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Interviewing job applicants: loaded questions

Published Herald Sept 18, 2012

New Zealand's politically correct laws often block employers from asking job applicants relevant questions. To avoid getting into strife with government bodies, like the Human Rights Commission, Privacy Commission or the Employment Relations Authority, I recommend significant caution when interviewing potential staff.

Do you have any medical conditions?

While you do have a right to ask the applicant if they have any physical or medical conditions that could prevent them undertaking a position (stress-related difficulties for someone hoping to join the police force, or physical constraints for a person applying to collect road-side rubbish, for example), you can't ask them to provide all their medical details.

Questions should be related to the person's ability to meet the demands of the position. If the work is physically demanding you could ask: "Are you aware of any health and safety issues that may impact on your ability to do the job?" In fact, in these circumstances, you could lawfully request they undertake a fitness test or obtain medical clearance.

Just don't ask for medical information that's not directly related to the position.

Are you getting married or having children?

The Human Rights Act says that it's illegal to discriminate on the basis of sex. This includes pregnancy, family status and marital status. You will probably say that all these factors can affect an employee's ability to attend work and can also affect them at work. So why can't you ask? The answer is because, 20 to 30 years ago, some politician thought it was a good idea.

Stick to the script and only ask directly relevant questions. There is nothing wrong in asking about an applicant's ability to commit to the business. Talk about the hours of work or the requirement to sometimes work after hours.

We already have too many women

A Hamilton car dealer, who employed many women, notified an applicant that they had enough women and would not be taking her application any further. The Human Rights commission was not impressed with this and the employer ended up paying the applicant compensation.

It is unlawful to discriminate under gender, therefore, do not advertise or tell an unsuccessful candidate that they were unsuccessful because of their sex. In some rare cases it is relevant to employ only one gender, for example a women's undergarment shop.

We will do a credit check

It is okay to ask for a credit check from applicants applying for roles that have financial risks (an accountant or credit controller), but don't ask this for other positions because the Credit Reporting Privacy Code 2004 can be used against you.

The Privacy Commissioner recently ruled that asking a person who's applying for a part-time retail role for a credit check is a breach of privacy. They said that the employer had no legitimate reason to undertake a credit check. The Commissioner also found that the request breached the Privacy Act because it was not lawful to collect the information for the position in question and the purpose for which the information was being collected was unclear.

Do you have a criminal record?

Yes; even criminals are protected under our current laws! The Criminal Records (Clean Slate) Act 2004 makes it illegal to discriminate against people with a criminal record of offences that occurred seven years earlier and had no sentence of imprisonment.

There is nothing in law preventing you from asking an applicant about their criminal history or for consent to access their criminal records to assess their suitability for a position. However, if you don't employ this person, for any reason, and they had a criminal record going back beyond seven years, they could challenge you for not employing them because of those convictions.

Remember you can only make those decisions for criminal offences that occurred within seven years and where no sentence of imprisonment was imposed.

Please provide your email and Facebook passwords

Most of us see this as crossing the boundaries of reasonableness; however, this year it has been publicised that some employers have asked for this information.

This is an obvious breach of a person's privacy and a breach of the Privacy Act.

Anyway, I do recommend you access media sites, like Facebook, to get more information about potential employees. This information is normally publicly accessible and able to be viewed easily.


The information you gather from an applicant during an interview usually determines whether you'll take their application further. What happens if they have lied to you? What happens if they have only given you selected answers and not revealed matters that will affect their ability to undertake the role?

There is a simple safeguard you can take - get the employee to fill in an application form that asks these relevant questions. This form will provide you with a record of their answers.

If an employee has provided false information then, provided the form notifies them that incorrect information will result in termination, you have grounds for dismissal.

It's time small businesses get a look-in

Published Herald July 19, 2012

Did you know that 90 per cent of New Zealand businesses employ five or fewer staff and 70 per cent of all businesses are sole operators?

Why do 90 per cent of Kiwi businesses fail to grow beyond five employees? Because our employment laws are too complicated and cost-hungry.

Terry McLaughlin, chief executive of the New Zealand Institute of Chartered Accountants, was recently quoted in the Herald as saying that we have too many small businesses in New Zealand and this is restricting our economic growth. He went on to say that we need more big businesses in order to sustain them.

Business owners are scared of what will happen if they make a mistake when handling employment issues.

And because they're small businesses, they don't have the time or money to fully understand the employment law - it's all too hard.

The overall impression is that employment law is about employer bashing, leading to employees swaggering around the work place saying, "step out of line, boss, and I'll shoot you with a personal grievance".

