By Folabi Kuti, SAN.
Background and Context
The recent judgment of the Court of Appeal in The La Casera Company Plc v Mr. Prahlad Kottappurath Ganghadaran (unreported Appeal No. CA/L/1059/2016,judgmentdelivered on the 9th of July 2025) has reignited critical debate on the doctrine of restraint of trade and the potential width of its proper application within the context of employment relationships in Nigeria. The decision, which reversed in part, the earlier finding of the lower court, theNational Industrial Court of Nigeria (NICN) in the similarly unreported Suit No. NICN/LA/533/13 delivered on the 17th of March, 2016, raises important questions on the limits of contractual freedom and the protection of legitimate business interests, in line with the presumptive expectation of worker protection.
At its core, the case concerned the legality and enforceability of Clause 23 of the Respondent, Mr. Ganghadaran’s employment contract with the Appellant, La Casera. The clause, as bifurcated into two segments, comprised two ‘distinct’ restraints:
(a) a restriction preventing the Respondent from accepting any job “in the same or similar field in Nigeria for a period of five (5) years” following the termination of his employment; and
(b) a further restriction preventing him, after those five years, from working “for any competing companies in the beverages, soft drinks, and table water industry in Nigeria” indefinitely.
While the lower court – the NICN, per Hon. Justice J.D. Peters – had struck down the entire clause as being unreasonable, contrary to public policy, and therefore void, the Court of Appeal partially disagreed. In the lead judgment, the Court of Appeal (per.OkaisaborJCA, with whom Nimpar, Ojo JJCA agreed) affirmed the invalidity of the perpetual restriction but upheld the 5-year restraint, holding that the first segment was neither excessive nor contrary to public policy. On this basis, it awarded La Casera ₦10,000,000 in general damages against the Respondent for breach of contract.
The knee-jerk reaction to this decision would naturally be one of surprise, to any observer even remotely familiar with Nigerian labour law jurisprudence. The settled orthodoxy is that post-employment restraints extending beyond 2 or 3 years are almost invariably struck down as being unenforceable and contrary to public policy. However, in this instance, it went beyond just that, and the La Casera case inevitably raised an almost philosophical question: should the law prioritise an employer’s interest in preventing competition over an individual’s right to work for as much as 5 years?
The answer, historically and normatively, has always been ‘no’. The law presumes that society benefits more from innovation and the free exchange of skill than from artificial monopolies created by overreaching contracts, and this understanding was once again reaffirmed at the trial Court. The Court of Appeal, however, appears to have upturned that age-old doctrine, and most unfortunately, did so without providing any reasoning or structured, analytical discussion, to either explain or justify its departure. For context, it is pertinent to reproduce the relevant passage of the leading opinion where the Court, arguably for the first time, held a 5-year trade/work restriction (in the employment law space) to be valid and enforceable. At pp. 26-28 of the judgment, the Court (per Okasaibor, JCA) decided this all-too-important issue thus:
“I hold that the second segment of Clause 23 of Exhibit C1, to wit: “Furthermore, if you choose to work in Nigeria after 5 years from the date of expiration of this contract you hereby agree and voluntary accept not to work for competing companies i.e. companies in beverages, soft drinks, and table water industry, “is unreasonable, illegal, contrary to public policy and unenforceable.
However, I am unable to come to the same conclusion with the first segment which restrained the Respondent from working in the same or similar field for a maximum period of 5 years.
The law is the trite as held in VEE GEE (NIG) Vs. CONTRACT (OVERSEAS) LTD (1992) NWLR (PT. 266) 503 at 515, PARAGRAPH H, by this Honourable Court thus:
“It is not every restraint to carry on a particular trade that is against public policy and therefore unenforceable… the courts will enforce by injunction negative Covenants in restraint of trade where such covenants are not wider than reasonably necessary for the protection of the covenantee and rare not injurious to public interest”
In TANKSALE Vs. ROBEE MEDICAL CENTRE LTD (2013) 12 NWLR (PT. 1369) 548 at 572, PARAGRAPH H, this Honourable court laid a condition for the enforceability of such trade restraint clause, thus:
“Where it can be established that such restrictions are justifiable in the circumstances being reasonable from the point of view of the parties and public, they are binding”.
