When it comes to hiring new employees, one of the most important steps is drawing up an employment agreement. There are certain provisions that employers must include in every employment agreement, by law, but there are also essential provisions that employers should include to protect the commercial aspects of their business. These include provisions such as restraints of trade, confidentiality terms, and intellectual property terms. Here’s a breakdown of these three essential provisions.
Restraints of Trade
Restraints of trade are an agreement between an employer and employee that prevents employees from working for competitors, soliciting business from the employer, dealing with the employer’s customers or suppliers, or starting their own businesses in competition with the employer. The aim of a restraint of trade is to protect employers’ interests by reducing the risk of employees taking confidential information or customer relationships to another company. Generally, restraints of trade are unenforceable, but they may be enforced by the Courts if they are found to be reasonable in scope and duration and only go so far as to protect the employer’s proprietary interests.
Employment agreements often contain three types of restraints of trade, including:
Non-competition – prevents an employee from working for, engaging with, or being interested in a competitor of their former employer.
Non-solicitation – prohibiting employees from soliciting clients, suppliers or employees of previous employers.
Non-dealings – prevents the employee from dealing with customers and suppliers of a previous employer.
As a general rule, an employee is bound by an implied duty of confidentiality, which means that they can’t disclose confidential information about their employer without the employer’s consent. This includes confidential information such as financials, business methods, trade secrets, customer lists and commercial strategies. Information like this is what makes one business stand out from another and an employer might lose its competitive edge if such information leaks. As the implied duty is not always specific or definitive, however, so it is important to include a specific and well-drafted confidentiality provision in an employee’s employment agreement too w. The provision should define what exact information is considered to be confidential, with examples, and should specify that the duty of confidentiality will continue after the employee’s employment ends (an enduring obligation). Keep in mind, however, that a contractual restraint must not go beyond what is reasonably necessary in order to protect the interests of the employer.
Intellectual Property Law
As any business owner knows, intellectual property (IP) is a valuable asset. Inventions, designs, brand identities, etc., are examples of intellectual property that an employer will want to protect. There can, however, be issues regarding intellectual property rights when the IP is developed by employees or independent contractors. In New Zealand, employers only receive the rights to IP that has been created by their employees if it was created ‘in the course of their employment’. Employees generally will retain ownership rights to IP that they create in their own time.
If an employer thinks that employee-created IP is automatically theirs, this can be a problem. Getting legal advice from a NZ employment lawyer is best if you’re unsure about whether your business owns certain IP. Otherwise, you might end up in a sticky situation. The most important thing is that IP rights are clearly stated in an employment agreement, by defining what an employer’s IP is, when the rights to IP will vest in an employer, and when an employee must assign the rights in any IP to the employer.
Need Help Writing Provisions In Employment Agreements? Edwards Law Can Help
Whether you need help drafting these essential provisions for your employment agreement or need help writing up an entire agreement, the team of experienced NZ employment lawyers at Edwards Law can help.