Restraint of Trade
March 29th, 2008 at 1:14 pm by David FarrarThe Dom Post reports on how Masterton Pak ‘N Save has put restraint of trade clauses in its employment contracts with shop assistants.
This is pretty bizarre and probably not enforceable. Restraint of trade clauses are intended to protect employers from senior or specialist staff suddenly walking out the door and setting up a competitor, or going to a competitor, with all their intellectual property, clients, contact lists etc. They are about key staff who might actually attract business away from their former employer.
Now it is hard to imagine how a shop assistant moving jobs could result in customers deciding to shop elsewhere – just so they can still be served by that shop assistant. I mean maybe if they were super-hot 
I suspect the supermarket is just worried about a competitor setting up nearby and offering higher wages. Restraint of trade clauses are not meant to be just about protecting yourself from the market.
I tend to agree with Laila Harre that the clause is “completely unreasonable and illegal”. Two legal experts also doubt it is enforceable, and Foodstuffs head office have pointed out they don’t think it is enforceable and has only been used in Masterton by the local franchise owner.
Tags: employment law, Foodstuffs, Laila Harre, Masterton, restraint of trade
March 29th, 2008 at 1:41 pm
Spot on DPF! Right on every point. Umm, isn’t there a startling new opinion poll out today?
Vote:March 29th, 2008 at 1:57 pm
startling?
The one that still shows National can govern alone?
Vote:March 29th, 2008 at 2:10 pm
A poll which shows National could easily govern alone and that the Greens would be wiped out – how awful.
You’re new here but it is long-standing practice I do not cover most polls, as I publish a monthly newsletter which goes into detail on them. I do cover the occasional one if it is particularly noteworthy.
Vote:March 29th, 2008 at 2:12 pm
It was out yesterday. BTW, I wonder how much money the store owner is spending training new staff. Maybe he is simply trying to stop the opposition pinching his staff once he has gone to the expense of training them. Otherwise it seems a bit daft.
Vote:March 29th, 2008 at 2:22 pm
I definatly used to have one when I worked and Pizza Hut, and I think at Macdonalds aswell (but not entirely sure, it was almost 5 years ago now). When you put it as protecting the investment that an empolyer makes in training the staff members it seems reasonable. But honestly training at these places consists of being buddied up with another staff member for perhaps an hour (maybe 2 absolute max) then later if you dont know something you ask someone around you, about the same for serving/counter as for out the back in the kitchen. So were talking maximum it costs to train a staff member is around $24. I could be wrong but I dont really consider that much of an investment, though the restraint of trade clause really sucked once the manager started treating me like crap, and there was a new Dominos 2 mins down the road, I would have happily taken a pay cut to be out of that place, but I had a 3 months restraint of trade clause, and needed the money so I was stuck, there wasnt too many other places I coud have gone and worked back then, but it sucked.
Vote:March 29th, 2008 at 3:09 pm
Oops, so sorry about the poll mention, which I had thought may be of interest in the light of some of the threads in recent weeks but which I won’t specify in order not to compound my mistake.
It is very enlightening, and surprising, to hear that the inclusion of restraint of trade clauses in individual employment agreements for the low paid extends beyond the Masterton supermarket. The courts are very loathe to enforce restraints of trade and require them to be “reasonable”, so these clauses would most probably not be enforceable, but the employers might be able to intimidate employees and former employees by threatening actions in the Employment Relations Authority, etc.
Happy news Mike. Since you worked in the fast foods industry Matt McCartin has come to the rescue of the workers there, and you would simply have to join the union and there would be no more restraint clause at all, as the union-negotiated greement would apply. And Matt’s just done a great deal with the largest fast food operator, which owns the Pizza Hut Brand here, amongst others.
Vote:March 29th, 2008 at 3:10 pm
You think that’s bad. How about that time when employees of Wandell’s in Eketahuna had to sign an employment contract giving their first-born child to the supermarket chain?
Vote:March 29th, 2008 at 3:23 pm
Zippy, That was under the ECA.
Vote:March 29th, 2008 at 3:35 pm
Restraint of Trade clauses are difficult but not impossible to enforce. Difficult, on the face of it, to see how the example above would be enforceable.
Vote:March 29th, 2008 at 4:51 pm
Some employers seem to like to include everything in the contract just in case it is enforceable – or maybe just to make the employee think they have an obligation they don’t have. It’s just rational behavior I suppose.
Anyway – I can just imagine pak’n save going to court over billy bob getting a job in a similar supermarket and billy bob fighting that with legal aid. I expect no one wins there.
Vote:March 29th, 2008 at 5:00 pm
GPT1 +0 Says:
March 29th, 2008 at 3:35 pm
Restraint of Trade clauses are difficult but not impossible to enforce. Difficult, on the face of it, to see how the example above would be enforceable.
It says that if you Leave pizza hut for any reason you cannot work at another fast food place for 3 months afterwards. I guess it sounds pretty convicing to a 16 year old.
How about the section in my old Macdonalds contract that says I won’t order anything but standard (ie, can’t even ask for no pickle) for the rest of my life? is that enforacable?
Vote:March 29th, 2008 at 6:47 pm
Adolf wrote:
But even there, I don’t really see the point. I suspect there are Kiwiblog readers who know the grocery trade a little better than me, but OSH regulations or food hygiene standards are hardly a proprietary trade secret. I’d respectfully suggest checkout clerks and shelf-stackers don’t routinely have access to supply contracts or marketing plans, and if they did there are perfectly routine confidentiality/intellectual property clauses to cover that.
Vote:March 29th, 2008 at 8:59 pm
How embarassing for the poor old lawyer who drafted that.
Vote:March 29th, 2008 at 10:24 pm
“Maybe if they were super-hot”?
Because I certainly know that’s the first thing I think about when I go to the store.
Vote:March 30th, 2008 at 9:28 am
Why would such a clause be illegal? I can understand it being unenforceable, but what law does it break? What is the crime? What is the punishment for the crime?
Vote:March 30th, 2008 at 10:08 am
Edit: Illegal? Just goes to show that Laila’s not infallible. She probably wasn’t thinking when she said that, having once trained as a lawyer, and therefore knowing full well that it’s not illegal.
Vote:March 30th, 2008 at 5:28 pm
Grant/jafa – illegal does not equal criminal.
The existence of the Illegal Contracts Act suggests that contracts can be “illegal” even though they’re not criminal.
Vote:March 30th, 2008 at 9:54 pm
I would like to see the supermarket try and enforce that – you can imagine the headlines in the newspapers and TV news – grocery giant vs 16YO shelf packer. it would be commercial suicide.
Vote:Unfortunately a lot of young kids won’t realise it is a bluff, so it will achieve it’s objective.
Geoff