Employment Relations (Restraint of Trade) Amendment Bill

Last September, Labour MP Helen White, a former employment lawyer, introduced to Parliament The Employment Relations (Restraint of Trade) Amendment Bill. It was a Private Members Bill which has now progressed to the Select Committee stage, with the Education and Workforce Committee calling for submissions before the Second Reading. It has the potential to completely change the approach to restraints of trade in New Zealand.

As a recap for those not dealing with restraints of trade on a daily basis, or who may assume that they are largely ineffective, restraints are used in employment agreements to prevent an employee from engaging in business activities that have an adverse effect on their employer at the termination of their contract. They are common place and enforced more often than many people realise.

Types of restraints of trade?

There are three main types of restraints of trade.

• Non-competition clauses prevent a former employee from working in an organisation that is in competition with their former employer. This is the most severe form of restraint and hardest to enforce.
• Non-solicitation clauses prevent a former employee from contacting clients they know from their former employment. They may also prevent an employee from contacting ex-colleagues and trying to poach them.
• Non-dealing clauses prevent an employee from accepting work from a client of the previous employer. It is more restrictive than a non-solicitation clause, but less onerous than a non-compete.

What is the current law?

The starting point for restraints is that they are unlawful as an infringement of the freedom to trade and earn a living. However, if an employer can prove that the restraint of trade is necessary to protect a legitimate business interest, and is reasonable in terms of its duration, geographical coverage and overall scope, the Employment Relations Authority and Employment Court will uphold the restraint and enforce it against an employee.

What will the Bill change?

The Bill proposes three key changes to the law in relation to restraint of trades. 

The first key change is that restraint of trade clauses will be unenforceable where the employee’s earnings do not exceed a threshold weekly rate. The threshold weekly rate is an amount that is three times the minimum wage, which currently translates to an annual salary of NZ $132,288.

The second key change requires employers to pay reasonable compensation to the employee for the duration of the restraint. Reasonable compensation equates to at least half the employee’s average weekly earnings. 

The final key change that the Bill proposes, is that restraint of trade clauses will have no effect beyond six months after termination i.e. the maximum duration will be six months.

When the restrictions will apply

The new restrictions will only apply to ‘conduct’ that occurs after the new law comes into force. 

However, the restrictions will apply to all employment agreements entered into after the Bill is passed into law and for employment agreements entered into before the new law comes into force after six months. 

What does this mean for employers?

If the Bill is passed in its current form, employers who wish to rely upon restraints will need to re-consider their entire approach and almost certainly will have to update their employment agreements.

NZ employment law issues related to ChatGPT

The sudden emergence of ChatGPT and other generative artificial intelligence models has brought with it a multitude of benefits and concerns for employers. Its ability to process large amounts of data and respond in a near-human manner gives it the potential to revolutionize many areas. Both employers and employers have found ways to use ChatGPT to aid them in their course of employment, however the relative youth of this form of technology raises many areas of uncertainty in regard to its use in the workplace. 

New Zealand does not yet have any regulation or legislation dealing with AI. University of Auckland lecturer, Nikki Chamberlain has cautioned against the use of this new technology and stated the need for legislation which addresses it. The Department of Internal Affairs has confirmed the government is in the process of working on guidance for agencies and their use of AI. This is expected to arrive in the near future. 

The Office of the Privacy Commissioner has released its expectations on agencies when using AI tools such as ChatGPT. The responsibility of complying with these expectations rests fully on the agencies. The expectations include: 

• Human review of any AI completed work to mitigate the risk of bias and inaccuracies along with consideration of any other risks. 
• Conduct a Privacy Impact Assessment on the use of the AI
• Transparency when AI is involved in the undertaking of any work
• Measures to ensure security of information and confidentiality
• Engagement with Māori on potential impacts on their communities and taonga.

A full description of expectations is available on The Office of the Privacy Commissioner website.

The legal consequences of using generative AI are still to be confirmed in what is uncharted territory. The main legal risks currently on the radar are confidentiality breaches with information entered into chatbots then being communicated to other uses, and organisations relying upon AI information or advice which is inaccurate. Instances of employee misuse of ChatGPT are already appearing, notably in the legal industry where lawyers have been caught referring to fictitious cases created by ChatGPT. Employers may want to front foot this issue by developing appropriate policies to govern (or even ban) the use of ChatGPT type technologies.

Many international companies have already banned or restricted staff from using ChatGPT in their work including Apple, Samsung, Amazon, JPMorgan Chase, Deutsche Bank and Goldman Sachs. Government agencies in New Zealand have followed suit with the Ministry of Business, Innovation and Employment (the ban has now been paused) and Te Whatu Ora banning their staff from using ChatGPT while they consider its implications. 

As the technology continues to develop, employers may wish to tap into the benefits of incorporating generative AI into the work environment. If employers intend to do so then clear policies will need to be developed to deal with the risks and consequences of its use. The scope of this policy will be for the employer to determine, based on the business model and their employees. Key points to address will be:

• Meeting the expectations of the Privacy Commissioner 
• Setting clear boundaries and guidance on when and how it can be used
• Security measures to protect sensitive and confidential information
• Training for employees 
• How to deal with situations where things go wrong, such as when AI is used in an improper manner or provides incorrect information
• Complying with any new government direction or law that comes into effect

Generative AIs such as ChatGPT are not going away and will only continue to develop as time goes on. Until there is legislation overseeing its use, it is up to individual employers to weigh up the benefits and risks and determine whether it has a place in their work. Now is the time to begin considering what role ChatGPT may play for your organisation. 

Amendments to Adventure Activities Regulations

The Minister for Workplace Relations and Safety, Hon Carmel Sepuloni has recently announced changes to the Health and Safety at Work (Adventure Activities) Regulations 2016. Reviews into the Whakaari/White Island tragedy have highlighted the need for stricter guidelines surrounding Adventure Activities in New Zealand. 

The proposed amendments are in line with the recommendations made by the Ministry of Business, Innovation and Employment’s targeted review of adventure activities and further internal reviews by WorkSafe New Zealand. The new requirements will come into effect in April 2024.

The regulations aim to standardise practices across the adventure activities sector, with heightened safety audit standards. This includes an obligation to declare sector-specific ‘notifiable incidents’ such as natural hazards encountered during the course of the adventure activity. Under the new Regulations, a natural hazard is any atmospheric-, land-, or water-related occurrence (including volcanic activity, landslip, avalanche, rockfall, ice fall, storm or flooding) the action of which adversely affects a location where an activity is provided. Additionally, adventure activity operators (operators) must also declare the failure, malfunction or defect of any safety-critical equipment while in use.

Operators will have a duty to communicate risks to participants. This is to ensure that participants are aware of any serious risks to their individual health and safety that may arise. Personal liability is attached to the contravention of this regulation. 

The amended Regulations set out a stricter regime for registration as an adventure activity operator and provide WorkSafe with broader regulatory powers. These powers include the ability to suspend, decline and cancel an operator’s registration. By and large, these powers are not new, rather, the amended Regulations make it easier to exercise these powers.

Those working in or with the adventure tourism industry should ensure they are up to speed with the new regulations and ready to comply by April next year.

This newsletter contains contributions from: Luke Ji and Bella Cronin-Stone

For further information on employment related matters, please visit our Global Employment hub, where you can find updates from many jurisdictions, including New Zealand, or reach out to one of our partners – Charlotte Parkhill, Greg Cain, James Warren or Renee Butler.