Restraint of trade claim fails…

The Employment Relations Authority has rejected a claim for a restraint of trade injunction and also one for a breach of confidential information.

The ERA concluded that there was no evidence that the employee had used any confidential information of the employer and therefore there was no breach of that clause of the employment agreement. 

In relation to the restraint of trade the ERA concluded that setting up a business to repair machinery of the same brand as the employer could amount to a breach of the restraint of trade clause, but that the 12 month time limit on the restraint was unreasonable and that a three month limit would have been appropriate.  As the claim was not filed until after the three months had already passed, there was no reason to give an interim injunction against the employee and so orders on the restraint of trade were also refused.

If the employer had brought a claim on the restraint of trade clause for damages then damages might have been found to have arisen from the breach, but that matter was never argued by the employer. They merely sought an injunction to stop him carrying out repairs on the same type of machinery that they worked on.

If you are subject to a restraint of trade clause or looking at enforcing a restraint of trade clause (or drafting one to include in an employment agreement) it is important to take advice from a professional experienced in this area.


Alan Knowsley
Employment Lawyer
Wellington