Category: Workplace Law

Our phones make us contactable at all hours, and COVID-19 has taught us that office workers can work from pretty much anywhere.  The Australian Senate recognised that this blurs the lines of “working hours” and passed the Right to Disconnect Bill.  The Bill gives employees protection to ignore calls, texts and/or emails after hours without fear of penalty.

In this article, we look at the Bill and how it stacks up against our laws in New Zealand regarding working hours.

Right to Disconnect Bill (Australia)

The Right to Disconnect Bill has been introduced in Australia in response to the growing connectedness created by phones and social media.  Under the Bill, employees can ignore any after-hours calls/emails and/or text messages from their employer, and there can be no retribution from the employer and/or detriment to an employee’s role or progression.  In fact, an employer could be fined AU$18,000 if an employee successfully raises concerns regarding an employer’s after-hours contact.

What is the situation closer to home?

While France, Italy and Belgium have taken a similar approach to Australia, we have yet to jump on this bandwagon here in Aotearoa.

Under the Employment Relations Act 2000, New Zealand employees have the right to work no more than 40 hours per week – unless otherwise agreed.  Since 2016, Zero-Hour Contracts have been prohibited – an employer can no longer require an employee to work whatever hours are required, whenever.  There must be a number of “guaranteed hours” for an employee, and any additional hours and availability requirements must be agreed and compensated.

Many salaried employees have provision in their Employment Agreement that they may be required to work additional hours to meet the demands of the business/perform their role effectively.  In these provisions, employees agree that their salary compensates them for that extra availability.

Practically speaking, work hours and expectations are best managed where there is honest and positive discussions between employers and employees from the outset of an employment relationship.  For example, some employees may seek flexibility in their working hours or arrangements to attend to personal matters during work hours.  The reasonable trade off for that may be that there is an email or two to check after hours.  Again, positive communication and reasonable expectations – in line with the values or aspirations of an organisation – can go a long way toward avoiding issues in this respect.  If there are queries in your workplace, a policy in this respect may be useful to provide that clarity.

Employment law assistance

Our Workplace Law Team is able to assist with all working hour-related employment pātai that you may have.  We are also available to discuss employment processes and any other bespoke employment queries.

Chantelle is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 958 7473.

The Government has already implemented changes to Aotearoa’s employment law framework, with further changes forecast for 2024.  We set out a few of the most notable changes and what employers should be mindful of.

90-day Trial Periods

The previous Government determined that 90-day trials could only be used for businesses of 19 employees or less.  As of 23 December 2023, 90-day trial periods can again be utilised by all employers in Aotearoa.

In light of this change, we recommend that employers re-familiarise themselves with trial periods to ensure they are clear on their obligations.  90-day trial periods cannot be utilised in conjunction with probationary periods and can only apply to new employees.

Minimum Wage

From 1 April 2024, the adult minimum wage will be increasing from $22.70 to $23.15 per hour.  For a full-time employee on a 40-hr week, this equates to $48,152 per annum.  Living wage is currently at $26.00 per hour (as at September 2023).

The Starting Out/Training minimum wage will be increased from $18.16 to $18.52 per hour.

Employers need to ensure that all employees are paid at least the minimum wage for every hour actually worked (regardless of any employment agreement).  Any payroll systems and employment records will also need to reflect the minimum wage changes.

Worker Protection Act

On 6 January 2024, the Worker Protection (Migrant and other Employees) Act 2023 (WP Act) came into effect. The WP Act aims to protect employees from exploitation in Aotearoa.  A key provision of this Act is the ten day timeframe for employers to comply with any Labour Inspector requirement.  The main role of a Labour Inspector is to ensure workplaces are upholding employment law standards.

The WP Act also disqualifies offenders convicted of migrant exploitation and/or trafficking from being able to manage or direct a company.  This provision helps limit the chance of reoffending in that capacity.

Fair Pay Agreements

In December 2023, the Fair Pay Agreements Act 2022 (FPA) was repealed.  The FPA meant that unions and employer associations could bargain for employment terms and conditions which would then apply to all covered employees in that particular industry or occupation.  In short, the removal of this will not affect all workplaces and/or employees but if you think it affects your area, you may wish to seek specific advice.  Collective bargaining remains available for unions and employers under the Employment Relations Act.