To demonstrate, the Government changed the law regarding when it is justifiable to dismiss an employee.

The legislation now states that an employer can dismiss an employee if that's what a reasonable employer could have done in the circumstances - they changed the word would for could.

No one knew what this meant, including the lawyers at the Employment Relations Authority.

It took a year before the Employment Court had a case where it could show what this change in the wording meant, so how is a small employer supposed to know when it's lawful to dismiss?

For years now, businesses have avoided employment laws by replacing staff with contractors.

These redundant employees have become the contractors (small business operators) and are working harder, longer, and often for less money.

Builders, for example, don't hire staff, they hire contractors.

Telecom, or should I say Chorus, rehired its staff as contractors in order, I suspect, to rid themselves of unions and pesky employment law.

The Ports of Auckland wanted contractors so as to rid themselves of its employees. The reasons there are obvious.

If you visit a large business you will often discover that even the receptionist is a contractor.

Our small-business operators are hardworking Kiwis - mums and dads struggling day in and day out to earn a fair living.

These Kiwi battlers earn for this country - wait for it - 39 per cent of our gross domestic product.

That's huge and they need to be heard, but instead they are ignored by our Government.

According to a 2011 report from the Ministry of Economic Development - titled SMEs in New Zealand: Structure and Dynamics - 90 per cent or 421,823 of New Zealand businesses employ five or fewer staff.

Despite this, the Government only appears to listen to the unions and large employer associations who make the most noise.

They have convinced the Government that big business is all that matters.

To prove this point, the Employment Relations Act is more than 300 pages long and 95 per cent of this is about businesses with more than 20 employees, and unions.

Nothing is mentioned about small businesses.

Unfortunately for small businesses, most politicians come from the unions, the government sector, legal or teaching professions and have only ever dealt with big businesses.

Small businesses need a voice, so what's the solution?

Our friends across the ditch may have an answer.

In Australia there is one employment law for small businesses and another for big businesses. It's time we gave our small businesses a fair go.

Butcher put new dates on old meat

NZ Herald May 3, 2012

A butchery manager at an Auckland supermarket was sacked for disguising old meat with new "best before" date labels.

West Auckland man Michael Dick was fired from his job at the Westgate Countdown in September 2010 after colleagues saw him repackaging chicken and adding a new "best before" date of the following day to extend the shelf life.

He did a similar thing with beef -mincing it and rewrapping it before putting it back out for sale- and was also seen putting "reduced" or "manager's special" stickers on the meat.

Mr Dick took the supermarket chain to the Empwhiteloyment Relations Authority, which has found Countdown was justified in firing him.

He claimed he was trained to handle meat that way, and was under pressure from the company to keep costs down.

But Countdown denied his actions were common practice and said anyone caught compromising standards was dealt with quickly.

The ERA found there was no evidence to support Mr Dick's claim that the practice was in use when he began working at the supermarket.

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Last night, Mr Dick would say only: "We fought the battle and lost, unfortunately, but life continues."

The ERA said in its decision, made public yesterday, that on September 20, 2010, Mr Dick was seen trimming fat from beef pieces, before mincing and rewrapping the meat.

He placed the minced meat back on shelves for sale, with a new best-before date for the next day.

An investigation was started, and the company discovered he had altered wastage figures for his department, reducing the amount of waste recorded on September 11 from $786.60 to $331.46 without telling anyone.

Mr Dick claimed the store had a practice of rewrapping and relabelling meat to reduce waste, and said Countdown wanted workers to keep the value of wasted meat below a set amount.

Meeting that target helped earn a bonus, he said.

He said other employees were doing the same thing and had not been dismissed.

Countdown spokesman Luke Schepen said any claim that what Mr Dick did was standard practice at Countdown was false.

"The safety of our team members and our customers is an absolute priority. On the rare occasion we find anyone compromising this commitment, we take swift and immediate action, and have done so in this case."

Dr Mark Hobbs from Auckland City Hospital said eating old meat, particularly chicken, was "never good".

"But if it's only a day later, it probably was not going to make much difference," he added.

Mr Dick's lawyer, Max Whitehead, said his client had worked in the industry for 24 years and had always re-packaged meat.

"Not to a dangerous capacity where the public have to be concerned, but he's been doing this labelling all this time. That's why he couldn't believe it when he was facing dismissal."

Mr Dick, who is in his 40s, did not think his actions endangered the public, Mr Whitehead said.

