Waikato Business News March/April 2017

12 WAIKATO BUSINESS NEWS March/April 2017
Restraints of trade
- some things you
need to know
EMPLOYMENT LAW
> BY ERIN BURKE
Employment lawyer and director at Practica Legal
Email: erin@practicalegal.co.nz phone: 027 459 3375
J5371P
Hamilton Monthly Property Report
SNAP SHOT OF WHAT
HAS BEEN HAPPENING
IN THE MARKET PLACE
OVER THE PAST MONTH.
Sales volumes for the Waikato/
Bay of Plenty Region compared
to January 2017 rose 52%,
with sales rising 83% in Hamilton,
and 53% in Rotorua and Tauranga.
Compared to February 2016 sales
across the region fell 24% with sales
falling 14% in Hamilton.
The median price across the region
rose $57,500 compared to February
2016. Compared to January the median
price fell $2,000, with prices rising 1%
in Hamilton.
The number of days to sell improved
by one day compared to January,
from 44 days in January to 43 days
in February. The number of days to
sell eased by seven days compared to
February 2016. Over the past 10 years
the average number of days to sell during
February for Waikato/Bay of Plenty
has been 61 days.
REINZ Regional Director, Philip
Searle noted that, “Interest from
Auckland is picking up once again
in Hamilton and Tauranga both from
investors and from families relocating.
Vendor expectations in these areas are
starting to soften indicating that the
rapid run up in prices over the past 18
months may be coming to an end.”
Obviously the statistics contained within
this article represent only a small
fraction of the data we have at my fingertips.
For more information relevant
to your street or your property, call and
ask for one of our team.
Local market facts
Hamilton City
P 07 834 9570 M 027 801 9962 F 07 854 3837
VISIT www.eves.co.nz
By Greg Petrin
Rototuna branch manager
Sales February
2017
Under $200k* 1 1
$200 - $299k* 6 30
$300 - $399k* 60 89
$400 - $499k* 62 87
$500 - $599k* 55 38
$600 - $699k* 39 34
$700 - $999k* 21 7
$800 - $999k* 15 14
Sales February
2016
$1,000,000 -
$1,999,999*
3 4
$2m+* 0 1
Total number of sales* 262 305
Median sale price* $500,000 $439,000
Median days to sell* 34 27
*Statistical Information Derived From The Real Estate Institute Of New Zealand. Realty Services
Ltd/Success Realty Ltd and any contractor/employee is merely passing over the information.
We cannot guarantee its accuracy and reliability as we have not checked, audited or reviewed
the information and all intending purchasers are advised to conduct their own due diligence
investigation into the same. To the maximum extent permitted by law Realty Services Ltd/Success
Realty Ltd and its contractors/employees do not accept any responsibility to any person for the
accuracy of the information herein.
Whether a restraint of trade is enforceable
is a question that comes across my desk
regularly, in equal numbers from employers
and employees. The rumour that “restraints
of trade are not worth the paper they are
printed on” is exactly that—rumour.
Part of the reason for the
misunderstanding is that
attempts to prevent competition
are, prima facie, unlawful.
This means that measures
taken by an employer merely to
prevent an ex-employee from
competing against them, usually
referred to as a non-compete
clause, will not be upheld by
the courts.
This does not mean that a
restraint of trade clause will
not be upheld, however, as
these clauses are different from
non-compete clauses. To ensure
an employment agreement contains
an enforceable restraint,
the employer must first establish
that they have a legitimate
“proprietary interest” that needs
protecting. Examples of proprietary
interests include client
relationships, pricing and marketing
strategies and client lists.
It does not necessarily include
confidential information alone,
as most employment agreements
contain both implied
and express restrictions on an
employee using confidential information
for any other purpose
than to benefit their employer,
which applies both during employment
and following its termination.
For a restraint to be enforceable
there must be a legitimate
proprietary interest that warrants
protection, and the restraint
must be reasonable and
necessary to protect that interest.
Restraint clauses usually
prohibit an employee from
doing certain things (such as
contacting or doing work for
an employer’s current/recent
clients) for a certain period of
time following termination, often
over a specified geographic
location. Where the court holds
that a restraint is not reasonable
as it is too long in duration, too
broad in scope or covering an
area that is unreasonably large,
the court may modify the restraint
to make it reasonable, or
may refuse to uphold it at all. It
is therefore important to ensure
from the outset that the restraint
clause is reasonable.
Clearly what is “reasonable”
is going to vary from case to
case. Some factors to consider
when drafting a restraint are
the seniority of the employee
(key personnel would be subject
to a longer restraint period
than others), specifying a reasonable
geographical distance
from a specified location (usually
the head office address or
the address where the employee
usually works from) and states
what the employee is restricted
from doing. In some cases,
the restriction may only apply
to soliciting (approaching) the
employer’s clients. Other restrictions
may prevent an employee
from dealing with any of
the employer’s clients that the
employee has carried out work
for over the past 12 months.
The imposition of a restraint
on an employee’s activities following
termination of employment
usually comes at a cost
to an employer—referred to in
legal terms as “consideration”
which can simply be defined as
“something of value.” If the restraint
clause is in the employment
agreement from the outset,
the consideration is usually
held to be the mutual promises
the parties have committed to
in the employment agreement.
Where an employer wishes to
introduce a restraint clause to
existing employees, where no
restraint previously existed, the
employer will need to offer additional
consideration, such as a
pay rise or other beneficial term.
Failure to do so means you are
imposing an additional burden
on an employee while offering
nothing more in exchange
for this. In that case, a court
would be unlikely to uphold a
restraint which extracted from
an employee a promise not to
do something in exchange for
nothing in return.
Finally, even without a restraint
of trade clause, employees
can still be held liable for
taking steps to set up in competition
against their employer
while currently employed and/
or working out their notice. In
the 2012 case of Rooney Earthmoving
Ltd v McTague, Whiting
& Bartlett three employees
were found to have breached
their implied duties of fidelity,
trust and confidence and good
faith to their employer by setting
up a competing company,
soliciting clients and staff
and using unlawfully obtained
quotes to undercut their employer
and divert the work to
the new company they had set
up, all done during their notice
period. Their employer successfully
sued them for nearly $4.3
million in damages.
Take home tips for employers
are to ensure that their
employment agreements are robust
and expressly include the
implied terms of fidelity, trust
and good faith. Careful consideration
should also be given to
any restraint of trade clauses
and ensure the terms are reasonable
and necessary to protect a
legitimate proprietary interest.
SOMETHING DIFFERENT
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