The Employment Relations Authority (Authority) recently enforced restraint of trade clauses in a political journalist's employment agreement when she resigned - Tova O'Brien v Discovery NZ Limited (2022). In deciding whether to enforce the restraints, the Authority considered whether they were reasonable and questioned the scope of the terms.
In October 2021 Ms O'Brien resigned from her role as political editor with Discovery NZ Limited (Discovery) to take up a position with MediaWorks Radio Limited (MediaWorks). Ms O'Brien's employment ended with Discovery on 21 January 2022 following a three-month notice period. She sought to commence employment with MediaWorks on 25 January 2022. Ms O'Brien's employment agreement with Discovery contained provisions which sought to restrain her from being involved in a competitive business in New Zealand for three months following the end of her employment. Discovery told Ms O'Brien of its intention to enforce the restraint clauses.
The employment agreement provided three restraints: non-compete, non-solicitation and non-dealings. The duration of the non-compete restraint was three months, and the non-solicitation and non-dealing was six months each.
The Authority considered whether the restraints contravened public policy and were therefore invalid. The Authority concluded, with evidence from a New Zealand media expert, that the restraints protected the legitimate interests of Discovery - including its proprietary interests in confidential editorial priorities and future plans; the identities of confidential sources; team salary information; its business relationship with Reid Polling; and Discovery's goodwill in Ms O'Brien's reputation from her employment in a key role. However, the Authority found that the terms of the restraints were wider than were reasonably necessary. The Authority reduced the non-compete restraint from three months to seven weeks, and the non-dealing and non-solicitation from six months to three months.
The Authority found that Ms O'Brien had breached the terms of her employment agreement when she approved a press release announcing her appointment to MediaWorks and allowed her image to be videoed for the purposes of a promotional campaign, while still employed by Discovery. The Authority found Ms O'Brien's actions breached the terms of her employment regarding conflict of interest and the duty of fidelity. Ms O'Brien was ordered to pay a $2,000 penalty to Discovery for the inconvenience and resources used in pursuing the matter.
Restraints can be enforced even where the ambit is too wide. The difficulty is what may be considered reasonable will depend on the facts of each case. For example, an employee's seniority, the extent of their business knowhow, or access to confidential information are all relevant factors. Similarly, the nature of the employer's business and the industry norm can be considered. Generally, restraints which have been carefully drafted and specifically tailored to a particular employee's circumstances are more likely to be upheld.
Although each case is different, the Authority has provided strong direction in finding Ms O'Brien's actions were made knowing Discovery's view on enforcing the restraints. The Authority found that it was imprudent of Ms O'Brien to ignore the restraints in the face of a clear dispute between the parties. This decision also supports the principle, the Court of Appeal held in 2007, when it said, "agreements are made to be kept".1
1 Fuel Espresso Ltd v Hsieh  NZCA 58.Download this article in PDF Format
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.