Days after he was dismissed from Countdown, Mr Dick got a job as a butcher elsewhere in Auckland, but Mr Whitehead would not say where that was.

"It's hard to find good butchers and he has got a good reputation," the lawyer said. "He's a damn fine one. He's very proud about what he said."

Mr Whitehead said Mr Dick's difficulty was that he was unable to find witnesses willing to testify against their employer and back his claims that relabelling was common.

Liquor store boss accused of paying slave labour wages

By Hayden Donnell
NZ Herald Feb 2, 2012

Slave labour allegations have been leveled at an Auckland liquor store boss over his "shocking" treatment of 12 new immigrant workers.

The workers at the centre of the allegations were all new immigrants from India and the Philippines who had traveled to New Zealand on student visas.

Employment law specialist Max Whitehead said they were unpaid for up to a month after their start date at the central Auckland liquor store.

When they complained, their boss forced them to work beyond the 20 hours a week allowed under their Visas, then threatened to tell the authorities about their actions and get them deported, he said.

He claims the workers were made to work for as little as $4 an hour. One alleges the boss threatened to kill him.

"I can say in 25 years of doing employment law I haven't seen anything as bad as this. It's absolutely shocking.

"These guys have been immensely exploited. They've been made to work 12 to 14 hours a day, paid miserable rates, been abused and threatened. You could look up the dictionary definition, but it's pretty close to what I would define as slave labour."

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The Department of Labour (DOL) has been investigating the workers' allegations since a complaint was laid on January 13.

A police complaint has also been laid against the liquor store owner and an investigation is underway.

Mr Whitehead said the DOL has agreed not to deport the men at the centre of the allegations while an investigation is ongoing.

He said most of them were in their 20s and 30s and at least one was married with a family.

Eight of the men were living in one small flat and one had gone deaf in an ear because he did not earn enough money to seek treatment for an ongoing medical issue, Mr Whitehead said.

"When these guys came into my office they were absolutely terrified. They were saying 'what is going to happen to us if we complain'.

"My biggest fear is there's more of these cases out there and they don't get reported."

Sacking over LinkedIn profile highlights net risk

NZ Herald Jan 9, 2012

The case of a British employee who alleges he lost his job for saying he was interested in 'career opportunities' in an online CV highlights the dangers of putting personal information on the internet, say Kiwi employment experts.

John Flexman, 34, posted his career history on networking site LinkedIn while employed as a graduate and development manager for gas company BG Group in Reading, the Daily Mail reported.

As part of his profile, he also ticked a box to say he was interested in career opportunities, the website reported.

However, after discovering his profile his employer took exception to it, saying Mr Flexman had revealed confidential information and breached company policy.

Mr Flexman is understood to have been ordered to remove the profile and was called to a disciplinary hearing for 'inappropriate use of social media'.

He was using the website to advance his career at a cost to the company: "In effect what you were saying was 'what a terrible place this is but what a great job I've done'," BG Group lawyer Ian Gatt QC, is reported saying.

Mr Flexman said he should have put more thought into the content of his profile but that he had a right to post his CV publicly.

"But did I do it to further my career? That's absolute nonsense."

Social media a modern minefield employers must negotiate

NZ Herald May 5, 2011

It wasn't so long ago that an employee could complain all they liked about their wage, an irritating customer, or Jim, the colleague with bad breath.

Normally this would play out over a few beers with mates, and afterwards everyone would feel much better, and that would be the end of it.

Those days are gone.

Today, many people discuss their problems in the virtual world, on social networking site such as Twitter and Facebook. This technology has changed everything - posts and tweets are in print and unless you are careful with your privacy settings, a seemingly harmless gripe about a boss or colleague can end up being broadcast to a huge audience, creating a world of trouble.

It doesn't surprise me that the Employment Relations Authority and courts, like other jurisdictions around the world, have had a rising number of cases brought before them.

Here are a couple of examples:

*In 2008, McDonald's Kaitaia obtained orders restraining an employee from posting unflattering comments on his blog.

*An employee of the Wellington Free Ambulance Service was sacked after calling a co-worker, on Facebook, "a prick", "a dick", and telling him to "learn his place". In this case the authority found that the dismissal was unjustified. It said the comments were not enough to dismiss, but were relevant to the decision not to reinstate her.

*Last year, NZ Post dismissed a postie, Lyndon Hohaia, for creating a comical blog on his Facebook page about a fictional postman.

In June last year, the Employers and Manufacturers Association (Northern) had this to say: "Employers should take action if employees bad-mouth them on Facebook or other social networking sites."