Get in touch

If you need help identifying what these changes mean for you or your business or want to talk through any employment related matters, our Workplace Law Team at McCaw Lewis is well-equipped to assist you and make things that bit easier.

Tazmyn is a Solicitor in our Workplace Law Team and can be contacted on 07 958 7467.

The Christmas Holidays are fast approaching!  Here is a quick guide to frequently asked employment questions around this time of year.

What are employees’ entitlements for public holidays?

If your employee works on a public holiday, they must be paid time and a half.  Further, if the public holiday falls on a day your employee would ordinarily be working, and they do work, that employee is also entitled to a day-in-lieu.

Since our public holidays over the Christmas break this year are either on a Monday or Tuesday, for many they will fall on a day that an employee would otherwise be working.  If this is the case, and the employee is not required to work (e.g. there is a closedown), the employee is entitled to be paid for that day.

For example, in the recent case Unite Union v Wendco (NZ) Limited, the Employment Relations Authority determined that Wendy’s fast food restaurants are not exempt from paying their employees on Christmas Day.  Wendy’s claimed it was customary for them to close on Christmas Day, therefore it would not be an “otherwise working day” for employees who were rostered on.  The Authority disagreed, stating that if Christmas Day were not a public holiday, Wendy’s would not be closed and employees would be rostered on.  Accordingly, those employees would be entitled to wages for the non-worked public holiday.

Is a casual employee entitled to payment for a non-worked public holiday?

Potentially.  In Unite Union v Wendco (NZ) Limited, the Authority explained that casual employees can be entitled to wages for a non-worked public holiday.  With Christmas Day being on a Monday this year, if a casual employee has been regularly working on Mondays for the weeks preceding, then they will be entitled to wages for the non-worked public holiday.

An employee resigned, and their last day is just before the Christmas break.  Do we still need to pay them public holidays?

If your employee has accrued annual leave to be paid out, then they may be entitled to payment for the public holidays as well.  An employer needs to calculate how many annual leave days will be paid out, and add that to the last day of employment.  An employee must be paid for the public holidays if their annual leave entitlement adds up and takes them through those public holidays – as if they had applied for, and taken, all their leave before their last day of work.

Can an employee refuse to work a public holiday?

An employee does not have to agree to work a public holiday, unless:

• They have agreed to work the public holiday in their employment agreement; or
• The public holiday is on an “otherwise working day” and their employer requires them to work.

Employment law assistance

Our Workplace Law Team are able to assist with all holiday-related employment pātai that you may have prior to the Christmas break.  We are also available to discuss employment processes and any other bespoke employment queries that you may have – festive or not.

Chantelle is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 958 7473.

The GF v Comptroller of Customs case is a significant decision reinforcing the relevance of tikanga/tikanga values in the employment jurisdiction and the heightened obligations on public service employers.

The applicant GF was hired by New Zealand Customs Service (Customs) as an Assistant Customs Officer in a maritime border role.  During the COVID-19 pandemic, GF was dismissed due to not being vaccinated.

GF challenged the dismissal with the Employment Relations Authority and was unsuccessful.  GF then appealed the ERA’s decision to the Employment Court where the Court overturned that ERA decision.  The Court awarded GF compensation for breach of good faith and lost wages, and found that the dismissal was unjustified as Customs failed to act as a fair and reasonable employer.

Tikanga

Customs had incorporated, tikanga values/principles into its employment documentation, including as kotahitanga, kaitiakitanga and manaakitanga.

Against that background, the Court stated:

“While the Employment Relations Act does not expressly incorporate tikanga/tikanga values, I agree with Te Hunga Rōia Māori that the statutory framework for employment relationships does not preclude their incorporation. Indeed the tikanga/tikanga values identified in this case seem to me to sit entirely comfortably with an area of law which is relationship-centric, based on mutual obligations of good faith, and focussed (where possible) on maintaining and restoring productive employment relationships”

Despite GF not being Māori, the application of tikanga values was not limited to those of Māori descent, given tikanga was incorporated generally into Customs’ relationship with all staff.