Based on the fore-going the learned trial judge was wrong to have held that the entire clause 23 of Exhibit C1 was illegal, unreasonable and contrary to public policy.
Accordingly, issue three is hereby resolved in favour of the Appellant and against the Respondent.’ (Underlining, supplied)
In the absence of a clear-cut and structured discussion as to the inner workings of the Court of Appeal in La Casera, it is apposite to look to the case law precedents referenced in the quoted passage of the judgment. For clarity, the Court of Appeal relied on the reported cases of Vee Gee (Nig.) Ltd v Contract (Overseas) Ltd (1992) 5 NWLR (Pt. 266) 503 and Tanksale v Robee Medical Centre Ltd (2013) 12 NWLR (Pt. 1369) 548, to hold that not every restraint is void for being contrary to public policy, as where a restriction is justified as reasonable, it may be enforced. However, as the facts of those cases show, neither supports the finding of the Court of Appeal in La Casera.
In the guiding words of Oputa JSCin Adegoke Motors Ltd v Adesanya (1989) 3 NWLR (Pt. 109) 250: “Pronouncements of our Justices whether they are rationes decidendi or obiter dicta must therefore be inextricably and intimately related to the facts of the given case. Citing those pronouncements without relating them to the facts that induced them will be citing them out of their proper context.” To rely on the decisions of Vee Gee (a tenancy restraint concerning exclusivity of business interests within a rented property) and Tanksale (a case concerning a restraint found contrary to public policy, where a criminal matter was disguised as a civil dispute, and in which the Court of Appeal even set aside the lower court’s decision) to justify a 5 year restraint in employment, is to wrench those cases out of their proper context, almost to the point of absurdity. Each concerned circumstances in different factual-matrix, unrelated subject matters, in far narrower scopes and (specifically concerning Tanksale) a final outcome that is diametrically opposed to the statement in passing made therein, now referenced in La Casera. In essence, the Court of Appeal (in La Casera), with respect, offered a mechanical application of principles divorced from their appropriate context.
The Court’s Treatment of the Issuesand the Error of Bifurcation
Even the most cursory reading of the judgment would identify the three issues the Court’s reasoning was structured around. The first two issues were concerned with whether the Appellant had proven the Respondent’s role and access to confidential information was sufficient enough to establish a legitimate business interest, while the third directly interrogated the legality and enforceability of this increasingly infamous Clause 23.
In this instance, the court decided to address the third issue first, and rightfully so at that, as its answer alone could render the entire appeal nugatory. However, as opposed to providing greater clarity, this simply meant that the grave misstep of the judgment only happened all the earlier. The Court of Appeal, following the arguments presented (as recorded in the precis of the cross-arguments of parties) similarly engaged in the pivotal analytical error: the bifurcation of Clause 23 into two independent parts, treating the ‘5 year’ and ‘perpetuity’ restraints as conceptually and legally distinct.
Firstly, the Court rightfully reasoned that because the second segment (the perpetual restraint) was “not meant to protect any legitimate interest whatsoever but to solely prevent competition by all means”, it was illegal and contrary to public policy. However, it then held that the first segment, which restrained the Respondent from working in the same or similar field in Nigeria for 5 years, was in fact, lawful and enforceable.
The commentator is of the considered opinion that the bifurcation, though superficially convenient, fundamentally altered the character of the clause. It inadvertently implied that both segments could independently be reasonable or unreasonable, when in truth, they derive from the same restrictive intent and operate to achieve the same effect. Furthermore,the supposed distinction between “similar field” and “competing company” is quite frankly illusory, as both statements are, even within the context of the case, materially indistinguishable. In reality, the clause’s structure merely repackaged the same restraint in two timeframes: 5 years and perpetuity.
Now, when a contractual clause is ambiguous or uncertain, it is trite law that it must be interpreted contra proferentem, that is, against the party who drafted it. This is known as the rule of construction, and within the context of employment matters, it lies in favour of the employee. In the case of New Nigeria Development Company Ltd v Ugbagbe [2021] LPELR-56666 (SC), the Supreme Court reaffirmed this principle, and made reference (in support) to the decision in James Adekunle Owulade v. Nigerian Agip Oil Co. Ltd [2015] 63 NLLR (Pt. 222) 199) handed down by an industrially-minded –howbeit, lower– court: the NICN.
