[New Zealand] MP calls for ban on contract clauses hurting low-wage workers

In New Zealand, Labour MP Helen White​ is campaigning to ban employers from imposing restraint of trade clauses in employment contracts for many workers, saying they suppress wages, stuff reports.

The clauses have recently been in the spotlight thanks to journalist Tova O’Brien, who​ is reportedly fighting TV3 owner Discovery NZ ​at the Employment Relations Authority in a bid to overturn a three-month restraint of trade clause in her contract that stops her working for competing news service Mediaworks.

Ms White supports Ms O’Brien​ in her fight and said that her case has highlighted the anti-competitive nature of restraint of trade clauses.

However, the MP said many people fail to realise that it’s not only well-paid people who are affected but people on minimum wage, earning just $20 an hour, too.

“The worst I saw were people who were seamstresses, at $20 an hour. Six months’ restraint,” Ms White said. The MP was an employment lawyer before standing for Labour.

She said restraint of trade clauses in many employment agreements are “prima facie” illegal, and would not stand up if challenged in the courts.

But, the MP said that people looking for work did not know that and lacked the money to challenge them if they wanted to switch employers.

“For somebody at that level ($20 an hour), you can say prima facie that's illegal, and it would not very likely to hold, but the problem is the seamstress can’t afford to challenge that,” Ms White said.

They also could not afford to take time off work between switching employers and therefore were effectively trapped in jobs, unless they went to a position in another industry.

In her maiden speech to Parliament in December, Ms White said restraint of trade clauses had the effect of suppressing wages.

“I want to see competition fostered where it will reinforce growth, including income growth. For example, to see a more certain and concrete prohibition of restraints of trade in employment agreements of low-paid workers,” she said.

“Restraints are habitually included in individual agreements for workers on wages close to the minimum wage.

“The poorer the worker, the more unlikely they are to challenge them. The possibility of litigation is too frightening. This means low-paid workers are afraid to go and set up their own cafe or move to the competition who might offer them a pay rise.”

“It stifles their capacity to move from, say, $20 to $25 per hour. It means their employer has no incentive to pay them more because they do not fear losing them to a competitor.”

Ms White says the use of restraint of trade clauses is widespread yet not well-researched.

Employment agreements negotiated by unions do not include restraints, she said. Instead, they are in individual employment contracts.

In her time working as an employment lawyer, the MP witnessed how widely they were used.

“The crept into everything,” she said.

Ms White had been working on a private members’ bill on banning restraint of trade clauses for lower-paid workers.

For higher-paid roles, new laws could require restraints of trade to be reasonable in the circumstances, she said.

She added that many restraint of trade clauses claim to bind workers from working for a competitor for six months, or even a year.

In addition to working on a possible private members’ bill, Ms White has also reportedly been campaigning internally in a bid to get the Government to adopt the issue, and bring it into its workstream of laws to be developed.

She said American economist Joseph Stiglitz counts restraints of trade (called no-compete clauses in the United States) as one of the reasons why income growth has been so weak.

“And yet people don’t even have it on their radar yet,” the MP said.

Related to the restraint of trade clauses, were “no-poaching” clauses where a departing employee is not supposed to hire any of their former co-workers.

Ms White said, “That's really anti-competitive.”

Source: stuff

(Link and quotes via original reporting)

In New Zealand, Labour MP Helen White​ is campaigning to ban employers from imposing restraint of trade clauses in employment contracts for many workers, saying they suppress wages, stuff reports.

The clauses have recently been in the spotlight thanks to journalist Tova O’Brien, who​ is reportedly fighting TV3 owner Discovery NZ ​at the Employment Relations Authority in a bid to overturn a three-month restraint of trade clause in her contract that stops her working for competing news service Mediaworks.

Ms White supports Ms O’Brien​ in her fight and said that her case has highlighted the anti-competitive nature of restraint of trade clauses.

However, the MP said many people fail to realise that it’s not only well-paid people who are affected but people on minimum wage, earning just $20 an hour, too.

“The worst I saw were people who were seamstresses, at $20 an hour. Six months’ restraint,” Ms White said. The MP was an employment lawyer before standing for Labour.

She said restraint of trade clauses in many employment agreements are “prima facie” illegal, and would not stand up if challenged in the courts.

But, the MP said that people looking for work did not know that and lacked the money to challenge them if they wanted to switch employers.

“For somebody at that level ($20 an hour), you can say prima facie that's illegal, and it would not very likely to hold, but the problem is the seamstress can’t afford to challenge that,” Ms White said.

They also could not afford to take time off work between switching employers and therefore were effectively trapped in jobs, unless they went to a position in another industry.

In her maiden speech to Parliament in December, Ms White said restraint of trade clauses had the effect of suppressing wages.

“I want to see competition fostered where it will reinforce growth, including income growth. For example, to see a more certain and concrete prohibition of restraints of trade in employment agreements of low-paid workers,” she said.

“Restraints are habitually included in individual agreements for workers on wages close to the minimum wage.

“The poorer the worker, the more unlikely they are to challenge them. The possibility of litigation is too frightening. This means low-paid workers are afraid to go and set up their own cafe or move to the competition who might offer them a pay rise.”

“It stifles their capacity to move from, say, $20 to $25 per hour. It means their employer has no incentive to pay them more because they do not fear losing them to a competitor.”

Ms White says the use of restraint of trade clauses is widespread yet not well-researched.

Employment agreements negotiated by unions do not include restraints, she said. Instead, they are in individual employment contracts.

In her time working as an employment lawyer, the MP witnessed how widely they were used.

“The crept into everything,” she said.

Ms White had been working on a private members’ bill on banning restraint of trade clauses for lower-paid workers.

For higher-paid roles, new laws could require restraints of trade to be reasonable in the circumstances, she said.

She added that many restraint of trade clauses claim to bind workers from working for a competitor for six months, or even a year.

In addition to working on a possible private members’ bill, Ms White has also reportedly been campaigning internally in a bid to get the Government to adopt the issue, and bring it into its workstream of laws to be developed.

She said American economist Joseph Stiglitz counts restraints of trade (called no-compete clauses in the United States) as one of the reasons why income growth has been so weak.

“And yet people don’t even have it on their radar yet,” the MP said.

Related to the restraint of trade clauses, were “no-poaching” clauses where a departing employee is not supposed to hire any of their former co-workers.

Ms White said, “That's really anti-competitive.”

Source: stuff

(Link and quotes via original reporting)