The Court held that where an employer operates an employment relations framework which purports to incorporate tikanga/tikanga values, the extent to which such commitments have been met is relevant to assessing the fairness and reasonableness of an employer’s actions, compliance with the good faith obligations and where the evidence demonstrates a commitment to act in accordance with tikanga, an employer should be obliged to do so.

Important Lesson for Employers

While this case puts all public service organisations on notice that they will likely be held to a higher standard, and that the “good employer” obligations factor into the section 103A of the Employment Relations Act 2000 fair and reasonable employer test, it is important that employers who incorporate tikanga values within their business, organisation or firm also ensure they are operating in line with those tikanga values.  It is helpful to understand:

• what values you seek to incorporate, including from a te ao Māori perspective;
• how these values are being incorporated through your business (i.e. through employment agreements, policies and procedures, contracts, etc); and
• how will you, as the employer and employee act in accordance with those.

If you have tikanga values within your business, it would be helpful to go through and check how these are working for you, or whether you need to adapt these to provide clarity and certainty as to working in line with those values/principles.

Cree is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 808 6069.

As an employer, it can be difficult to know what to do when faced with allegations of a serious nature.  Allegations could form an employee’s formal complaint of bullying and/or harassment, or they could be the employer’s own concerns that an employee has engaged in serious misconduct.

As a starting point, the complaint/concern needs to be taken seriously and the employer needs to determine whether an investigation is required to then be in a position to make an informed decision about what to do next.  Not all allegations or minor complaints require a formal investigation straight away, but employers need to turn their minds to this.  If an investigation is the way forward, this article provides some basic tips to start.

Some employers will have the resources internally to undertake a investigation into the matter.  Others will not have the resources/expertise or are run off their feet trying to operate their business, and may wish to take a more risk-adverse approach and outsource the process.

Set out below is a glimpse into the process of a workplace investigation, the circumstances where an investigation could be required, and whether an internal or external investigation may be better suited.

What does an investigation entail?

Any investigation must follow what a fair and reasonable employer could have done in all the circumstances.  An investigation must:

• Be undertaken in good faith;
• Follow a fair and thorough process;
• Utilise principles of natural justice.

The purpose of an investigation is to gather information and establish the facts.  An investigator should not recommend next steps or advise what decision should be made – they will make findings of what they consider occurred based on evidence gathered.  The investigator will also adhere to agreed Terms of Reference, which outlines the matters for investigation and the process.

The investigator must conduct their investigation without bias or predetermination.  They must uphold confidentiality and allow the employee a reasonable opportunity to respond to the allegations, and those interviewed the opportunity to be heard.

The process depends on the kind of investigation required.  As a starting point, the employer needs to:

• Review the employment agreement and company policies to check for the process.
• Identify a preferred investigator.
• Identify a preferred decision maker.
• Formulate Terms of Reference for the investigation. These form a roadmap and explain the process to be undertaken.
• Advise the employee concerned about the allegations, and share the draft Terms of Reference. Seek their feedback on the proposed investigator, decision maker, Terms of Reference and process.

An investigation can now begin, which broadly involves an investigator:

• Interviewing witnesses and formalising their statements;
• Providing the witness statements to the employee concerned;
• Interviewing the employee concerned and seeking their feedback to the allegations and witness statements;
• Formalising a draft report for feedback;
• Considering feedback received and finalising the report;
• Providing the report to the decision maker. The report will not contain recommendations for next steps – it will only contain the investigator’s findings linked to the evidence.

The decision maker can then consider the findings and make an informed decision as to next steps.

Who should undertake the investigation?

Employers can choose to investigate internally if they have the resources and time required, or alternatively can utilise an external workplace investigator.

Employers may opt to undertake the investigation internally if they have the resources and time needed.  The investigator must remain neutral and present the evidence gathered in a balanced way, for the decision maker to consider.  If an employer is looking to undertake the investigation internally, we recommend seeking legal advice regarding the process.

If an employer is looking to appoint an external workplace investigator, they must be:

• a licensed private investigator under the Private Security Personnel and Private Investigators Act 2010; or
• a lawyer holding a current practising certificate from the New Zealand Law Society.