I agree with them. Employers should take action if they or their employees are being slandered on social networking sites.

However, more often than not, indiscretions happen outside of the workplace making the rules for disciplinary action not so straightforward.

The Court of Appeal's decision in the Smith versus Christchurch Press case offers some useful guidelines to employers when assessing misconduct outside of the workplace.

In this case, Mr Smith invited a female colleague to his home during their lunch hour and made unwanted sexual advances.

She complained to her boss and Smith was sacked.

The Court of Appeal upheld the dismissal. The decision was based on the following categories in which dismissal for misconduct outside the workplace can warrant dismissal. These same guidelines can be applied to misconduct online.

They are:

The employer's business might be damaged in some way.

The conduct might be incompatible with the proper discharge of the employee's duties and cast doubt on their suitability for the job.

The conduct might adversely affect relationships with other employees in the workplace.

The conduct might impact on safety at work, for example if it involved apparent dangerous behaviour.

The conduct might undermine the trust and confidence between employer and employee.

In simple terms, the Court of Appeal said there must be a link between the conduct and the employment.

The employer doesn't have to prove that damage was done to justify sacking an employee, only that the potential for damage is there.

My advice to employers: have a clear policy on internet and email activity so that everyone knows where they stand.

Make it clear to your staff that an inappropriate comment in cyberspace could cost them their job.

Explain that they can measure their comments by asking, would my employer be happy if this appeared as a headline for a news story?

It's common sense really.

On his return to work he was handed a list of disciplinary charges and told he could be sacked, Reading Employment Tribunal heard.

The dispute led to Mr Flexman's resignation in June, reported the website.

Employment law expert Max Whitehead of Whitehead Group Employment Solutions said it was unlawful to treat anybody differently because they were seeking employment.

However, employers were entitled to expect loyalty from staff and if the employee knowingly published confidential information in his online CV, the dismissal may have been justified.

"If the employee breached the trust or confidence to such a degree, that's reason for dismissal," he said.

LinkedIn was a networking site so CV details were required in order to find like-minded people, said Madison Recruitment chief operating officer Julie Cressey.

However, there were boundaries to consider when posting information online: "It depends on what he wrote and how he framed it," she said.

The case highlighted the need to be careful what information you put online, said Drake Recruitment Agency Hamilton branch manager Christine Haigh.

"It's not something that should happen but it is public property like Facebook so you've got to be careful," she said.

However, it wasn't unusual for an employee to be looking at other career opportunities, as 80 per cent of the job market are looking for work, she said.

Alterations to sick leave go too far, says expert

NZ Herald Jul 22, 2010

The Government's plan to change the law so that bosses will no longer need reasonable grounds to demand proof of sickness from a worker is being called a step too far by an employment law expert.

The current law states that an employer can ask a worker who has taken three consecutive sick days for proof of sickness or injury, which may include a doctor's certificate.

But the law also states that an employer can ask for this proof if there are "reasonable grounds to suspect" that the sickness is not genuine, even if it is only one day's sick leave.

The employer must tell the worker as early as possible and pay the doctor's bill.

Labour Minister Kate Wilkinson confirmed that the Government wants to make the law simpler.

"The intention is to look at re-wording [the act] to remove the requirement of 'reasonable grounds'. By simplifying the law it makes it clear that an employer can ask when they're suspicious," she said.

"The concern employers have expressed is that they're unsure about the point at which they have reasonable grounds.

"This small change makes it obvious to absolutely everyone that someone who likes to pull sickies runs the risk of being pulled up."

Employment law expert Max Whitehead said there was a case to change the current law, as the legal definition of "reasonable grounds" was uncertain.

As things stand, a boss would not necessarily have reasonable grounds to demand proof from a worker who claimed to be sick on three Fridays over six months, he said.

But removing the test of reasonable grounds was "going too far" and left the law open for "unscrupulous employers to abuse it".

Ms Wilkinson said the fact that employers have to pay for the doctor's bill would be a disincentive to abuse the law.

"So no doubt it will only be used when there is genuine concern someone is abusing their sick leave. I don't expect this provision will get much more use than it does right now, but it is intended to be much simpler to understand and implement."

Labour's associate spokeswoman for labour issues, Darien Fenton, asked for evidence that employers find the current law murky.

She asked Ms Wilkinson in the House yesterday if the Government was proposing to allow bosses to require proof of sickness on "unreasonable grounds".

Ms Wilkinson replied: "We do not insist on unreasonable grounds for anything. Employment law should be based on what is reasonable and what is fair to both the employer and employee."


