The Employment Relations (Restraint of Trade) Amendment Bill, which will prohibit the use of restraints of trade in employment agreements for lower and middle income employees has passed its first reading in Parliament, says Labour MP Helen White.

A restraint of trade, also often called a non-compete, stops an employee when leaving a job, from working in the same or similar field, or for a competitor for a set period after the employment has ended

“While such restraints were once rare, it is concerning that they have become increasingly common in many employment agreements where they are not needed and hurt workers and businesses.” says Helen White.

“Research just out of Australia says 1over 1 in 5 workers have a non-compete and that includes many outward facing junior roles, like childcare workers”,

“I was shocked to see these clauses in some retail workers collective agreements on $20.50 per hour,

“The research shows these clauses suppress wages and innovation. The US is Federal Trade Commission is proposing to ban them because it says this could increase wages by US$300 billion per year.

“This has been recognised as an anti-competitive practice used by large companies to stop employees moving to a better paid job and their competitors being able to get ahead by offering better pay. Lots of workers just can’t afford to move if it means months without pay, even though that would be better for their career in the long term. It also means employers don’t pay good workers what they are worth because they know the employee can’t afford to leave.”

Right now many restraints which shouldn’t be enforceable go unchallenged because challenging them in court is too expensive and stressful so my this bill will bring certainty to lower and middle income New Zealanders by banning these restraints.

“Research in America shows where restraints are banned for employees in these income brackets their wages go up 6 percent in 5 years and the benefit is almost double for women so this bill is a serious step in addressing the pay gap between women and men.”

“The bill reinforces the right to protect confidential information to address the employer’s legitimate concern is an employee taking trade secrets with them when they leave”, says Helen White.

Where this bill allows restraints the bill will limit their duration to six months and require compensation be paid to the employee of at least half their salary for the period of restraint.

“I looking forward to the Select Committee further examining the Bill and would ask for anyone effected by unfair restraints of trade to come forward with their stories”, says Helen White.

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