This commentator respectfully submits, that by failing to apply this settled interpretive presumption, the Court of Appeal sustained a substantively overbroad clause and overlooked the protective orientation of labour law jurisprudence. Once the Court accepted that the clause was excessive and anti-competitive in one breath (the perpetual part), the inevitable conclusion should have been that the entire clause was tainted by the same vice of overreaching and public policy contravention.
Unfortunately, this was not the case, and the Court’s mischaracterisation of a blatantly predatory clause as one that was permissible and in line with public policy was decided.
Reasonableness and its Misapplication
For additional context, it is pertinent here to return to the starting point of the restraint of trade doctrine, in order to properly appreciate the gravity of this decision.
Restraint of trade is a common law doctrine which served as a precursor to competition law. The jurisprudential foundation of the Court’s treatment of the doctrine is that any such restriction is prima facie void and unenforceable, unless the party seeking to rely on it can prove its reasonableness on the specific factual matrix of the case. As first articulated in the English case of Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd (1894) AC 535, Lord Macnaghten held that “…all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void.” The reasoning behind this is the Court’s refusal to permit contractual freedom to be used as an instrument of economic servitude or professional exclusion. This position has consistently been affirmed in English and Nigerian jurisprudence alike. The Nigerian Supreme Court, in Koumolis v Leventis Motors Ltd (1973) LPELR-1710 (SC), adopted this very formulation and further held, per Udo-Udoma JSC, that the burden to prove that such a restraint is in fact valid, lies on the party seeking to enforce a restraint. Such a party would be expected to show that said restraint is necessary and reasonable in scope, duration, and geographical reach, to protect a legitimate business interest.
In the Leventis case, the clause under scrutiny imposed a 1 year restriction within a 50-mile radius of business with the Merchants Engineers company, which satisfied the duration, geographical reach and scope requirements, respectively. That decision remains the leading Nigerian authority on post-employment restraints, and was naturally relied on in the instant case. In its decision, the Supreme Court upheld it as reasonable and necessary, taking care to emphasise that such restrictions must be narrowly tailored to the protection of genuine trade secrets or goodwill. Though lengthy, the relevant passage is worthy of reproduction for emphasis.
PerUdoma JSC in Koumolis v Leventis Motors Ltd(Supra)(Pp. 11-13, paras. C-B): “Generally all covenants in restraint of trade are prima facie unenforceable in common law. They are enforceable only if they are reasonable with references to the interest of the parties concerned and of the public (See Esso Petroleum Company limited v. Harper’s Garage, (Stockport Ltd.) 1967 2 W.L.R. 871). In the oft-quoted passage of the judgment of Lord Macnagten in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Company Limited (1894) A.C. 535, at p. 536 a passage which has been referred to with approval in almost all the cases cited to us by learned counsel, the principle governing the validity or invalidity of a contract in restraint of trade has been stated as follows:- “The true view at the present time, I think is this: The public have an interest in every person’s carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable-reasonable, that is, in reference to the interest of the parties concerned and reasonable in reference to the interest of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public. In interpreting the above passage of the judgment, Lord Atkinson in Herbert Morris Limited v. Saxelby (1916) A.C. 688 said at page 700 as follows: If it be assumed, as I think it must be, that no person has an abstract right to be protected against competition per se in his trade or business, then the meaning of the entire passage would appear to me to be this. If the restraint affords protection to the person in whose favour it is imposed nothing more than reasonable protection against something which he is entitled to be protected against, then as between the parties concerned the restraint is to be held to be reasonable in reference to their respective interests but notwithstanding this the restraint may still be held to be injurious to the public and therefore void; the onus of establishing to the satisfaction of the judge who tries the case facts and circumstances which show that the restraint is of the reasonable character above mentioned resting upon the person alleging that it is of that character and the onus of showing that, notwithstanding that it is of that character, it is nevertheless injurious to the public and therefore void resting in like manner on the party alleging the latter.”