* Bosses can ask workers for proof of sickness if they have "reasonable grounds" to suspect that the sickness is not genuine. * The Government says removing "reasonable grounds" would make the law simpler and make it easier for bosses to demand proof from workers that they are sick. * Bosses will still foot the doctor's bill, which will be a disincentive to abuse the system.

Fired worker takes on union

NZ Herald Sep 11, 2008

Act candidate Shawn Tan is taking legal action against the Engineering, Printing and Manufacturing Union after he was sacked as an organiser this week.

Mr Tan, who worked as an organiser at the union's call centre, was suspended on August 18 after it was revealed he was to stand for the Act Party and had not sought the union's permission.

The EPMU said at the time that Mr Tan was suspended on full pay as it investigated the case.

National secretary Andrew Little said yesterday that Mr Tan had been fired after the union decided his actions had irrevocably damaged the employment relationship.

"The requirement to seek approval was agreed to by Shawn at the time of his employment," Mr Little said.

"It would have been possible to resolve the issue of candidacy if Shawn had acted in good faith, but actions such as holding a press conference outside our office and calling us racist ... significantly changed the relationship with Shawn and the issues got harder."

Mr Tan's advocate, Max Whitehead, said he was astonished the union had gone through with the dismissal.

"They are a defender of employees' rights, that's their status in life, and here they are treating one of their own so dismally - dismissing him for his political beliefs.

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"They said, 'If you're going to stand for a political party, we would instruct you that you have to come and seek our consent first'.

"Shawn did not do that on the basis that that's an unlawful requirement."

Bill will Cost Jobs and Cause Closures

Labour Spokesperson Darien Fenton's proposed Bill will require employers to pay compensation to redundant employees. The Employment Relations Amendment Bill is due for its first reading on Wednesday 19th August. "If passed, Fenton's Bill could be the death knell for many small businesses", says Max Whitehead, Principal of the Whitehead Group. "Small Business is the life blood of the NZ economy and this Bill is the last thing NZ Business needs during the current recession." Whitehead says that each week small business owner has to assess how much longer they can afford to pay wages and stay afloat. He explains this often results in the sacrifice of a few jobs to keep afloat and retain their existing employees. " In Auckland alone 1000 jobs are sacrificed each week. Adding redundancy compensation costs will force many struggling employers to close their doors," he says. The Bill will entitle all employees with more than one year service to: • A notice of dismissal of no less than four weeks. • Compensation for redundancy of four weeks remuneration for the first full year of continuous service with the company and an additional two weeks for each full or partial year of service up to a maximum entitlement of 26 weeks. The definition of redundancy in the draft Bill is given as ‘The substantial disappearance of the work performed by an employee, by reason of the restructuring, downsizing, going into receivership or administration or cessation of the operations of the employer. "The National Government has the numbers to block this Bill, however National has been known to make last minute tradeoffs- that would disastrous," says Whitehead.

