Case proves restraint of trade sometimes enforceable

• Published date: 31 January 2022
• Publication title: Otago Daily Times: Web Edition Articles (New Zealand)

Discovery's predecessor was MediaWorks TV which produced shows such as Newshub and The AM Show

Ms O'Brien's employment agreement with Discovery included a restraint of trade provision, preventing her from working in any business or activity in competition with MediaWorks for a period of three months.

Ms O'Brien contested the restraint of trade. Settlement negotiations were unsuccessful and she then applied to the Employment Relations Authority for a determination that the restraint of trade was unenforceable.

The Authority disagreed and ordered that she comply with the restraint of trade for a reduced period. The original three-month restraint of trade was reduced by five weeks to allow for annual leave taken and the adjournment of Parliament on December 19, 2021. This means she cannot start her employment with MediaWorks Radio until March 14.

The starting point when looking at any restraint of trade is that they are contrary to public law and not enforceable. That is because they are anti-competitive. To overcome this, Discovery had to establish it had a legitimate proprietary interest to protect and that the restraint was no wider than was reasonably necessary to protect that interest.

The Authority found the legitimate propriety interests were:

- Confidential information including editorial priorities and future plans, identities of confidential sources and team salaries;

- Business relationships including a key relationship with Reid Polling;

- Goodwill. As Ms O'Brien was employed in a ''key role'', this contributed to her reputation in the New Zealand market.

The Authority then considered whether the restraint of trade was reasonable, in terms of duration, scope and geographical limit. The duration of a restraint of trade normally references the amount of time the employer needs to respond to the employee moving to a competitor. The Authority considered whether the total period of the restraint should include the notice period, when Discovery had the ability to put Ms O'Brien on garden leave and therefore remove her from access to confidential information and contact with key relationships.

The Authority took into account the adjournment of Parliament and that Discovery had, within days, appointed a new political editor while Ms O'Brien was on annual leave. The Authority exercised its discretion and modified the duration of the restraint of trade to seven weeks (a reduction of five weeks).

The Authority found the geographical limit (New Zealand-wide)...