Not unsurprisingly, the Court of Appeal in La Casera did make glancing reference to Koumolis v Leventis Motors Ltdat page 31-32 of the judgment. Thankfully however, due to the clarity provided by the Supreme Court in the Leventis judgement, it has become strikingly clear that the Supreme Court’s approval of a 1-year clause, narrowly limited in scope and geography, cannot even be invoked to support the 5-year nationwide restriction in La Casera.
Comparative and Statutory Perspective
In addition to the marked shift from settled jurisprudence, it was further remarkable that the Court of Appeal in La Casera failed to engage with the legislative position now codified under Section 68(1)(e) of the Federal Competition and Consumer Protection Act 2018. It would appear that this statutory provision, while not expressly argued by either party before the Court, represents the clearest reflection of modern public policy on restrictive covenants in Nigeria. It provides that a contract of service may include post-employment restrictions, provided that“…this period shall not be more than two years…”
Although the FCCPA postdates the contract in issue, its underlying rationale, i.e., the promotion of competition and prevention of undue restriction of labour mobility, cannot be divorced from the Court’s interpretative duty. That is, filling the gap of a philosophical underpinning for the Court’s intervention in this area. In fact, this is doubly relevant in the instant case, as the Court of Appeal – being the final port of call as it were, for cases appealed from the National Industrial Court – functions as a ‘Court of Policy’ in labour and employment matters.
Within this context, the FCCPA therefore serves an almost philosophical role in addition to its standard statutory nature. The inclusion of the 2-year ceiling in Section 68(1)(e) is a direct legislative expression of what Nigerian public policy considers reasonable, as it even goes so far as to forego the reasonableness requirement in favour of a strict numerical limit.
It is a principle of statutory interpretation that a statute is presumed not to alter the common law unless it does so expressly or by necessary implication. As the Supreme Court stated with firm authority in Patkun Ind. Ltd. V. Niger Stores Ltd. (1988) NWLR (Pt.93) 138, per Nnamani JSC, “It is well settled law that where a common law right has been enacted into statutory provision, it is to the statutory provision so made that resort must be had for such rights and not in the common law… Again where a statutory provision is in conflict or differ from common law, the common law gives place to the statute.”
Consequently, by upholding a restriction more than twice that duration, the Court of Appeal has placed its ‘stamp of approval’ on a standard directly at odds with the statutory regime.
The restraint in La Casera, being for 5 years, plainly offends both the letter and the spirit of the legislative standard. From a comparative standpoint, jurisdictions with similar constitutional commitments to the right to work have reached consistent conclusions. Section 35 of the Constitution of the Federal Republic of Nigeria (as amended) 1999 (“the Nigerian Constitution”), guarantees every citizen the right to personal liberty. As per the Court of Appeal in La Casera, this personal liberty“encompasses the freedom to engage in lawful activities including entering into contracts”, which naturally extends to employment and trade relationships. It is interesting to note that this closely mirrors Article 19(1)(g) of the Constitution oof India, 1950 (“the Indian Constitution”), which more expressly provides for freedom “to practise any profession, or to carry on any occupation, trade or business.” In light of this provision, the Indian Supreme Court has long held that post-employment restraints are void except in the narrowest of circumstances (such as was in the case of Niranjan Shankar Golikari v Century Spinning & Mfg. Co. Ltd AIR 1967 SC 1098).
Similarly, in South Africa, where Section 22 of the Constitution of the Republic of South Africa, 1996 (“the South African Constitution”), enshrines the freedom to choose one’s trade or profession, the courts have adopted a different, yet principally identical approach. In Magna Alloys & Research (SA) (Pty) Ltd v Ellis (1984) 4 SA 874 (A), the South African Supreme Court held that restraints are presumed valid only until proven unreasonable. Although this appears antithetical to the established common law position at first glance, it actually remains squarely in line with it, and merely shifts the burden of proof to the employee. Yet even in this seemingly radical departure, as it seems, durations beyond 2 years have rarely survived judicial scrutiny, and the reasonability of the provision still stands at the forefront of its applicability.
