Steve Teixeira worked with a travel agent specialising in ski holidays. Photo / 123rf
Steve Teixeira was ready for a change. He had an interview with a travel agent specialising in ski holidays close to his home and got the gig.
But his employer at the time, another ski travel agent, raised a concern about the transition. Teixeira had failed to consider the six-month restraint of trade clause in his contract, preventing him from working for another business in the same line of work.
On January 27, Concept Travel Limited (CTL), the parent company of Newmarket’s Ski Travel Specialists, took its former employee to the Employment Relations Authority (ERA) seeking an urgent interim injunction preventing Teixeira from starting work at the competitor.
An urgent declaration was made in favour of CTL, barring Teixeira from beginning the new job until May 1.
Clauses like these aren’t uncommon in employment contracts but they are topical and there’s a members’ bill before Parliament to try to prohibit them.
While the ERA found the company was justified in enforcing this restraint, Teixeira says it’s come at a cost for him - he’s not getting paid at the moment - and he questions whether there is still a place for them.
“I’m 55 and the only thing I have to offer are my skills. Now I’m being told I can’t use them,” the agent said in an interview this week.
According to the ERA’s determination, Teixeira was employed as a manager for the company in 2017. He did not raise concerns around the restraint of trade clause in his employment contract when he started.
“The first year was good, as we were all finding our feet.”
But Teixeira claims his managerial status was diminished over time, including losing access to sales figures in 2019. A separate claim for constructive dismissal remains before the authority and will be heard soon.
In June 2021, Teixeira suffered a heart attack requiring two stents. He attributed the attack to stress, which he says stemmed from his time with the business.
Eventually, he began to look elsewhere, securing a position with a direct competitor of CTL in September last year - a more junior role in title, with a lower salary.
He handed in his notice that month but chose not to tell CTL who his new employer was, despite being asked repeatedly.
Concerned that he was working for a competitor, the owner of CTL emailed him directly, reminding him of his restraint of trade obligation.
Teixeira replied, refusing to divulge exactly where he was moving, but providing a promise he would not take clients with him. In this email, he states he had received legal advice saying the clause was unenforceable.
A meeting was later held between the owners of CTL and Teixeira, where he said it continued to be his view the clause could not be enforced.
The company lodged a claim with the ERA in December.
According to the authority’s determination, goodwill with customers was the propriety interest CTL sought to protect by enforcing the restraint of trade. The injunction would allow the business time to liaise with customers, it said.
CTL said the company’s customers form relationships with specific agents, and feared business could be lost when Teixeira moved on. Teixeira, on the other hand, rejected that claim, saying customers were loyal to the company, not necessarily the agent they dealt with, which changed from time to time.
He was also subject to a non-solicitation clause, preventing him from intentionally attracting CTL’s customers, for 12 months after his employment ended.
The authority was critical of Teixeira’s decision to keep his new employer secret for so long, which resulted in reducing the time CTL had to protect its proprietary interests.
“However, the period of the injunction needs to be sufficient for Concept Travel’s consultants to talk to customers and that process does not truly start until mid-to-late March this year.” Teixeira was told his new employment cannot begin until May 1.
Speaking to NZME shortly after the declaration was made, Teixeira said with the benefit of hindsight, he would have shared who his new employer was sooner than he did, but believes the enforcement of the clause was unnecessary.
“Part of me wanted to leave the industry and try something new, but there’s also this other part of me saying I’m not finished with the ski travel industry. I wasn’t fully ready to leave the industry.”
Teixeira questioned what information he held that CTL was concerned about. While accepting he was a manager, he says he was not aware of the company’s sales figures and suppliers across the industry are broadly the same from business to business.
Since leaving CTL, Teixiera has worked just four days, helping out a friend who works as a builder. He’s applying for part-time work, but is yet to have any luck.
“This has probably cost me $50,000 in lost wages and legal fees. That’s a year’s wage it has cost me to leave there. I’m pretty down about the whole thing. But the stress it’s caused to me is equally harmful, I believe. My wife is feeling it as well.
“Whether I start on the first of February, first of March or first of May, it won’t make a blind bit of difference to Ski Travel Specialists, but will have a major effect on me.”
Auckland Central-based Labour list MP Helen White currently has a members’ bill before Parliament which would ban restraints of trade for employees below a certain salary cap. Over the cap, which White says will likely be three times the median wage, employers who want the clause will have to compensate the employee.
The bill is supported by the Labour caucus and will likely be read the first time this month, White says.
Speaking generally, she says the clauses are inherently unfair, preventing employees from trading on the only thing they have to offer - their skills.
“We’ve seen some really odd decisions around restraints of trade. Sometimes clauses like these are seen as unenforceable, particularly for lower-waged employees, but that isn’t necessarily the case.
“You have only got a limited amount of time to work, and if you’ve got that, you should be able to use it.
“There are more ways of handling this than banning the person from going and working. People have certain skills. If an employee has built up a certain skill over time, whose property is it? It’s as if we assume the goodwill is built up entirely by the employer.”
Concept Travel Limited declined to comment.
An employer and employee may agree to include a restraint of trade clause in their employment agreement. These clauses are designed to protect a business’ commercially sensitive information by restricting the employee’s activities, moving to a competitor or starting their own business, when they finish working for that employer.
Wellington employment lawyer Steph Dyhrberg says it’s often hard to provide firm advice as to whether a restraint of trade is enforceable.
“We always encourage our clients who want to use them to use them reasonably. We say put something reasonable in, and it’s much more likely to be enforceable.
“That includes considering the length of time [of the restraint], or whether it is actually necessary for the employee’s position.”
There are two types of restraints of trade; non-competition clauses, where a former employee is prevented from working in a similar field to their former employer’s business, and non-solicitation clauses, where a former employee is restricted from contacting their former employer’s clients about their new business.
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