Staff cut costs greater than savings

From: One third of companies are expecting to cut staff in the next three months. Catherine Harris looks at the options they face. When things look bleak, it seems an easy fix to cut staff. When employment accounts for up to two-thirds of a business' costs, employees are an obvious target. But human resource experts say employers should be sure they're not shooting themselves in the foot. "Remember, your employees are often the key to the success of your business," says Max Whitehead, chief executive of human resources firm The Whitehead Group. Where once employers were loath to cut staff, he fears they are now too quick. Skills shortages made staff valuable but in his experience, when the winds change, "there is an automatic trend of initially thinking about carving your staff first". Experts say reducing staff should be the last resort because staff often possess significant intellectual property. Then there are the direct and indirect costs - paying redundancies and re-hiring when the economy improves - to say nothing of the impact on morale in the meantime. Alternatives range from the radical - reducing hours or pay - to the obvious, such as deferring capital expenditure, retraining at-risk staff and bringing outsourced work in-house. Jens Butler, an Australian- based analyst for global advisory firm Ovum, says it is easy during a downturn for chief executives to be driven by "a fear of the unknown". What's needed, he says, is long- term vision, and that might mean finding other means of cutting employment and operating costs to hang on to their core assets: "their people and their knowledge". "At the end of the day the CEO still has a business to run and needs to consider what options are available in times of falling revenues. However, with the service industry accounting for a third or more of overall GDP in economies such as Australia, the US and the UK, organisations are far more dependent on knowledge workers, their knowledge, ideas and networks." Tensions in the workforce are rising, Mr Whitehead says, with employers now demanding high performance from employees they were previously happy with. "There's a bit of resentment from . . .small to medium employers particularly, feeling the strain of lack of profits and probably even some losses, and seeing employees just plodding at the same pace as they were before." However, he has also seen some employers prepared to make personal sacrifices to retain staff. Staff are also coming to the party. The four-day week is "becoming very popular." When redundancies are needed, a bit of sophisticated thinking is needed, Mr Butler says. "There are too many examples of firms that simply went through their organisation and cut every group by a static, fixed percentage. "Unfortunately, those teams were already running lean and were subsequently unable to respond to critical projects while still carrying resources that were inappropriate for the path ahead." Beverley Main, chief executive of Human Resources Institute of New Zealand, thinks this recession is different than the last because it is not affecting all sectors. She says most employers believe the recession is not going to last very long, and the talent shortage "means the smart ones have figured out that you don't really want to dump everyone". "I don't think it's going to be like it was in the early 1990s, where pretty much everyone just got systematically made redundant . . . A lot of organisations have a freeze on recruitment, so they're spreading the tasks around, using a bit of secondment." Nevertheless, inquiries about redundancy and restructuring are "substantially up" at the employers and manufacturers group EMA Central, says Angela Walker, team leader of employment relations. However, there are exceptions. "[I was] talking to an employer just last week who is focusing very much on trying to avoid potential cuts in staff. "They're making a loss at the moment, it's not sustainable long- term but they have told their staff that they're not going to be making any cuts for a period of time because they're all looking to see what they can do in terms of expanding into other areas, focusing on getting the business on track." For the staff who remain, Ms Walker says employers need to be aware of unique recessionary tensions, created by people who might have moved on staying in their jobs. "That creates some particular issues, in terms of you're more likely to get personal grievances because people who may have moved straight into another job if something went wrong may not be able to move immediately into another job. You tend to get more performance issues, incompatibility, more stress at home." However, "if the person isn't performing, then it's probably increasingly important for the employer to deal with it rather than put up with it." Another key, Ms Main says, is to communicate openly with staff. She advises managers to keep workers appraised of the company's situation and to ask people at the coalface to come up with ways to do things better, "to give people an opportunity to help with survival". Mr Butler quotes Peter Drucker, regarded by some as the father of modern management: "Layoffs should be a last resort . . . as discarding skills and knowledge is a short-sighted strategy."


  • Recruitment - do you really need the position?
  • Is someone able to take part or all of the role? Could someone be retrained?
  • Trial periods - must be in writing, only for staff hired after March 1, for staff who haven't been hired before, and for firms with fewer than 20 staff.
  • Defer operational expenditure instead of cutting staff.
  • Reduce hours/four day weeks.
  • Remove bonuses, especially at senior levels.
  • Cut insurance and pensions.
  • Encourage unpaid vacations.
  • Enforce service leave.
  • Consider offering "loyalty bonuses" with a promise to get paid back when times are better.

Restraint of Trade

A necessity in employment agreements Restraint of Trade provisions in employment agreements were not common in the 1980s and ‘90s. Those that did exist, and were challenged, were often deemed by the judiciary to be unfair and unenforceable. Consequently they began to fall out of common use. Recent radical changes in the work place have seen a resurgence in Restraint of Trade clauses in employment agreements. The purpose of a Restraint of Trade is to prohibit an employee from engaging in a specific activity during and more particularly when their employment comes to an end. An employee who engages in business with the competition while still employed may be in breach of the duty of fidelity. 95% of New Zealand employers are small businesses owners with fewer than 10 employees. These businesses are most commonly either based on a niche market, or the owner or an employee has a unique skill on which the business is based. When these businesses experience an increase in activity the owner will take on an employee and train them in the unique aspect of the business, sharing their valuable knowledge, trade secrets and upskilling the employee for the benefit of the business. However, what in reality often happens is that an employer later discovers that far from creating a major asset for their business they have created a major competitor. This competitor then either moves to an opposition company or starts their own business in competition with their former employer. This is such a common occurrence that employers are now going to great lengths to protect their interests. Another factor adding to this phenomenon is the current widespread labour shortage which is causing desperate employers to poach employees from their competitors. The poaching a key staff member not only slows down the business from the staff member is lost, but the poacher also reaps the benefits of the cost, time and investment that has been made in the employee. This may also include a highly valuable client database. In recent years Restraint of Trade clauses have become more reasonable and more enforceable resulting in a series of successful court cases against former employees. This has given employers added confidence in Restraint of Trade clauses, so much so that such organisations as the Whitehead Group are commonly being asked to draft Restraint of Trade clauses tailored to each particular business. However, a Restraint of Trade does not provide unlimited protection against competition from current and former employees, although one that is well-drafted can provide effective short-term protection against former employees who attempt to exploit confidential information gained at their previous workplace. An employer relying on a Restraint of Trade must show that it is reasonable. A court will look at all the circumstances of a case to determine this. Generally a Restraint of Trade will be held to be reasonable if it affords adequate, but not more than adequate, protection for the employer. A court will not enforce a Restraint of Trade if there is another means of protecting the employer's interest or if it would make the employee unable to earn a living. Factors the courts will consider when assessing reasonableness include:

