Call for fewer but more effective work rules

OPINION: Restraint of trade clauses in employment contracts have been highlighted in the legal fight by journalist Tova O’Brien, who is leaving TV. There are reports that seamstresses, on $20 an hour are subject to six months’ restraint, meaning because they can’t afford a legal challenge or take that much time off work, they are effectively trapped in their jobs. This seems unfair. Why doesn’t Parliament alter the law to restrict use of restraint clauses? An MP from each side of the House gives their views.

In the red corner Arena Williams Manurewa MP, Labour

Restraints of trade can be used to keep working people down. They can be a handbrake on productivity and innovation, and they don’t usually serve the industry well in the long run.

A couple of years ago, a friend came to me for legal advice. She was picking up dress-making and design work through our local mums’ network and wanted to set up her own business. She had been working at the mall hemming jeans for years on 10-hour shifts, and her boss would regularly remind the workers of the restraint clauses in their contracts.

‘‘These clauses are rarely enforced,’’ I told her. ‘‘I don’t have the money to go to court to find out,’’ was her response.

And that’s the problem: restraints have a huge impact on low-wage workers who can’t afford to challenge an unfair limitation on their ability to earn a living. And, because they can’t afford to wait it out before switching, they get stuck in low-wage jobs.

We want to see workers being able to secure higher wages at businesses that are able to make the most of their skills and potential, or get out on their own and upskill others.

When she eventually quit her mall job to start her dressmaking business I referred her to my friend, employment lawyer Helen White, who is now the Labour MP proposing a member’s bill to reform restraints of trade.

New Zealand also lacks sector-wide bargaining in our labour market, which can allow employers to undercut each other, causing a race to the bottom on wages which comes at the cost of our most vulnerable workers and undermines productivity.

To make sure workers get a fairer deal, we are introducing Fair Pay Agreements to set basic employment conditions across an industry. We have brought back meal and rest breaks, and restored protections for vulnerable workers. We have also boosted the minimum wage and passed equal pay legislation, because we believe that a hard day’s work deserves a fair day’s pay.

As we rebuild the economy, we have an opportunity to design better support for New Zealanders who lose their jobs through no fault of their own.

We’re looking at a scheme that could provide those who lose their jobs with around 80 per cent of their income, with minimum and maximum caps.

Further details on this will be announced in the near future.

In the blue corner Stuart Smith Kaikoura MP, National

The summer break is a time when many New Zealanders reassess their lives and often consider changing jobs, and in a very tight labour market as we have at the moment, there are plenty of jobs available and not enough people to fill them.

Businesses have spent the summer trying to fill vacancies and employees have dusted off their CVs and employment contract’s as part of their own due diligence in considering a change.

An employment contract sets out the rights and obligations of both parties in an employment relationship and is a legal requirement.

The purpose of a restraint of trade clause in a contract is to protect an employer’s processes, sensitive information such as intellectual property, which includes the way things are done and customer contractual arrangements.

They are legitimate and appropriate in many cases and there are rules to ensure they are reasonable and do not affect an employee’s ability to get a new job.

However, the case of a seamstress on $20 an hour being subject to a six-month restraint of trade on the face of it appears to be well outside the existing rules.

If it is, the courts would likely take a dim view of this and rule accordingly, that of course requires the employee concerned to take the matter to court.

It has been suggested that a Labour MP’s proposed member’s bill that would establish a threshold for restraint of trade clauses would fix this issue.

However, the Labour Party voted against a member’s bill put forward by Paul Goldsmith that would have introduced thresholds into employment contracts.

We often hear the call for a new law to deal with all sorts of issues, but they often do not achieve what they set out to and create more bureaucracy and red tape along the way. This in turn creates more problems than they set out to solve.

What we do not need are more interventions such as the ‘‘Unfair Pay Agreements’’ being pushed by the Government that will take New Zealand back to the bad old days of ‘‘National Awards’’ in the 1970s.

We need fewer but more effective rules that allow a flexible labour market that will enable our recovery from the Covid lockdowns that have wreaked havoc through the business sector.