Many employers are not yet aware that the 2016 Employment Relations Amendment Act now provide that clauses in employment contracts that prevent employees from being involved in secondary employment are only valid where the employer can show a genuine reason based on reasonable grounds to prevent employees taking up secondary employment.
The amendments under the 2016 Amendment Act apply to all employment agreements signed after 1 April 2016. However agreements that were signed before 1 April 2016 are required to comply with the changes under the act by 1 April 2017.
Accordingly employers may find that their employment agreements contain restrictions on secondary employment which are unenforceable.
For a clause prohibiting secondary employment to be valid the contract must set out in the employment agreement the reasons the employer has included a prohibition on secondary employment.
As indicated these reasons must be both genuine and reasonable. Reasons may include such things as managing potential conflicts of interest, confidentiality or protection of other intellectual property rights.
Prohibition clauses that prevent secondary employment in related or competing businesses if worded correctly will likely constitute reasonable grounds however widely worded and general prohibitions on secondary employment may cause difficulties.
All employers should review their employment contracts to consider whether they have provisions that breach the 2016 Amendment Act. If so, variations or amendments to existing contracts and any new contracts should be undertaken immediately.
Farry and Co can assist employers in relation to any of these matters.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
pfarry@farry.co.nz
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.