In New Zealand, employees maintain the right to engage in secondary employment, even when holding a full-time position. While employers may wish to restrict this practice, the Employment Relations Act 2000 imposes rules to balance these interests.

 

Genuine Reasons for Restriction

 

Employment agreements can include terms preventing or restricting secondary employment, but only if the employer has “genuine reasons.” Valid reasons include safeguarding commercially sensitive information, protecting intellectual property, maintaining commercial reputation, and preventing unmanageable conflicts of interest. These reasons must be founded on reasonable grounds. For instance, a company may reasonably restrict a new executive from working for a competitor to protect confidentiality and avoid conflicts of interest.

 

Statement of Reasons in Employment Agreement

 

If an employment agreement includes a provision limiting secondary employment, it must explicitly state the reasons for this restriction. Failure to do so may render the provision unenforceable.

 

Extent of Restriction

 

Even with valid and reasonable reasons, the Act mandates that any restriction “not apply to a greater extent than is necessary.” This implies that blanket bans on secondary employment are challenging to justify. Restriction should be tailored to the individual circumstances of each employee.

 

Considerations for Employers

 

When contemplating secondary employment clauses in employment agreements, employers should exercise caution and consider the following:

 

1. Tailored Provisions: Avoid making these provisions standard across all employment agreements. Customize each provision to the unique circumstances of individual employees.

 

2. Genuine Reasons: Ensure that genuine reasons exist for each employee, rooted in reasonable grounds.

 

3. Employee Specifics: Take into account the specific situation of each employee. Factors such as part-time status, access to confidential information, and professional expertise should be considered.

 

4. Enforceability of Outright Bans: Understand that outright bans on secondary work are generally challenging to enforce if contested by employees.

 

5. Necessity of Prohibition: Evaluate whether a prohibition on secondary work is essential or if a provision seeking employer consent to secondary work would suffice.

 

Balancing the interests of both employers and employees is crucial when navigating secondary employment clauses, requiring a thoughtful and individualized approach for each employment agreement.