Following the conclusion of a three-day hearing, the determination from the Employment Relations Authority (Authority) was that Tova O’Brien remains restrained from starting her new position at MediaWorks, with the breakfast radio show TodayFM, until 15 March 2022, due to a restraint of trade (ROT) clause in her employment agreement with Discovery.
O’Brien was working as a Political Editor for Discovery (the previous TV arm of Mediaworks) and intended to move to Today FM radio (the radio arm of Mediaworks).
The legalities (in short) are as follow:
- The ROT clause in O’Brien’s contract restrained her from working for the ‘competition’ anywhere in New Zealand for 3 months after her employment ended with Discovery (‘competition’ being the operative word).
- O’Brien argued that her new role as a radio show host captured a substantively different audience to her work as a political editor and therefore would not be ‘competition’ for the purposes of her ROT. O’Brien claimed that Discovery’s ROT clause is merely punitive in preventing her from undertaking work as a journalist in any sector within New Zealand.
- The Authority rejected this argument, siding with Discovery’s contention that O’Brien’s new role appealed to a significant portion of Discovery’s target market, namely the younger generation of consumers who appear to switch between breakfast radio and TV media based on their preference of hosts.
ROT clauses are inherently difficult to enforce given the significant effect they can have on an employee’s ability to work in their chosen field and the effect they could have on competition generally.
Nonetheless, we are not surprised to see a three-month ROT for a senior high-profile, presumably well-paid role, upheld as reasonable. Discovery was able to show that it has legitimate proprietary interests in business relationships built up by Ms O’Brien, goodwill in the New Zealand marketplace, and confidential information, including Discovery’s editorial priorities and future plans. The ROT was designed to protect those interests and in our view it would have been unusual for the Authority to regard that as excessive.
If you are considering the enforceability of a ROT clause, the key principles to bear in mind are as follow:
- ROT clauses are presumed to be unenforceable. The party seeking to enforce the ROT must prove the provision is reasonable, taking into account specific legal tests.
- A ROT should be no wider than is necessary to protect the party it was designed to protect (ie, is it too long in duration? Does it cover a geographical space that is too wide? Does it restrict the employee from working for only the necessary competitors?).
- A ROT cannot protect an employer from ‘mere competition’ (ie, the skills and experience an employee gains from employment is generally not subject to a ROT. The employer must be able to point to “trade secrets” that can be regarded as the employer’s property and, therefore, must be protected by the ROT).
If you have any concerns about the enforceability of your ROT clause don’t hesitate to get in contact with a member of our employment law team.
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