Employees Challenge Contracts

Stuff

A full-employment market has led to an increase in employees challenging agreements stopping them from working for a competitor or setting up in business for themselves.

Bell Gully employment law partner Andrew Scott-Howman said a “flurry” of cases were the result of an increase in the number of staff changing jobs, particularly at executive level.

There was also growing uncertainty about the ability of an employer to enforce a restraint clause, Mr Scott- Howman said.

“Under New Zealand law, restraints are on their face illegal, but due to a number of historical factors, the courts will enforce them to the extent that they are reasonable.”

The courts considered the geographic nature of the restraint, the length of time that it applied for, and any compensation paid, Mr Scott- Howman said.

Employees often agreed to a restraint clause when they took a job, confident that they could challenge the terms if they later worked in competition with their employer.

Bell Gully employment law partner Andrew Scott-Howman said a “flurry” of cases were the result of an increase in the number of staff changing jobs, particularly at executive level.

There was also growing uncertainty about the ability of an employer to enforce a restraint clause, Mr Scott- Howman said.

“Under New Zealand law, restraints are on their face illegal, but due to a number of historical factors, the courts will enforce them to the extent that they are reasonable.”

The courts considered the geographic nature of the restraint, the length of time that it applied for, and any compensation paid, Mr Scott- Howman said.

Employees often agreed to a restraint clause when they took a job, confident that they could challenge the terms if they later worked in competition with their employer.

“It is because of that uncertainty that I think more people are now willing to give it a go.”

Legal action also often become a fight between competing employers, with the original employer seeking to protect their business and the new employer wanting to attract staff.

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