Tova O’Brien v Discovery – Restraints of Trade and Learnings from a High-Profile Decision

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.