| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Auckland |
| Reference No | AA 294/09 |
| Hearing date | 31 Jul 2009 |
| Determination date | 21 August 2009 |
| Member | R Arthur |
| Representation | A McCormick ; A Maelzer |
| Location | Auckland |
| Parties | Hall v Pan Pacific Auto Electronics Ltd |
| Summary | RESTRAINT OF TRADE – Applicant sought orders be relieved from restraint of trade clause (“RTC”) in employment agreement (“EA”) – Applicant claimed RTC unnecessary when bound by confidentiality and non-solicitation clauses – Respondent sought to enforce RTC – Respondent argued applicant acquired confidential information therefore RTC necessary to protect trade secrets – Applicant employed at respondent for six years and promoted to product manager – Applicant’s new EA provided salary increase, benefit package and six months RTC – Applicant given opportunity to seek independent advice before signing – Applicant had access to trade secrets – Applicant entered into EA with respondent’s competitor (“AL”) – Applicant advised AL applicant under RTC when EA entered - Applicant resigned from respondent six days later – Applicant agreed to start at AL after expiry of resignation notice and garden leave but before restraint period ended – Authority found respondent had sufficient proprietary interests in information and business relationships to be protected by RTC – Found respondent gave consideration for restraint by offering revised salary and benefits – Found restraint necessary to protect respondent’s interests when balanced against public interests – Found fostering competition important, however must also prevent former employees and their new employer from unfairly benefiting from other employer’s property – Found applicant should be free to utilise skills, however signed EA knowing RTC present – Found applicant may deliberately or inadvertently disclose confidential information to AL – Found AL entered EA with applicant knowing RTC may be valid - Found six month restraint period unnecessary to protect respondent’s interests therefore should be reduced to three months consistent with public policy – Found RTC enforceable against applicant and restraint period reduced to three months - PENALTY – BREACH OF CONTRACT - Respondent sought penalties on three grounds – First, applicant entered into EA with AL while employed at respondent – Second, applicant misled respondent’s director (“C”) by stating would not obtain employment with AL – Third, applicant agreed to start work at AL before restraint period expired – Authority found although applicant became AL’s employee while employed at respondent, workers usually sign new EA before resigning from present job – Found applicant did not intend to mislead C as applicant’s statement made in response to C telling applicant could not work for AL before restraint period expired – Found applicant truthful at time statement made, however, subsequently received advice RTC may not be valid – Found although applicant agreed to start work before restraint expired, applicant had not in fact started or received payment from AL - Found applicant took reasonable steps to ask respondent to be released from RTC – Found penalties and special damages award not warranted – Penalty declined – Special damages declined – Products Manager |
| Result | Application partially granted (Restraint of trade clause enforceable)(Restraint period reduced from 6 months to 3 months) ; Applications dismissed (Order for release from restraint of trade clause)(Penalty)(Special damages) ; Costs reserved |
| Main Category | Restraint of Trade |
| Statutes | ERA s162;Illegal Contracts Act 1970 s8 |
| Cases Cited | Allright v Canon New Zealand Limited unreported, Couch J, 3 Dec 2008, AC 47/08;Littlewoods Organisation Limited v Harris [1978] ALL ER 1026;Stenhouse (Australia) Limited v Phillips [1974] AC 391 (PC) |
| Number of Pages | 12 |
| PDF File Link: | aa 294_09.pdf [pdf 40 KB] |