Employee ordered to pay $5,000 after setting up a rival business to her former employer...

The Employment Relations Authority has ordered an employee to pay $5,000 after she helped to set up a rival business when she was prohibited from doing so.

The employee entered into an employment agreement which included a clause that stated she was not permitted to set up a competing company within 20km of the employer for six months after the end of her employment.

After resigning, the employee began working for a company in the same field. This business was owned by her sister. Whilst it was her sister who owned the business, the employee had performed numerous tasks that showed that she had helped to set up the company. These tasks included registering the company with the Companies Office, registering her mobile phone as the sole company phone number, and setting up the company bank account.

She also paid for company uniforms, and arranged for the insurance, finance and registration of the van.

The Authority decided that the employee had breached her employment agreement, as taking the above steps amounted to the setting up of a rival business which was expressly prohibited by the clause contained in her employment agreement.

The employee was ordered to pay $5,000 to the employer as damages for breaching their agreement.

If there is confusion around an employee’s rights and obligations, it is wise to seek advice from a professional in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Alan Knowsley & Matthew Binnie

Litigation Team
Wellington