Understanding the Restraint of Trade Amendment Bill

Understanding the Restraint of Trade Amendment Bill

On 22 September the Employment Relations (Restraint of Trade) Amendment Bill was introduced to Parliament by MP Helen White.

If passed, this bill would have a significant impact on when restraints of trade can be included or enforced.  In particular the bill would:

• provide that restraints of trade have no effect wherever an employee earns less than 3 times the minimum wage.
• limit the use of restraints of trade to those situations where the employer has a proprietary interest to protect through the use of the provision.
• require employers to pay to employees who are subject to a restraint of trade provision an amount equal to half of the employee’s weekly earnings for each week that the restraint of trade remains in effect.
• limit the duration of restraints of trade to no more than 6 months.

The bill only applies to non-compete and non-solicitation clauses, making clear that common law duties of confidentiality and fidelity would be unaffected by the change.

If this bill is passed it would significantly narrow the circumstances where restraints of trade can be used. Arguably it would limit the use of restraints of trade to circumstances where they are most appropriate and provide more protection for lower paid or skilled employees who likely should not have restraints post-employment.

This bill will likely go through debate and amendment as it works its way through the parliamentary process, so watch this space.

If you have questions about the restraint of trade amendment bill or restraint of trade clauses please get in touch with the Watermark team, we are happy to discuss your situation. 

Kylie Hudson (Associate)