Potential Changes Ahead to Sexual Harassment Claims and Restraints of Trade

As well as potential changes to the Holidays Act, see last year's article Changes on the way for the Holidays Act, there are potential changes on the horizon in relation to sexual harassment claims and restraint of trade provisions. We have outlined the details below.

Sexual Harassment Bill

Currently, an employee has 90 days to raise a grievance, including a grievance for sexual harassment. At present, a Bill is before parliament which looks to extend the period.

The Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Bill ("Bill") is currently awaiting its final reading in parliament before becoming law. If passed, the Bill will amend the Employment Relations Act 2000, to extend the time employees have to raise a personal grievance alleging sexual harassment, from 90 days to 12 months.

MP Deborah Hill, who introduced the Bill, said in its first reading that “Sexual harassment is an invidious and difficult issue to talk about, let alone take action to try to prevent or to seek redress when it is found to have taken place.”

The Bill aims to improve the personal grievance process for victims of sexual harassment by allowing them more time to process what has happened to them before deciding whether to raise a personal grievance.

The Bill has received cross party support in parliament and is expected to pass. However, some commentators have questioned whether the Bill goes far enough in terms of the timeframe, while others have wondered whether it should incorporate other types of claims that build up over time, such as bullying. However, these suggestions have not been incorporated, and if the Bill is passed in its final reading, the extension would only apply to personal grievances involving sexual harassment.

Employers can prepare for the change in law by ensuring their workplace policies on sexual harassment are up-to-date and adequate. If you need any support with this, please feel free to contact our Employment Team.

Restraint of Trade Bill

Restraints are often the source of litigation. Over the last year, we have heard a lot about restraints, particularly the case of Tova O’Brien, where she contested a restraint of trade clause in her contract with Discovery, which would prevent her from launching her new breakfast talk radio show at MediaWorks for three months.

In September last year, a Bill was introduced into parliament with the aim to significantly narrow the scope and conditions under which restraint of trade clauses can be included and enforced in employment agreements. The Bill is currently in its early stages and has only had its first reading. This means that there is a long way to go before the Bill becomes law, and so there is potential for the Bill to change, if it is even passed into law at all.

Generally speaking, the purpose of restraint of trade clauses is to protect the employer’s business, when an employee who holds a prominent position in the business, and/or holds commercially sensitive information, decides to leave. Such clauses typically include non-competition and non-solicitation provisions.

A non-competition clause aims to prevent an employee from working for a competitor or starting a business in a similar field to their former employer. They often stipulate a geographical area in which the employee is prohibited from working for an agreed period of time. A non-solicitation clause seeks to prevent a former employee from approaching employees, clients and suppliers of their former employer for an agreed period of time. However, the courts have generally been hesitant to enforce restraint of trade clauses unless they can be established as reasonable.

If the Bill is passed:

• It would prohibit restraints of trade for lower and middle income employees.  A restraint would have no effect where an employee earns less than three times the minimum wage, $63.60 per hour, equating to approximately $132,288.00 gross per year.

• It would restrict the use of restraints to situations where the employer needs to protect a proprietary interest, and the proprietary interests needs to be described in the employment agreement.

• It requires employers to compensate employees subject to the restraint of trade, not less than half of their average weekly earnings for the duration of the trade restriction.

• It limits the duration of restraint of trade to six months.

If the Bill becomes law, including restraints of trade in employment agreements it will significantly increase costs for employers.  We will update you on how this Bill progresses, if and when it does.

If you have any questions or queries regarding the above, please contact:

Melissa Johnston (Partner) on (09) 306 6729 (mjohnston@mcveaghfleming.co.nz)

Hiruni Wijewardhana (Solicitor) on (09) 262 4940 (hwijewardhana@mcveaghfleming.co.nz)

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Written by Melissa Johnston and Hiruni Wijewardhana