Employer Awarded $28k by his Former Employee (and his Girlfriend)

A man who helped his girlfriend establish a new business, in competition with his employer, has been ordered by the Employment Relations Authority (ERA) to pay his former employer $ 22,854.36, and the girlfriend to pay $6,000 for aiding and abetting him to breach his employment agreement obligations.

Cookright Filtering Services Limited services the hospitality and corporate catering sectors and undertakes cooking oil filtering and disposal tasks.  It also sells cooking oil and other commercial kitchen consumables. Keith Hill was an employee of the company, being promoted to Area Manager in 2017 before his resignation, with an intended end date of 29 July 2023. Kaye Thomas, Hill’s girlfriend, started a competing business A1 Vat Services early in 2023. Hill’s signed Employment Agreement had a restraint of trade and a non-solicitation clause.

On 1 June, Cookright Co-Director Stephen McMullen was contacted by a customer telling him Hill had approached them saying Hill was setting up a business offering the same services as Cookright and that he was approaching other customers as well. On 2 June McMullen raised the allegation with Hill and reminded him of his Employment Agreement obligations. In a subsequent meeting on 19 June, attended by Hill and Thomas as his support person, Hill made it clear he would not comply with his confidentiality, non-solicitation and restraint of trade employment obligations. McMullen consequently paid Hill in lieu of the rest of his notice and advised Hill he would pursue the matter if he continued to breach his post-employment obligations.

A1 Vat Services then employed Hill, and the company continued to solicit Cookright customers. As promised, Cookright then raised the matter with the ERA also naming Thomas as a second respondent.

The ERA concluded Hill did breach the non-solicitation and confidentiality terms, however found the restraint of trade to be unreasonable, primarily on the basis the two-year restraint period. The ERA also found Thomas knew of Hill’s obligations to Cookright and aided and abetted him to breach them.

Hill was ordered to pay damages of $14,854, the amount Cookright said they had lost from losing customers to A1 Vat Services. He was also ordered to pay a $8000 penalty, and Thomas was fined $6000.

This decision is being challenged in the Employment Court.

A lesson from this is to take time when you draft your individual employment agreement.  Consider the specific wording of your restraint of trade clause, what your employee’s position within the organisation will be (are they are senior integral role?).   Also, really turn your mind to your business’s actual needs – don’t just copy and paste from an old employment agreement.  Most importantly, actually read the restraint of trade clause for a reality check on whether it is reasonable.  If you would like some assistance or guidance on what is ‘reasonable’ get in touch with us.