| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Auckland |
| Reference No | [2013] NZERA Auckland 402 |
| Hearing date | 30 - 31 Jul 2013;13 Aug 2013 |
| Determination date | 05 September 2013 |
| Member | R Larmer |
| Representation | M Smyth ; P Barnard (in person) |
| Location | Auckland |
| Parties | Zeald New Zealand Ltd v Bernard |
| Summary | BREACH OF CONTRACT – RESTRAINT OF TRADE – Respondent to pay applicant $7,715 damages – PENALTY – $50,000 penalty appropriate |
| Abstract | Respondent (Mr Bernard) employed by applicant (Zeald New Zealand Ltd) as website results specialist (Information Media and Telecommunications Sector). Applicant sought damages and penalty for respondent’s breach of employment agreement (“EA”). Respondent subject to three month restraint of trade provision (“ROT”) in EA. Respondent became disgruntled at applicant. Respondent resigned. Respondent took annual leave for final week of notice period. While on annual leave respondent commenced work for applicant’s competitor (“F”). Applicant became aware respondent had been soliciting work from applicant’s customers and found website domain names used by respondent acquired during respondent’s employment with applicant. During subsequent meeting respondent surrendered flash drive containing electronic documents assembled and taken by respondent and 50 business cards belonging to applicant’s customers. Respondent claimed only removed website planning documents to harvest customers’ e-mail addresses and similarities between documents and templates created for F coincidence. Respondent denied failed to disclose at outset of employment that administrator of other website and claimed websites established by respondent intended for own training and thus to benefit applicant. Applicant sought damages for income earned by respondent doing work for third parties. Applicant sought reimbursement of cost of hiring private investigator.;AUTHORITY FOUND –;BREACH OF CONTRACT – RESTRAINT OF TRADE: Respondent breached EA and duty of fidelity by removing 100 planning documents containing confidential information and applicant’s intellectual property and using documents to solicit business for respondent. Respondent breached EA by using confidential information taken from applicant and applicant’s intellectual property to create templates for F’s benefit. Respondent’s association with other website and upgrade of other website during employment conflict of interest with respondent’s role with applicant. Respondent breached EA by failing to disclose association with other website at start of employment with applicant and failing to obtain permission to upgrade other website. Respondent’s work upgrading other website during employment with applicant in competition with applicant and in breach of respondent’s EA. Respondent breached gifts and benefits policy by receiving services in kind from other website in exchange for respondent’s work. Four websites established by respondent while employed at applicant established for respondent’s own benefit and designed to establish respondent in competition with applicant. Establishment of four websites breach of respondent’s duty of fidelity. Respondent solicited three of applicant’s employees to leave employment with applicant in breach of duty of fidelity and non-solicitation clause in EA. Respondent breached duty of fidelity by soliciting ten customers of applicant while employed by applicant and breached ROT by soliciting at least 41 customers after employment ended. Respondent breached duty of fidelity by beginning work for F while on leave during notice period and breached ROT by working for F after end of employment with applicant. Applicant entitled to be reimbursed for income received by respondent from third parties in breach of EA and for cost of engaging private investigator. Respondent to pay applicant $7,715 damages.;PENALTY: Respondent breached EA at least 263 times. Serious harm caused to applicant. Respondent’s breaches serious and required significant penalty to bring home to respondent that conduct unacceptable and to deter other employees from breaching EAs. Respondent’s conduct aggravated by fact respondent intended to harm applicant and breached obligations to F, including by misleading F that no impediment to respondent beginning work for F immediately. Respondent’s conduct suggested did not take employment obligations seriously. Respondent appeared to have deliberately misled applicant and Authority. Authority considered fact respondent apologised to applicant, offered some repayment and had care of dependent child. Award of penalty not futile just because respondent bankrupt. $50,000 penalty appropriate. |
| Result | Applications granted ; Damages ($7,715.17) ; Penalty ($50,000)(payable to applicant) ; Costs reserved |
| Main Category | Breach of Contract |
| Statutes | ERA s134 |
| Cases Cited | Xu v McIntosh [2004] 2 ERNZ 448 |
| Number of Pages | 29 |
| PDF File Link: | 2013_NZERA_Auckland_402.pdf [pdf 333 KB] |