  • A valid Restraint of Trade must be limited in terms of time and space. The longer the restriction is to apply and/or the more extensive it is in terms of geographical area, the more difficult it is to establish reasonableness. Restraints for periods of six months or less have commonly been upheld as reasonable. A Restraint of Trade which the court considers excessively long will not necessarily be struck down completely; instead the court may reduce its length.
  • A covenant that simply attempts to prohibit an employee from associating with competitors is unenforceable. An employer cannot seek to prohibit a former employee from using the additional skills and experience gained in the ordinary course of employment. The proprietary interest that the employer is seeking to protect must be distinct from the additional skills, experience and knowledge gained while they were employed.
  • A court will pay particular attention if the employee has established close relationships with the employer's clients or customers, and can influence them. In such cases, the employer may be seen to have a proprietary interest in the performance of the employee's work, but only if the employee's position is such that they have the power to entice customers away.

Where an employment agreement imposes an unreasonable Restraint of Trade, a court has wide discretion to modify the restraint provision. Modifications may include deletion of the clause, changes to the geographical area of the restraint or changes to the duration of the restraint. A court's chief concern is to modify the clause in such a way that the employment agreement would have been reasonable at the time of employment. On the other hand, where an employee is held to be in breach of a Restraint of Trade covenant, the courts may award damages in favour of the employer. In conclusion, Restraint of Trade clauses cannot be used by employers to provide unlimited protection from competition from their former employees. A clause that goes beyond restraining an employee for just long enough to allow the employer to continue business normally is unlikely to be enforceable. A successful restraint of trade clause will need to be reasonable, precise and relate to the specific parties.

Max Whitehead runs for seat on North Shore Regional Council

Max brings energy, drive and enthusiasm. Driven from family values coupled with superior no-nonsense business accruement Max will get you the results; NOW! Max is proud of his family and life successes: Christine & I
  • Built a successful business, providing employment solutions.
  • North Shore family home and mortgage.
  • Board member of Waipuna Hospice
  • President of Takapuna Business Network Institute
  • Board member for the Albany Business Association
  • Managing director of the Whitehead Group
  • 11 years as Advocate and Manager with the Employers and Manufactures Association
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Uni confirms lecturer was fired for sending an email

From Radio New Zealand - 8 August 2007. The Universtiy of Auckland has confirmed it dismissed a prominent lecturer after a single complaint made over an email he sent. The political scientist and commentator Paul Buchanan says he was dismissed after sending a memo to a student denying her an extenstion on an assignment and criticising her performance. Student magazine Craccum has published what it states is a copy of the email sent by Dr Buchanan. The university has since released a statement saying Dr Paul Buchanan's employment was terminated after it investigated a complaint against him over an email. It says normal disciplinary procedures were followed. The news and editorial director for campus radio station bfm says the email was harsh, but Dr Buchanan has a reputation for being tough. Jose Barbosa says there are also unconfirmed rumours of the university succumbing to pressure from the student's family. An employment law expert, Max Whitehead, says the email is foolish and unwise, but not enough to warrent a dismissal. He says there is a strigent process and a high threshold for sacking an employee, and if the email is the only issue, the Dr Buchhanan has a strong case against the university. He says he's been dismissed after sending a strongly worded e-mail to a student denying her an extension on an assignment. Former student Scott Mansell is running a campaign backing him, and says the email was harsh, but Dr Buchanan then apologised. Mr Mansell says he understands the student accepted the apology and has now left the country, returning to Dubai. He says Dr Buchanan was still called before the Vice Chancellor and Dean. Scott Mansell says its a gross over-reaction to fire a man with good record over a harsh email, and he believes there is more to the situation. A petition caling for Paul Buchanan's reinstatement is being circulated.