As a matter of settled principle, Courts globally have treated ‘time’ as the most decisive factor in evaluating reasonableness. In employment cases, post-contractual restraints rarely exceed 2/3 years, and even that duration is typically reserved for senior executives with direct access to trade secrets. Anything beyond that is presumed excessive, unless supported by extraordinary justification. The English and South African authorities alike reflect this understanding. In Reddy v Siemens Telecommunications (Pty) Ltd (2007) 2 SA 486 (SCA), for instance, the Supreme Court of South Africa upheld a 1 year restraint in light of the employee’s technical access to confidential information. Yet, the Court cautioned that the longer the duration, the more compelling the justification must be for the court to consider the provision valid.
International labour standards similarly echo this policy. The Forced Labour Convention, 1930 (No. 29) and Protocol of 2014 highlight conditions that restrict a worker’s ability to freely leave employment as potential indicators of forced labour. Furthermore, the International Labour Organization recognises the freedom of employment and mobility as a core component of decent work principles, and cautions against contractual restraints that unduly limit a person’s capacity to seek or change employment. Contemporary scholarship and modern legislation, such as the UK’s Modern Slavery Act 2015, Australia’s Modern Slavery Act 2018, and various U.S. federal and state laws, view excessive non-compete clauses as potential infringements of labour and human rights norms. For completeness, it is instructive to note that the ILO’s Forced Labour Convention, 1930 (No. 29) has been ratified by Nigeria, and so applicable here by virtue of section 254(C)(1) of the 1999 Constitution (as amended). InAfrab Chem Ltd v. Pharmacist Owoduenyi (2014) LPELR-23613 (CA) it was held that any contract which tends to impose servile obligations upon any person would not be enforceable.
Thus, under every conceivable benchmark, be it comparative, constitutional, or policy-wise, the 5-year restraint in La Casera stands out as excessive and unjustifiable. It therefore begs the question, how despite following an almost identical route to multiple sister-jurisdictions with similar constitutional/policy safeguards in place, the Court of Appeal in the instant case strayed so far from the widely accepted precedent.
Public Policy Within the Employment Context, and the Trading Society Test
This public policy dimension becomes even more pronounced in employment relationships, where the bargaining power of the parties is asymmetrical. Employees rarely have genuine negotiating parity; instead, they are often compelled to accept standard-form contracts, frequently drafted to the employer’s advantage. To argue, as the Court of Appeal did, that the “Respondent willingly accepted the said employment contract containing the trade restraint clause, having clearly understood it” and is therefore bound by it, is, respectfully, to disregard the very rationale behind judicial intervention in restraint of trade cases. It is precisely because of this inequality that the law subjects such clauses to the reasonableness test, in order to ensure that the covenant is not used to impose undue hardship or to stifle a person’s right to earn a livelihood.
At a philosophical level, the doctrine of restraint of trade embodies the tension between two foundational principles of contract law: ‘freedom of contract’ and ‘freedom to trade’. While both of these rights are constitutionally protected, the courts have long recognised that unregulated contractual freedom can itself become a vehicle for coercion and social harm. Consequently, the Court’s attempt to invoke “freedom of contract” under the aforementioned Section 35 of the Constitution as justification for upholding the restraint is, respectfully, misconceived.
Section 35 guarantees personal liberty, which indeed permits any individual to enter into any agreement of his choosing, in line with the doctrine of privity of contract. However, this right cannot be read in isolation from the other liberties the provision undoubtedly seeks to protect, such as the liberty to work and to engage in lawful employment. Both rights coexist within the same constitutional framework that values autonomy and the freedom to earn a living. To interpret the Constitution as enabling an employer to unilaterally curtail that freedom for 5 years is to invert its protective purpose.
This balancing act was well captured by Lord Wilberforce in Esso Petroleum Co. Ltd v Harper’s Garage (Stourport) Ltd[1968] AC 269, where he formulated the “Trading Society” test, which is used to determine if a restrictive covenant in a contract is reasonable and therefore enforceable, or if it improperly restricts a person’s freedom to trade. He reasoned that restrictions which have become a normal part of commercial life and which serve legitimate purposes consistent with public welfare may fall outside the doctrine; but those that unduly limit a person’s economic liberty fall squarely within it.