The content of the allegations will also determine whether to conduct the investigation internally or outsource.  We recommend engaging an external workplace investigator for:

• Serious allegations made by an employee against their employer/senior employees.
• Any matters where there may be concern as to bias or predetermination.
• Serious allegations that include bullying, harassment or discrimination. These issues are complex, sensitive and are best investigated by an independent.
• Allegations of dysfunction amongst a team of employees.
• Allegations regarding concerns of health and safety.

Summary

Overall, the best approach is to look after your employees and take every complaint seriously.  Each complaint and/or concern will require a tailored approach as to best practice, however if an investigation is required, any investigator – whether internal or external – needs to handle matters confidentially, impartially and fairly.

Investigating complaints and concerns can be complicated.  Whether you require a workplace investigator, or are looking to carry out the investigation internally, and would like guidance, our team is able to assist.

Employment law assistance

Our Workplace Law Team is able to assist with all employment processes, workplace investigations and any other bespoke employment queries.

Chantelle is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 958 7473.

Employers need to be knowledgeable around sick leave entitlements and how to minimise the impacts of staff absences on the business.  Staff absences due to illness increase at different times for a variety of reasons, most commonly during the winter months.  This article covers employer’s obligations and answers some frequently asked questions from employers.

Employer obligations

After six months of service, employees are entitled to 10 days sick leave per year.  Employees can accumulate their sick leave to 20 days, or more if the employer allows.  Employees are entitled to paid sick leave if they are sick or injured, or their spouse/partner/dependant is sick or injured.  A dependant is someone who regularly depends on the employee for care, and therefore it makes sense that the employee needs to take leave to look after them when they are sick (e.g. a child).

If an employee is sick, an employer should encourage them to stay home.  This is important for both the business, your affected employee and your other employees.  Your sick employee will recover more quickly and their absence/recovery will help prevent illness amongst your other employees.  You will generally find that your business will be more efficient when sick leave is properly taken, than if your employee continued to work through their illness.

Can my employee just work from home instead?

Even if working from home is an option in your line of work, we recommend encouraging your employees not to simply “work from home” if they are sick.  As a starting point, they should take time to rest and recover.

Of course, there will be exceptions to this from time to time, but employers should keep health and wellbeing front of mind.  A good example of when this might work well for all parties is when the employee has taken sick leave for a few days, has effectively recovered but seems to have a lingering cough that does not bother the employee, but is distracting to others in the office.

What if my employee runs out of sick leave?

As an employer, there are several ways you can support your employee if they exhaust their sick leave entitlement, including:

• Providing additional sick leave
• Allowing them to take unpaid sick leave
• Allowing them to take sick leave in advance
• Allowing them to take leave without pay

We strongly advise against declining your employee’s leave if they have exhausted their sick leave entitlements.  Requiring an employee to come to work when they are sick or injured risks endangering the health and safety of the affected employee and those around them.

Can I dismiss an employee if I believe they are using their sick leave improperly?

If you believe your employee is misusing their sick leave and that their illness is not genuine, your options are:

• Request a medical certificate for their absences
• Have an informal discussion to try and resolve the issue
• Commence a formal disciplinary process, if you have sufficient evidence

Whichever option you choose, we recommend treading carefully, having considered all the possibilities.  If you are making an allegation of dishonesty in relation to sick leave, clear evidence is required.  It is also not an employer’s place to determine how their employees should be recovering from illness – clear evidence is required from an employee undertaking an activity so inconsistent with recovery that the illness can be questioned.  Further, a fair and reasonable process must be carried out before any decisions are made regarding disciplinary action.  Such a process includes consulting with the employee, and we recommend reaching out to your lawyer to discuss this before taking any steps.

Can I dismiss an employee if they are genuinely sick, but their frequent absences are affecting my business?

While there is an obligation to act in good faith towards employees, an employer cannot be expected to infinitely hold open an employee’s job if they are unable to fulfill their role due to illness.

In time, an employer may have no other option financially but to take steps towards terminating the employee for medical incapacity.  This process should never be approached lightly and significant care must be taken – this will be a difficult time for your employee.

