July 2023

In New Zealand, employees have the right to work for other employers, even if they are already employed full-time. To prevent this, employers can include terms in their employment agreements that prevent or restrict their employees from working multiple jobs. However, rules in the Employment Relations Act 2000 (Act) limit the employer’s rights on the issue.

Genuine reasons

The Act provides that an employment agreement cannot restrict an employee from working multiple jobs unless their employer has ‘genuine reason(s).’ These include (but are not limited to):

• protecting an employer’s commercially sensitive information;
• protecting intellectual property;
• preserving commercial reputation;
• preventing an unmanageable conflict of interest.

Whatever the reason, the Act also stipulates that they must be formed on reasonable grounds. If a supermarket hired a new executive staff member, they would likely want to prevent their new hire from working for a competitor, on the grounds of protecting confidentiality and avoiding a conflict of interest. It would be difficult to argue that these grounds are not reasonable. However, if the new employee is a checkout operator, even if reasons of confidentiality and conflict of interest remained, it would likely be unreasonable to prevent them from working for a competing supermarket at the same time.

Reasons must be stated in employment agreement

If a secondary employment provision is used, the employment agreement must also state the reasons for including it. If this is not done, then it is likely that the provision will be unenforceable.

Extent of restriction

Even if the reason(s) are reasonable and based on reasonable grounds, the Act provides that any restriction must not apply ‘to a greater extent than is necessary…’ In short, total bans on secondary employment are difficult to justify. Some kind of limitation of its application and scope is necessary.

Conclusions

While in many circumstances it may be desirable to include secondary employment clauses in their employees’ employment agreements, employers should be cautious when including such provisions, and should consider the following elements before doing so:

1. These provisions should not be ‘standard’ across every employee’s agreement. Each provision should be tailored to the individual employee’s circumstances.
2. Genuine reasons must be present for each individual employee and they must be based on reasonable grounds.
3. The employee’s specific situation must be taken into account. Are they a part time worker with little access to confidential information? Or are they a well-paid professional with intimate knowledge of the company they work for and their particular specialisation?
4. Outright bans of secondary work are generally unenforceable if an employee was to challenge it.
5. Consider whether a prohibition of secondary work is necessary, or whether a provision that simply seeks an employer’s consent to secondary work would suffice