Employment Relations (Restraint of Trade) Amendment Bill

Employment Relations (Restraint of Trade) Amendment Bill The Parliament of New Zealand enacts as follows: 1 Title This Act is the Employment Relations (Restraint of Trade) Amendment Act 2022 . 2 Commencement This Act comes into force on the day after the date on which it receives the Royal assent. 3 Principal Act This Act amends the Employment Relations Act 2000. 4 New sections 67I to 67K and cross-heading inserted After section 67H, insert: Restraint of trade provisions 67I Interpretation 1 In sections 67J and 67K this section and sections 67J and 103(1)(ia) ,— 12-month period means the 12-month period immediately before the end of the last pay period before the end of employment average weekly earnings , in relation to an employee, means the employee’s average weekly earnings as calculated under subsection (2) employment period means the most recent period of employment in the 12-month period in which the employee was employed by the employer gross earnings has the meaning given to it by section 14 of the Holidays Act 2003 reasonable compensation , in relation to an employee who is subject to a restraint of trade provision, means compensation that— a is paid separately from any salary, wages, or other benefit provided to the employee in connection with their period of employment; and b amounts to not less than half of the average weekly earnings of the employee for each week (or part week) that the restraint of trade provision applies restraint of trade provision means a provision in an employee’s employment agreement that— a operates after the employment ends; and b prohibits or restricts the former employee from 1 or more of the following: i performing work in a similar field to their former employer’s business: ii in the course of business, contacting or dealing with employees or clients of their former employer’s business: iii offering employment to employees of their former employer’s business ROT compensation , in relation to an employee who is subject to a restraint of trade provision, means compensation that— a is paid separately from any salary, wages, or other benefit provided to the employee in connection with their period of employment; and b amounts to not less than half of the average weekly earnings of the employee for each week (or part week) that the restraint of trade provision applies threshold weekly rate means an amount that is 3 times the minimum weekly adult rate prescribed under section 4 of the Minimum Wage Act 1983. 2 For the purposes of subsection (1) , average weekly earnings must be calculated as follows: a = b / (c – d) where— a is the employee’s average weekly earnings b is the employee’s gross earnings received from the employer in the 52 week period preceding the end of the employment in the employment period c is the lesser of the following: i the number of weeks (to the nearest week) that the employee has been employed under the employment agreement (or part weeks) in the employment period ; and ii 52 d is the number of weeks (to the nearest week) in the 52 week period (or, if the employee has been employed under the employment agreement for less than 52 weeks, in that shorter period) in which the employee was— i being paid weekly compensation under the Accident Compensation Act 2001: ii exercising their entitlement to leave under the Parental Leave and Employment Protection Act 1987: iii on leave without pay with their employer’s agreement. d is the total number of weeks (or part weeks), if any, in the employment period that the employee was on unpaid leave for a period of more than 1 week as agreed with the employer for the purposes of section 16(3) of the Holidays Act 2003. 67J Restriction on restraints of trade 1 A restraint of trade provision is of no effect unless— a the employee’s average weekly earnings exceed the threshold weekly rate; and b the employer has a proprietary interest and— i the provision protects the interest; and ii the interest is described in the employment agreement; and iii the restrictions imposed on the employee by the provision are no greater than necessary having regard to the interest; and c the provision requires the employer , at the time that the employment ends, to pay reasonable ROT compensation to the employee for the restrictions imposed by the provision by the date specified in subsection (2)(b) . 2 A restraint of trade provision is of no effect unless ,— the reasonable compensation referred to in subsection (1)(c) has been paid to the employee. a on the date on which the employee’s employment ends, the employee’s average weekly earnings exceed the threshold weekly rate; and b the ROT compensation is paid to the employee in full, by the date that is the later of— i 5 working days after the date on which the employee’s employment ends; and ii 5 working days after the notice in subsection (2A) is given. 2A If an employer requires an employee to comply with a restraint of trade provision, the employer must notify the employee in writing of that requirement by the earliest of the following: a 2 weeks after either party gives the other notice that the employment will come to an end: b 2 weeks after the date on which the employee’s employment ends: c 2 weeks before the end of an employment to which a fixed term agreement applies under section 66 . 3 A restraint of trade provision ceases to have effect on the day that is 6 months after the date on which the employment ends (or on any earlier date agreed by the parties). 4 An employment agreement that contains a restraint of trade provision that is of no effect under this section is not, as a consequence, an illegal contract under subpart 5 of Part 2 of the Contract and Commercial Law Act 2017. 67K Effect on law of restraint of trade, confidentiality, and fidelity 1 Nothing in sections section 67I or 67J limits or affects any rule of law relating to restraint of trade, except to the extent that the rule is inconsistent with those sections. 2 Nothing in sections section 67I or 67J limits or affects the common law duties of confidentiality and fidelity. 5 Section 103 amended (Personal grievance) In section 103(1)(h), replace or 67H with 67H, or 67J . After section 103(1)(i), insert: ia that the employee has been disadvantaged by some unjustifiable action of the employer relating to a restraint of trade provision in the employee’s employment agreement that, at the time of the employer’s action, was of no effect in accordance with section 67J ; or 6 Schedule 1AA amended In Schedule 1AA Schedule 1AA ,— a insert the Part set out in the Schedule Schedule of this Act as the last Part; and b make all necessary consequential amendments. New Part 4 7 inserted into Schedule 1AA 4 7 Provisions relating to Employment Relations (Restraint of Trade Terms ) Amendment Act 2022 17 23 Interpretation In this Part, 2022 Act 2022 Act means the Employment Relations (Restraint of Trade) Amendment Act 2022 . 18 24 Application, savings, and transitional provisions arising from 2022 2022 Act 1 The amendments made by the 2022 Act do not apply to conduct that occurred before the commencement of that Act. 2 If a collective agreement (the previous agreement ) is in force immediately before the commencement of the 2022 2022 Act, sections 67I to 67K (as inserted by section 4 of that Act) apply to— a any collective agreement that replaces the previous agreement, on the commencement of the replacement agreement; and b an individual employment agreement that comes into force under section 61(2)(a), based on the previous agreement and any additional terms and conditions agreed under section 61(1), on the commencement of the individual employment agreement. 3 If an individual employment agreement has been entered into, or has come into force under section 61(2)(a), before the commencement of the 2022 2022 Act, sections 67I to 67K (as inserted by section 4 of that Act) apply to the agreement from the day that is 6 months after the date on which the 2022 2022 Act came into force.