Procedurally, check the employment agreement for the process regarding medical incapacity, and reach out to your lawyer to minimise risk before carrying out the process.  The process for medical incapacity is complex at best, notwithstanding the emotional challenges this presents to your employee, and likely you as employer.  The process entails conducting a full and fair investigation into the employee’s medical state, including their current state, their prognosis and expected timeframes for full return to work.

How many sick days do part-time employees get?

Part time employees are still entitled to 10 days sick leave once they have worked for you for six months.  Regardless of whether they only work one day or four days per week – sick leave entitlements are not pro-rated.

How many sick days do casual employees get?

Casual employees are entitled to sick and bereavement leave after six months of working an average of 10 hours per week – comprised of at least one hour per week or 40 hours every month.  If you have a casual employee qualifying for sick leave, your casual employee may be considered “permanent” legally.  We recommend reaching out to your lawyer for clarification.

Going forward

Overall, the best advice we can give is to look after your employees.  If your employee is genuinely ill, consider what you can do to support and minimise the impacts on them.

If you believe your employee is using their sick leave illegitimately, or you are unfortunately at the stage where a process for medical incapacity may be necessary, we recommend reaching out to our team to discuss options and assist you moving forward.  Any attempt to address matters relating to sick leave must be approached carefully and through a fair and reasonable process.

Employment law assistance

Our Workplace Law Team are able to assist with all employment processes and any other bespoke employment queries that you may have.  No query is too big or small.

Chantelle is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 958 7473.

An employment agreement is a fundamental document providing protection and clarity for both, an employer and employee. It is crucial that these agreements encapsulate the important basics of any relationship.

This article sets out the different types of employment agreements, and some of the important terms all employers need to know about.

There are three main types of employment agreements, these include:

• Permanent full-time or part-time
• Casual
• Fixed term

The basics, what are they?

From a legal perspective, there are certain clauses that must be incorporated into an individual employment agreement.  Additionally, there are clauses that can be added which help to ensure that each agreement is fit for purpose and aligns with the differing needs of the parties.

The law requires that an employment agreement contains the following:

• The names of the parties
• A description of the work that will be carried out by the employee, it is important that there is a clear expectation of the employee’s responsibilities are
• Place of work
• The agreed hours that the employee is expected to work, including start and end times, and specific days
• The wage or salary rate (compliant with minimum wage or higher) with an indication of how and when this will be paid
• How to resolve employment relationship issues, including that personal grievances must be raised within 90 days
• Rest break times
• That the employee will get paid time and a half for working on a public holiday
• If applicable, an employment protection provision. This is necessary in cases where the employer’s business is sold/transferred, or if the employee’s work is contracted out
• Any other matters that are agreed on between parties, including trial periods, probationary arrangements or availability. A 90-day trial can only be included for employers with 19 or less employees and must be in a signed agreement before employment commences
• Nature of the employment

For many, employment agreements are seen as a “tick box” document that should be signed and put in a folder, never to be looked at again.  The best employment agreements embody the values of the employer and set a framework for a positive relationship, covering off all matters that need to be covered in the tricky times.

The Workplace Law team at McCaw Lewis are available to assist with drafting, reviewing, or answering any queries that you may have around employment agreements.  Get in touch now!

Tazmyn is a Law Clerk in our Workplace Team and can be contacted on tazmyn.prendiville-stowers@mccawlewis.co.nz.

While we are technically now in a recession, it’s good practice for employers to consider how their business may be impacted and what that means for them and their employees.  This article covers:

• How good employers act in times of recession
• Employer’s obligations to employees
• Pre-emptive strategies to minimise the risk of employment litigation
• What restructuring might look like

Employer Obligations

As a minimum, it’s important to remember that basic employer obligations underpin all dealings with employees, even in times of recession and economic downturn.  These obligations apply regardless of the health of your business, and include but are not limited to:

• Duty to act in good faith
• Duty to act fairly and follow proper employment processes
• Duty to consult with your employees and keep them “in the loop”

Communication, communication, communication

A practical first step for any business that may feel the crunch of a recession is to consider which business expenses can be scaled back.

