29 February 2016. Theron subsequently commenced employment with a bank as the Head of Finance Distribution.
On 11 April 2016, Theron, acting on behalf of his new employer, signed an offer of employment which was presented to Mr Eden Pillay (Pillay). Pillay had been promoted to succeed Theron. On 13 April 2016, Pillay tendered his notice of resignation from the applicant's employ and commenced employment with the bank.
The applicant instituted a damages claim against Theron in terms of Section 77(3) of the Basic Conditions of Employment Act 75 of 1997, arising out of his breach of the non-solicitation undertaking. The applicant contended that Theron enticed Pillay to resign and take up employment with the bank.
The applicant found a replacement for Pillay through a recruitment agency. The recruitment agency charged the applicant ZAR 284 961.24 for its services. The applicant contended that this cost constituted its direct damages suffered for replacing Pillay.
The Labour Appeal Court in KwaZulu-Natal Tourism Authority and Others v Wasa  ZALAC 35 succinctly summarised the two issues that arise in respect of a claim for damages consequent to a breach of contract. The Court held that an applicant must prove -
- that it suffered damages as a consequence of the breach of the undertaking by the respondent and that there is a link between the damages it suffered and the breach; and
- the quantum of damages it actually suffered.
The Labour Court, in casu, found that Theron was directly involved in headhunting Pillay to join the bank in breach of his contractual undertaking. Theron thus rendered himself liable for the applicant's damages suffered in replacing Pillay.
The Labour Court proceeded to determine whether the applicant was entitled to the damages claimed. The Court held that the applicant's damages incurred for Pillay’s replacement are natural and a foreseeable consequence of Theron's contravention of the contractual undertaking. Furthermore, the Labour Court accepted the quantum of the damages, being the recruitment agency's service charge for placing Pillay's replacement.
The Massmart judgment adds ammunition to an employer's arsenal when taking former employees to task for breaching a non-solicitation undertaking and provides useful guidance on how to quantify damages.