Employee ordered to pay $50,000 after starting rival business...

The Employment Relations Authority has ordered an employee to pay $50,000 after the employee set up a competing business shortly after his resignation from the workplace. The employer brought the damages claim to the Authority after the employee approached some of their clients for business.

The employer claimed that the employee’s employment agreement contained a restraint of trade clause which prevented him from working for competing companies for three years, or within a 50-kilometre radius of the workplace. As well as this the employer claimed that the employee had breached his employment agreement by using confidential information to his commercial advantage.

The Authority found that three years was longer than is reasonably necessary for a restraint of trade clause, and modified this to be active for one year.

The Authority upheld this modified restraint of trade clause and that the employee had breached the clause by failing to wait a year to set up the company. The Authority also decided that the employee had breached his employment agreement by contacting and working for his former employer’s clients based on confidential information he took from the employer.

The Authority ordered the employee to pay $43,000 in damages to the employer, as well as a $7,500 penalty for obstructing the Authority’s investigation.

If there is confusion around your obligations to a previous employer, it pays to seek advice from a professional with experience 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