If the business is looking to scale back, this doesn’t necessarily mean a restructure.  For employees, it may look like amendments to ways of working e.g. more working from home and downsizing the office, meaning a saving on overheads.  Other initiatives could be to restrict overtime, reduce any recruitment and outsource operations where possible.  We recommend keeping employees involved and seeking their input – they may have some great ideas here.  If your employees know that costs are being cut, yet there is no prospect of a restructure at this point, it would be helpful to ensure that your employees know it.  They may be feeling uncertain, and some reassurance will go a long way.  Further, if your employees are kept in the loop, this can help to speed up a restructure process later, (if it gets to that).

Any proposed amendments to an employee’s role, remuneration, or hours of work will require consultation with your affected employees and their written agreement.  If this cannot be obtained, we recommend reaching out to one of our lawyers for guidance.

Restructuring

If scaling back expenses requires a restructure of the business, being aware of the processes and your employer obligations under the Employment Relations Act 2000 is key, and it is always best to speak with a lawyer as a first step.

In brief, any restructure and/ or any subsequent redundancy of employees needs to follow a strict process, with consultation with affected employees throughout.  Restructuring must be for genuine business reasons, and must be because the role is no longer required – it cannot be specific to a person.  We discuss this here, however in any restructure, it’s important to communicate as openly as possible with affected employees and get the process right.  In these circumstances, we strongly recommend taking legal advice to minimise the risk of employment claims.

Going Forward

A recession may not be all bad for your business; there is unique opportunity to reassess the business expenditure as a whole – is the workforce as streamlined as it could be?  Are your other contracts and business expenses really working for the business?  Being proactive and taking minor steps before the effects of a recession are felt can really pay off, and can incentivise employees if they feel they have some influence.

This is also a great time to ensure that all employment agreements are up to date and reflective of recent developments in employment law.  This is particularly true in times of economic hardship – it is integral that employment agreements can be relied upon if needed.

Overall, the best advice we can give is to look after your employees.  If you do need to restructure the business, consider what you can do to support your employees and minimise impacts on them.  This not only retains morale among the remaining employees, but also minimises risk for you of personal grievance claims for unjustified dismissal if a restructure is necessary.

Employment Law Assistance

Our Workplace Law Team are able to assist with employment matters relating to restructuring, redundancies and any other bespoke employment queries that you may have.  No query is too big or small.

Chantelle is a Senior Solicitor in our Workplace Law Team.  She can be contacted on 07 958 7473.

When it comes to entering into Records of Settlement with former employees, there is often some agreement around what is or is not to be said.  This might include whether written references are to be given or perhaps agreement not to provide any reference or comment at all.

The Employment Relations Authority dealt with one of these situations in Timothy Levchenko-Scott v Presbyterian Support Central Charitable Trust.[1] Here the Authority dealt with an issue arising from an agreed Record of Settlement made in a mediation.

In the Record of Settlement, Presbyterian Support Central Charitable Trust (PSC) and Timothy Levchenko-Scott agreed that “neither will disparage nor speak ill of the other, non-disparagement extending to all forms of social media”.  It also recorded that the employer would “provide a written reference to Tim on PSC letterhead…the text of which is contained in the addendum to this settlement agreement.  If contacted by a third party, PSC will restrict its comments to those which are consistent with the text of the reference”.

Unfortunately, when Levchenko-Scott went looking for work, three potential employers withdrew offers of employment after reference-checking him.  They said that when PSC was asked whether they would employ him again, they answered “no”, and said he failed to align with the organisation’s values.

The Authority agreed with Levchenko-Scott that the comments made by PSC officials were outside the scope of the agreed text and were a breach of the Record of Settlement.  PSC was restricted to the agreed text discussed.  That meant that PSC could not say why they would not rehire Levchenko-Scott or to discuss his alignment with the organisation’s values.  The reference comments went too far.

For employers in this situation, there are a few lessons that can be taken from this decision:

• Think about what type of reference you are willing to give – will it be written only or will it be supported by a verbal reference?  Remember that, unless agreed, there is no requirement for a reference.  You might wish to keep clear of providing any reference so that you do not get yourself into a tricky position when providing a reference.
• Be clear on what is being agreed upon in a wider sense – what information is going to be included in any reference that is provided?  Be sure to agree on any factual statements around the reason for an employee’s exit.  Know what you are agreeing to in terms of non-disparaging remarks as well.
• Be realistic – while not all employer-employee relationships end on good terms, it is essential to keep acting in good faith and uphold your own reputation and mana.  As an employer, try not put yourself in a position where you might jeopardise that by agreeing to give references that you would rather not!