Employment disputes escalate

Bosses be warned - workers are taking their employers to court in ever-increasing numbers. A top Auckland employment relations expert has noticed a marked increase in employees taking legal action against their employers. The reasons vary, but Max Whitehead says it is common knowledge among workers that many small to medium business fail to comply with the employment laws. This has opened the legal floodgates to employees disgruntled with their working conditions or pay. Max Whitehead, principal of the Whitehead Group, an Albany-based employment and human resources consultancy says, "We are often seeing disgruntled employees extracting huge settlement payments from employers who have unwittingly not complied with the law." Mr Whitehead says the difficulties stem from higher employee expectations driven by a Government and unions constantly telling workers they deserve better conditions and more money. "Last year the unions drove a vigorous ‘Five Percent For 2005' campaign and this year the ‘Super Size My Pay' movement is gaining real traction. "The Government's extra fourth week holiday kicked in April and they are were pushing through a law enabling staff to work hours which suit their personal circumstances. "On top of all this employees know that with the current skilled labour shortages, the company would have trouble replacing them. "Taken all together, it's understandable that employees are expecting and demanding more," says Max Whitehead. However, some of the cases coming before mediators and the courts are entirely frivolous. The should be dealt with internally and never allowed to escalate to such a level. For example, in a recent case a receptionist was put through a disciplinary process for failing to pass on messages and leaving her work-station for long periods. Another received a written warning after arguing with her boyfriend in the reception area. The employee then resigned but took a personal grievance for disadvantage. Her claim, however, failed. Max Whitehead says, "We see a lot of this. Other examples include a boss refusing to send an employee on a training course; and an employee claiming bullying and racial discrimination after being told off by the employer." As a result of the rise in such cases, Max Whitehead says employers are calling in the experts earlier than they used to. "Previously, they would either ignore the problem and hope it would go away, or try to handle the complicated legal system themselves," he says. In addition, many small companies now recognise the need to put appropriate policies, rules and employment agreements in place, and then proactively seek advice before problems escalate. "We go in and install a simple system that provides legal compliance and only come back to advise or assist with issues as they arise. Employers find this an effective and economical way to keep on top of employment matters," says Max Whitehead.

Work life balance wobbles

The Union movement and governments Flexible Work Bill sounds nice but what it will do is decrease New Zealand's productivity and drive business off shore. What the Union movement and Government are proposing that employees who have a dependant will be empowered to seek a change in working hours, days of work or place of work. These employees will tell business when they are allowed to run their business. How do you think businesses will react? Yes; they will move off shore. What our Unions and Government don't appreciate is that 95% of Kiwis work in small businesses and work life balance arrangements are already in place without the Union or government intervention. What people know in small business is that the quickest way to be made redundant is by reducing your employers' business productivity. This Flexible Work Bill will do exactly this. Most employees will be smart enough to realize the damage it will cause and ignore it but there will be a few who will abuse it and ruin many businesses and jobs for others. Politicians need to leave things alone. Let me demonstrate; when preschool has an open day, your local businesses will need to reduce its productivity and profit to facilitate absent parents. Business will also have to accept poor productivity and poor services to its clients before preschool starts at 9.00am or after 3.00pm. No wonder businesses are leaving NZ in droves. Here is another family responsibility taken away from adults and placed firmly back on business. If only our politicians would keep out of family lives and let people learn to take responsibility for their own families. Why don't our Politicians know this? Because most of them have never run a business or worked in a business that has had to generate a profit to survive. They pay themselves from our taxes. They don't understand what drives people in small business. Yes; its that dirty word "profit" which means job security and jobs for ordinary people. I wish they would focus on making laws like keeping crime out of our homes and stop violence toward children. There is nothing wrong in promoting Work life balance its good for employers and employees but what we don't want is another set of laws that will be ignored by small business who don't have the time or resources to understand them all.

Mike Hosking interviews Max about online shopping in the workplace

Inconsistent Determinations from the Employment Relations Authority

Karyn Hay Interviews Max on RNZ

Max Interviewed on Radio Live - Working in the country can be tough when it’s not legal


The NZ Farming Facebook page sees a shocking number of rural New Zealanders questioning their bosses’ employment rules, which often can be illegal.

Resident employment law specialist Max Whitehead joined us to answer questions from the page ahead of another Facebook LIVE Q&A next Friday.

Topics will include:

  • If you’re on a day wage and work public holidays are you still meant to get time and a half?
  • The cash value of rent of the house on the farm and the confusion around that.
  • What to do if you see illegal activity on farm such as animal welfare issues and how your employment is protected.

Max Interviewed on TVNZ

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