The Employment Relations Authority (ERA, similar to the ET) granted an injunction to Cookright Filtering Services Ltd against an ex-employee who had gone into competition with Cookright.
At first glance we were surprised that ERA Member Antoinette Baker injuncted Keith Hill from working in competition with Cookright within a 100km radius of Nelson for six months – this is getting into Fuel Espresso v Hsieh territory where the Court of Appeal absurdly issued a restraint of trade injunction against a barista for a few weeks in 2007. But it appears that in this matter the ex-employee didn’t put up much of a fight.
There’s no way an ERA Member will find a restraint period of two years to be reasonable, especially for a worker earning about 20% above minimum wage including bonuses, but Members (and Employment Court judges) can “blue pencil” it down to three or six months; in this case six.
[11] Mr Hill emailed the Authority… on Monday 20 November 2023. Mr Hill confirmed he was no longer represented, that he would not be filing any further affidavit evidence, that he could not afford representation and that he was under ‘stress’ from the ‘accusations’ made by Cookright. He said he could not attend the scheduled interim investigation meeting on 22 November 2023 because he did not have a computer and because he did not want to face Mr McMullen due to the way he felt he was accusing him, and this was causing him stress.
[12] … I strongly urged Mr Hill to provide a phone number so that he could participate in the interim investigation meeting to enable me to assist him to understand the process and explain what was required of him. I explained that the process did not involve the testing of evidence.
[13] Mr Hill emailed a response to the Authority saying that he did not intend to attend the interim investigation meeting on 22 November 2023. He repeated the same reasons…
For example:
[79] Mr Hill’s position in his email on 20 November 2023 is: “[Mr McMullen] in every way has taken away my human rights to earn a living in whatever field I wish to enter into by his and grant Hills behaviour and actions. I only have three years of working life left before I can retire fully and they have taken away my rights to even earn a part time wage to survive in a field I am comfortable in. No person or organization has the right to dictate and take away the human right of any individual living in New Zealand. The restraint of trade is a humiliating thing to enforce in any contract.”
[80] Mr Hill includes in his email dated 21 November 2023 that he believes Cookright’s claims are: “…taking away my right to work for the next 3 years before I can retire as I’m 62 years old.”
However:
[14] I decided… that the meeting would continue. This was because it had been given priority and because… I had statements and affidavits from both parties from when Mr Hill was represented by counsel.
Solicitation
Mr Hill is now subject to an interim restraint of trade injunction that expires on 30 June 2024. That is not the end of the matter, as Cookright alleges that Mr Hill actively solicited, or “poached” its clients on the basis that he knew how much Cookright invoiced for its services and therefore how much he would need to undercut Cookright to close the deal.
There are two reasons most “breaches” of noncompetes are not enforced by the employer – the risk of failure (examples here and here) and the risk of reputational harm, irrespective of whether or not they succeed in the ERA. A worker thumbing their nose at an overreaching noncompete clause, or even being unaware of its existence when job hunting, does not always mean that worker has been misusing commercially sensitive information to poach clients.
Substantive matter
Having succeeded in getting an injunction, Cookright may seek penalties against Mr Hill and possibly his partner (who employed him). I asked lawyer Megan Inwood if her client Cookright intends to pursue this, given that Mr Hill claimed not to be able to afford a lawyer and was only working part time when injuncted.
Ms Inwood said "At present, the Authority has only granted an interim injunction at the preliminary hearing stage. While the substantive matter is still before the Authority, Cookright has no further comment."
So there may be a follow-up article based on a subsequent determination, unless the matter quietly settles.
In general, noncompetes are moderately enforceable in New Zealand. Enforceablity in the United States ranges from almost unenforceable in California, to very enforceable in Florida.
UPDATE: The injunction lifted on 1 July 2024 and Keith Hill is back at work with A1 Vat Services operated by his partner, Kaye Thomas. But both have been threatened with bankruptcy proceedings. Our follow-up article sets out how an assault charge may have derailed Cookright's claim against for damages and penalties.
Section of the Month: 134A (Obstruction) - 4 September 2024
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