Wilson Parking is currently pursuing legal action in the Christchurch Employment Court against a former employee, alleging he breached a restraint of trade clause by establishing a competing venture, ATE Property. The company claims the former manager secured short-term lease agreements for sites shortly before his resignation in August 2023 to facilitate his new business, according to court proceedings overseen by Judge Helen Doyle.
Why is the restraint of trade clause being challenged?
Lawyers for the former employee and ATE Property argue that the 12-month restraint is unenforceable and was unreasonable from the moment it was signed in 2013. Glenn Jones, representing ATE Property, argued in court that the reasonableness of such a clause must be assessed based on the circumstances at the time the employment contract was initiated, rather than at the time of departure.
Jones further contended that the information the employee possessed—specifically the identity of site owners in Christchurch—did not constitute a trade secret. According to Jones, information stored in an employee’s memory does not equate to the unauthorized removal of confidential data, distinguishing between “remembering contacts” and the act of copying sensitive files.
How did the employee’s role influence the legal arguments?
Dean Russ, the lawyer representing the former employee, characterized his client’s position as “low-level management” during his tenure. Russ argued that while his client had access to site layouts, pricing, and ownership details, this information was largely in the public domain and did not constitute confidential client lists.
The defense highlighted that for much of his time at Wilson, the employee reported to several layers of management and lacked the autonomy to enter into formal agreements. While the employee was promoted to regional manager in 2020, Russ maintained that his contractual authority remained restricted. The court heard that the employee was expected to report on market trends and participate in site visits with senior management, but he did not have access to proprietary client data that would justify a restrictive covenant.
Restraint of trade clauses are common in employment contracts to protect business interests, but courts often weigh whether the restriction is necessary to protect “legitimate proprietary interests” against the individual’s right to earn a living.
What happens next in the litigation?
Wilson Parking initiated this action after discovering the competing business in November 2024. The company subsequently issued a letter to the former employee requesting the preservation of evidence. As the hearing continues before Judge Helen Doyle, the court will determine whether the specific “cascading” provisions in the employment agreements are valid and if the 12-month restriction is enforceable under the circumstances of the employee’s departure.
Pro Tip: Protecting Intellectual Property
Employers often use restrictive covenants to prevent the immediate loss of trade secrets. To be enforceable, these clauses must be narrowly tailored, reasonable in duration, and specific to the actual influence the employee held over the company’s business relationships.
Frequently Asked Questions
- What is a restraint of trade clause? It is a provision in an employment contract designed to prevent an employee from working for a competitor or starting a rival business for a specified time after leaving their current job.
- Can an employer stop a former employee from using their memory? Legal arguments often hinge on whether the information used is a “trade secret” or general industry knowledge. As argued in this case, distinguishing between memorized contacts and the misappropriation of confidential documents is a key factor.
- Who decides if a restraint is enforceable? In New Zealand, the Employment Court assesses these clauses based on the reasonableness of the restrictions relative to the employer’s need to protect their business.
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