Restraint of Trade Clauses

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Handsomedan

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#293461 24-Jan-2022 09:02

Reading this article (and earlier ones outlining the issue for the person involved), it leads me to ask the question:

In today's competitive market, with the challenges that both employers and employees face, should "Restraint of Trade" clauses exist?

I was caught by one of these about 30 years ago, but successfully challenged it, to be able to continue working. Others are not always so lucky.

On one hand, I see the need, to protect IP and prevent poaching etc, but by the same token, if you only know how to do one thing, it can be quite hard to live with a clause like this, cutting off your livelihood.

Thoughts?

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#2855326 24-Jan-2022 09:11

Should be outright banned.

nztim

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#2855330 24-Jan-2022 09:32

You can work for a competitor but not a customer/ supplier within a defined timeframe that is fair employment clause

Any views expressed on these forums are my own and don't necessarily reflect those of my employer.

elpenguino

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#2855333 24-Jan-2022 09:39

It's a type of overreach, where employers think they need a clause because they've heard of it being used in other cases.

You're absolutely right - if your skill is , for example, as a software developer, a restraint of trade clause would attempt to stop you quitting and working for a competitor, thereby earning a living.
My current employer had such a clause (years ago) and notified all staff that legal advice had been received that the clause was unenforceable and would be withdrawn.

I can see how such a clause might be useful for a business owner. One example that comes to mind was the Mac's brewery case.

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1101

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#2855348 24-Jan-2022 10:31

Ive been down this rabbit hole with an over the top restraint of trade clause.
I got legal advice & was advised its wasnt enforceable , in my case .

I later found out , the employer knew it wasnt enforcable & was a bluff . I called the bluff & they dropped that from the contract
However , that same employer , contacted another ex employees new employer & threatened legal action .

I know there has been a civil case for breech of contract over restraint of trade. If that happened the legal bills could be huge .

SirHumphreyAppleby

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#2855352 24-Jan-2022 10:39

I believe these should be strictly enforced. Preventing someone from carrying out the same type of work in an unrelated industry is never going to be enforceable, but if you are going to setup your own competing business, then absolutely they should be. If you're simply working for a competitor as an employee, then it depends. I would hope common sense would prevail, but that's why we have the courts to decide these matters.

In the case above, I believe the individual was already working for a competitor and that only became an issue due to a change of ownership. In that case, I consider it unreasonable to enforce the clause as working for the competitor is established practice.

Starlith

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#2855360 24-Jan-2022 10:54

Its anti-competitive, a simple NDA should cover what employers want to protect but they seem to want to have their cake and eat it all at once.

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Handsomedan

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#2855366 24-Jan-2022 11:04

nztim: You can work for a competitor but not a customer/ supplier within a defined timeframe that is fair employment clause

I guess we'll have to disagree there.

I think moving to a customer or supplier is probably more beneficial to the current employer than moving to a competitor, so I think it should be a no-brainer that a restraint of trade shouldn't be enforceable and a simple broad-reaching NDA should be used instead.

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Dunnersfella

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#2855382 24-Jan-2022 11:21

I've been through it...

Turns out I was a pawn in a game between 2 x GM's who disliked each other immensely.

I was an entry level employee at the time, on close to minimum wage - but because I moved to the opposition I was the guy who got caught in the crossfire.

3 months on the sideline was eventually turned into 2 when my restraint of trade was bargained over... basically the company I was leaving were taking an employee of the company I was moving to - and my new employee had invoked a restraint clause on them.

Fun times.

Kyanar

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#2855430 24-Jan-2022 11:23

Handsomedan:

I guess we'll have to disagree there.

I think moving to a customer or supplier is probably more beneficial to the current employer than moving to a competitor, so I think it should be a no-brainer that a restraint of trade shouldn't be enforceable and a simple broad-reaching NDA should be used instead.

Agree with you. We had an employee leave and go to one of our customers, the result of that is that the customer now has someone with in-depth knowledge of our product on their team and they've reduced our support request volume by self-solving more of their queries. They also make the support request process much quicker if they run into an issue they cannot self-solve by knowing what information we need, understanding how to describe their issues, and understanding when we respond without going back and forward.

A company could only be so lucky as to have their employees leave to go to a customer.

Senecio

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#2855435 24-Jan-2022 11:36

I can understand a restraint of trade clause for senior level execs, directors and board members. These people hold information that could be used against the current business if that individual decided to start their own business. A bog standard employee should never be subject to a restraint of trade.

Paul1977

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#2855560 24-Jan-2022 12:55

They are a way to make it difficult (or effectively impossible in some cases) to leave your current employment. An employer could refuse fair pay adjustments because they know they know you have no options if you left because if it.

Anti-solicitation clauses up to 3 months are fair enough, but restraint of trade should be illegal.

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1101

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#2855668 24-Jan-2022 13:29

Senecio:

I can understand a restraint of trade clause for senior level execs, directors and board members. These people hold information that could be used against the current business if that individual decided to start their own business. A bog standard employee should never be subject to a restraint of trade.

Thats sort of what I was advised when I got legal advice .
Very hard to enforce for average working dude .

I believe it might be enforceable to cover trade secrets . ie whats in the colonel's secret herbs and spices :-)

insane

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#2855724 24-Jan-2022 13:50

But as alluded to above, that's already covered in your employee agreement you sign when you join the company, and those non disclosure clauses supposedly last beyond the termination of your employment - meaning the restraint of trade is really just a final FU on your way out.

Some people also have VERY long notice periods if they are a key staff member who might be difficult to replace in the notice period and where a solid handover is needed - that's totally fair given their compensation and they have the option to resign first, then get a new job, and start immediately.

Perhaps is best to just keep your mouth shut and don't go making a big noise about your new job on LinkedIn until the restraint period is over!

richms

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#2855771 24-Jan-2022 15:36

I dont think they should exist at all. Once they stop paying for your time, they should stop having any say in how and where you use that time. If you leaving to a competitor makes their lives hard then perhaps they should have upped their offer for your time or made the job suck less. Someone on a salary or wage is only to be expected to answer to the business for the time they are being paid by that business.

Richard rich.ms

PolicyGuy

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#2855779 24-Jan-2022 15:57

In her decision released on Monday, (Employment) Authority member Marija Urlich determined the radio and television programmes were in competition and that the restraint of trade clause was enforcible.
“The evidence establishes if Ms O’Brien starts work with MWR [Mediaworks] she will be working in competition with Discovery.”
The restraint of trade covered a three-month period but Urlich took into account O’Brien’s one-month annual leave over December. She will be free to start her role at Media Works on March 14.

https://www.stuff.co.nz/business/300501389/tova-obrien-broadcaster-must-wait-two-months-before-beginning-her-new-job

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