If I am made redundant, does the restraint of trade in my employment agreement still apply?

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Mark Donovan

In most cases, the answer will be yes. A restraint of trade clause is not affected by the way in which you have been dismissed, provided that you are justifiably dismissed.

However, there are two exceptions:

1. If the restraint of trade clause itself says that it will not apply if you are dismissed by reason of redundancy, then of course it will not still apply. But I assume the clause in your case does not state that because otherwise you would not have asked the question.

2. If you have been dismissed in a way that was unjustified, then you can argue that the entire employment agreement, including the restraint of trade, has been repudiated. In other words, you are no longer bound by the restraint because the employer did not act in accord with it when dismissing you. The only problem with this approach is that your restraint will typically expire before you can get a ruling that you were unjustifiably dismissed. So there is some risk in treating yourself as not bound by the restraint on this basis, because you may be wrong. For a case that applies this principle see paras 94 and 95 of this determination of the Employment Relations Authority: www.nzlii.org

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