Applying that logic to La Casera, the 5-year blanket restraint effectively exiles the employee from his industry for half a decade. This is a period long enough to extinguish professional currency and render his skills obsolete. Such an outcome runs counter to every known judicial and economic rationale underpinning the doctrine of restraint of trade, and is quite clearly a blatant attempt to immobilise a skilled worker and monopolise knowledge flow within the industry.
The reasoning in the preceding paragraph is the position that is well understood throughout the commonwealth world. However, the Court of Appeal strayed from this in La Casera, and failed to provide adequate reasoning while doing so. In this ccommentator’s viewpoint, this proves the most dangerous element of the whole judgment.
Considering the entirety of what has been discussed, the Court of Appeal’s approach is particularly troubling when viewed against its institutional role. As earlier stated, in employment matters, the Court of Appeal functions as a court of final instance, and therefore, a Court of Policy. As such, it bears a heightened responsibility to ensure that its pronouncements “clarify… and… develop the law incrementally and interstitially, adapting it to the changes in our social and commercial life”, to borrow Lord Hodge’s phrasing in ‘The scope of judicial law-making in the common law tradition’, (Paper delivered at Max Planck Institute of Comparative and International Private Law Hamburg, Germany, 28 October, 2019).
Drawing a useful (further) parallel with the UK Supreme Court on this, is the rationale for having a final court control its own docket. Lord Burrows of the UK Supreme Court in a paper delivered given at the Commercial Bar Association of India Roundtable on the 13th September 2025 in Mumbai, aptly titled ‘Working Methods of the UK Supreme Court’, clarified that “There is no right of appeal from the Court of Appeal of England and Wales (or the Court of Appeal of Northern Ireland or the Court of Session in Scotland) to the UKSC. Rather, permission to appeal must be sought from the UKSC itself or, in rare circumstances, may be given by the Court of Appeal.” This essentially means that the UKSC is in control of which cases it hears. As our United States Supreme Court colleagues would say, “we control our own docket”.’
By comparison, in the Nigerian context, the Court of Appeal, when hearing appeals from the National Industrial Court, similarly functions as a final court of instance and, crucially, controls its own docket. The value of such autonomy cannot be overstated, as it allows a final court to select and prioritise cases that present significant questions of law or policy and to lay down principles that will guide lower courts and future litigants. In this way, docket control is both a privilege and a responsibility that no policy court is expected to take lightly. This is more evident in the careful/deliberate prescriptions that the Court makes in matters requiring clarity or policy guidance/coherence from the final Court.
In this light, the failure of the Court to provide a discussion/reasoning for its departure from the well-established orthodoxy leaves a jurisprudential void. The problem, therefore, is not merely the conclusion, but the pathway to it. No analytical bridge was constructed between the statement of principle (“not all restraints are contrary to public policy”) and the final holding (“a 5-year restraint is enforceable”). The judgment fails to interrogate the reasonableness of duration, the imbalance of bargaining power, or the economic implications of excluding a man from his chosen trade for half a decade. Instead, after reciting general principles of restraint of trade, the Court simply declared that a 5-year restriction was valid, without adequately demonstrating how those principles justified such an outcome on the specific facts. This read as though the general positions of law were lifted wholesale from the cited authorities.
Concurring, or ‘dissent’?
Another peculiar feature of the Court of Appeal’s decision in the instant case, is the stance adopted by the concurring Justices. While the lead judgment set aside the NIC’s decision, both concurring opinions appeared to align more closely with the part of the lower Court’s reasoning, focusing largely on the unreasonableness of the perpetual clause rather than engaging with the justification for upholding the five-year restraint. This internal dissonance further weakens the coherence of the Court’s ratio.
The concurring justices, perhaps inadvertently, lent credence to the very reasoning that the lead judgment sought to overrule. Their silence on the enforceability of the five-year restriction leaves the impression of a fractured court, with no unified reasoning on the central issue. In effect, the appeal succeeded, yet the supporting opinions emphasised agreement majorly with the lower court’s position on the second segment of the documentary exhibit.
