Account manager held to restraint of trade clause

Employment Relations Authority backs three-month restraint in contract

In a decision that belies the commonly-held belief that restraint of trade clauses are difficult to enforce, Konica Minolta’s right to enforce a non-compete clause in a former employee’s contract has been upheld by the Employment Relations Authority.

In a determination last month, the authority found in favour of Konica Minolta, after it went to the authority to enforce restraint of trade provisions in the employment contract of a former Konica Minolta account manager, Vaughan Love. He had left Konica Minolta to join rival Fuji Xerox.

Love resigned from Konica Minolta in November and, after serving out his notice, began at FujiXerox in December.

Restraint of trade clauses in his employment contract with Konica Minolta specified that certain activites, such as being connected or engaged with businesses that compete with Konica Minolta, were prohibited for three months after the termination of his employment.

Love said at an investigation meeting held by the authority at the end of January that he hadn’t commenced sales duties with FujiXerox and, at that meeting, undertook not to approach or solicit any Konica Minolta customers before March 4, the three-month anniversary of his resignation from Konica Minolta.

The authority, in its determination on February 4, found in favour of Konica Minolta, noting “The length of the restraint (three months) and the geographical scope of the restraint are reasonable, given the nature and competition in the industry but particularly between Konica Minolta and [FujiXerox NZ]”. With Love’s job at Konica Minolta and his new one at FujiXerox both involving working with government and corporate clients in Wellington, the geographical scope was a factor.

It noted that while Love breached his restraint by taking up employment with FujiXerox before the three-month period expired, “There is no evidence of any other breach by Mr Love of the confidentiality and the remaining terms of the restraint required under his employment agreement”.

Love’s counsel noted other cases in which, in similar circumstances, ex-employees had made undertakings after changing jobs that mitigated against the need for their former employer to enforce restraint of trade clauses.

The authority ruled that for the month between the determination date of February 4, and the March 4 three-month anniversary of Love’s departure from Konica Minolta, Love was “not to carry on or be connected, engaged or interested, either directly or indirectly, alone or with any other person, in any business of [FujiXerox NZ] which competes directly or indirectly with the business of Konica Minolta, without the prior written permission of Konica Minolta”.