Cree is a Solicitor in our Workplace Law Team.  If you would like some assistance with employment workplace matters, please contact our Workplace Law Team.

[1]     Timothy Levchenko-Scott v Presbyterian Support Central Charitable Trust [2020] NZERA 452.

Tova O’Brien’s Restraint of Trade found enforceable

Many employment agreements contain restraints of trade.  Some restraints may be enforceable, and some completely unreasonable.  This article explores the recent high-profile decision of the Employment Relations Authority in O’Brien v Discovery NZ Limited and the general position regarding restraints of trade.

Background

As TV3’s Political Editor, Tova’s employment agreement stipulated she could not take any role with any competitor nationally for 3 months, and contained a six month non-solicitation and non-dealing clause. TV3’s owner, Discovery NZ “Discovery” justified this restraint in the agreement by stating “we naturally wish to protect our business relationships and our confidential information.”

Arguments

Tova’s counsel argued the restraint was unenforceable as she was taking a role that would not directly compete with her prior role. Tova’s role with Discovery was in television, predominantly presenting in the 6.00pm timeslot. In her projected move to MediaWorks, she would occupy a morning timeslot over radio. Tova asserted that she would not be directly competing with her prior role, and since Discovery did not have any radio shows or presence on that media, she would not be competing with Discovery’s television presence in the mornings as the commuter audience that radio attracts would not usually be in a position to watch television.

Discovery disagreed, claiming that the terms of restraint were not related to Tova’s role – they related to her being “key on-air talent” for Discovery, and going to a competitor (MediaWorks) and being “key on-air talent” for them. The Employment Relations Authority agreed with Discovery’s assertion that Newshub’s AM Show will be competing against Tova’s new radio show for audiences and attention, which brings about significant advertising revenue.

Decision

The Authority ruled that Discovery’s proprietary interests (advertising revenue and Tova’s political sources in Parliament) were reasonable and capable of protection, and therefore found the restraint enforceable. However, the Authority did consider the restraints too broad, and lessened her non-compete restraint to seven weeks, and her non-solicitation and non-compete restrictions to three months.

The Authority also ordered Tova to pay $2,000 to Discovery for breaching her conflict of interest clause by undertaking promotional activity for MediaWorks while she was still employed by Discovery.

The Default Position – Restraints of Trade

Restraints of Trade exist to protect employer’s proprietary interests, trade secrets and business connections. They cannot be unreasonable to the point they do not achieve those means, or are unreasonably restrictive and unfairly prevent an employee from making a living.

The default position is that restraints are unenforceable, and employers need to prove that the restraint is necessary to protect their tangible proprietary interest, without unreasonably restricting their employee’s ability to make a living, or preventing healthy competition in the market. In determining enforceability, there are multiple considerations including the seniority of the employee, the nature of the industry they are in, and the level of confidential information or the trade contacts they have access to.

Going Forward

The restraint in O’Brien v Discovery NZ Limited is certainly not your average restraint of trade. Tova is a high-profile individual, who brought in considerable advertising revenue and had multiple parliamentary sources that Discovery were trying to protect their proprietary interests in.

The biggest lesson from this case is to avoid the assumption that employers will not try to enforce restraints of trade. This case also dives deep into the facts of the matter, and reinforces that the enforceability of any restraint will be very fact-specific and differ on a case-by-case basis.

If you have concerns regarding the enforceability of a restraint of trade in your Employment Agreement, or wish to enforce a restraint of trade, we recommend getting in touch.

Employment Law Assistance

Our Workplace Law Team are able to assist with employment matters relating to restraints of trade, and provide guidance on plausible restraints and potential enforceability concerns.

Chantelle is a Solicitor in our Workplace Law Team. She can be contacted on 07 958 7473 or chantelle.tyler@mccawlewis.co.nz.