The ‘unanimous’ decision of the Court of Appeal ought to set clear doctrinal/policy guidance. Instead, by omitting a contextual clarification both in the lead and concurrent judgments, the Court abdicated its policy-making function and left the law less certain than it found it. What this does, is signal to employers that any 5-year nationwide restriction may be tolerated so long as it is couched in language suggesting ‘protection of legitimate business interests’. This is a policy misstep of significant consequence.
The Doctrinal and Policy Dangers of the La Casera Decision
The immediate negative repercussion of this inconsistency, is that it encourages employers to insert similarly draconian clauses into employment contracts, confident that they can later rely on the La Casera precedent to validate them under the pretext of contractual freedom. This is materially anticompetitive and predatory, which is undoubtedly at odds with what the policy governing restraint of trade sought to achieve in the first place. In fact, it may even go so far as to also discourage skilled expatriate or domestic professionals from engaging in Nigerian industries where such restrictive practices appear judicially tolerable.
Although this conclusion appears excessive on the back of a lone appellate decision, one must be clear: in the commentator’s limited research, there is no reported case, local or foreign, where a 5 year post-employment restriction has been upheld as reasonable. Even in the English and South African contexts, where courts have occasionally taken a more flexible approach, such durations are regarded as extraordinary and almost inevitably excessive.
In Just Group Ltd v Peck[2016] VSC 614, the Australian Supreme Court struck down a two-year restraint imposed on a senior financial executive, finding it beyond what was necessary to protect the employer’s interest. In fact, the court reasoned that within the context of the case, even where an employee had access to confidential information, a 12 to 24-month restraint period was unreasonable, and could only be justified in exceptional circumstances.
If a 12 to 24-month restraint period could not survive judicial scrutiny in a case involving the Chief Financial Officer of a multinational group, it is difficult to comprehend having a 5-year nationwide restriction fall within the ambit of reasonableness. The outcome is even more striking when one recalls that the Respondent’s contract was not negotiated at arm’s length (namely, with no undue influence on either party’s part), and the restraint operated not merely to prevent misuse of confidential information but to exclude him entirely from his own field of work.
The Proper Approach
A more intellectually honest and supportable approach that is consistent with both precedent and policy, would have been to affirm the lower court’s finding that Clause 23, in its entirety, was unreasonable and unenforceable. Subsequently, the proper analytical sequence should have been as follows:
Step one: Recognise that all restraints of trade are prima facie void.
Step two: Determine whether the employer has demonstrated a legitimate business interest capable of protection.
Step three: If such an interest exists, inquire whether the restraint is reasonable in scope, geography, and time, having regard to the nature of the employment and the public interest.
Step three is where the Court of Appeal would have been at liberty to wax authoritatively on its reasoning, if ultimately still determining that said restraint is reasonable. However, it inadvertently became crippled at step two. It rightfully found a legitimate business interest, but never subjected the 5-year restraint to the reasonableness inquiry demanded by both common law and comparative authority. This is its ultimate failing.
Conclusion
The La Casera decision should be read with caution. Its holding, if left unexamined, risks distorting the balance between employer protection and employee freedoms. For a nation seeking to strengthen both its rule of law and its economic competitiveness, the better view remains that articulated by the NIC and reflected in Section 68 of the FCCPA, namely: any restraint is presumptively contrary to public policy and must be proven to be the opposite; and in employment matters, any restraint exceeding 2 years is unenforcable.
In such a world, a clause seeking to prevent a man from working in his chosen field for 5 years would be, rightfully so, an affront to public policy and to the freedom of work itself.
Ultimately, the La Casera judgment departs from the historical and philosophical underpinnings of the restraint of trade doctrine. It places corporate convenience over human livelihood, and contractual form over substantive justice. As a matter of policy, Nigerian courts must resist the temptation to turn the doctrine of restraint of trade into an instrument of economic exclusion. Despite the legitimacy or otherwise of a business interest, the law requires that such interest must weigh both qualitatively and quantitatively against the competing right of the employee to not be rendered economically inactive and unproductive. The freedom to contract (in employment matters, specifically) cannot override the freedom to work. It is the latter, which is anchored in both constitutional and economic logic, that sustains a fair and competitive labour market.
– Folabi Kuti SAN is Lead Partner, Union Attorneys (Incorporating KutiLegal)
folabikuti@kutilegal.com
