The signs we’ve reached the point of no political return


Vernon Small is a former business and political journalist with more than two decades in the press gallery, who until recently was an adviser to Attorney-General David Parker. He is now writing a weekly column for the Sunday Star-Times.

OPINION: We’re clearly at that point in the parliamentary term when the sunny uplands of principle are all behind us.

From here in, folks, it’s nothing but the dark canyons of politics through to October 14.

There were a couple of obvious signs we have reached the point of no return.

The first and most overt was the virtual confirmation that, as flagged in this column last week, Labour plans to remove GST from fresh fruit and vegetables.

The clearest clues the 2011 campaign skeleton would rise again came from clumsy non-denials by ministers Ginny Andersen and Barbara Edmonds.

It’s hard to see how that is a better fit for Labour values than a $20 a week tax cut funded by a tax on the mega wealthy, but it is eternally popular and no doubt the focus groups showed that.

The second sign we had crossed the political Rubicon came from the opposition’s reaction to a member’s bill by Labour’s Mount Albert candidate Helen White.

Her Employment Relations (Restraint of Trade) Amendment Bill aims to restrict the use of the alternately named Non-Compete Clauses (NCCs) in employment contracts.

Put simply, the clauses, which are increasingly common, restrict an employee who quits a job from working in the same or a similar role for a competitor.

Traditionally, they have been used where an employee holds trade secrets or knowledge of clients that it would be unfair for a rival business to obtain.

As such – as noted in the United States – you might expect to see them imposed on senior executives or workers in high-tech industries. However, they are increasingly popping up among doggy-daycare workers, hairdressers and yoga instructors.


Dr Sean Sweeney was queried in June about the hardship fund for businesses affected by the construction of the huge project. Video contains references to Viv Beck, CEO of Heart of the City, who fought for the fund to be established.

In New Zealand you can add baristas at Starbucks to the list.

They are particularly prevalent in individual employment agreements. We do not keep records of individual agreements, but in the US and Australia they appear in about one in five agreements.

White, who was an employment lawyer for 25 years, has prosed some key restrictions in her bill.

It would ban NCCs from applying to those earning less than three times the minimum wage. Currently that would be $141,648 a year.

Above that figure they would be allowed, but the employer must have a definite proprietary interest to protect. The employer would have to pay half the former worker’s salary for the duration of the restraint, which could be no more than six months.

It would not limit or change the existing common law duties of confidentiality or fidelity, so it would not mandate open slather on taking information to a rival business.

At the moment many NCCs are unenforceable, but it is expensive for individual workers to challenge them in court. They have a chilling effect on anyone planning to move to a new job with better wages or conditions, as well as on anyone looking to recruit new staff. Not being able to work in your area of expertise for perhaps six months is too high a hurdle for many.

Beyond the limited roles where they are clearly justified, they are bad for current employees, future employers, the economy and the flexibility of the labour market. NCCs widely used would stifle job mobility and competition, curb wage rises, and limit employers’ access to the job market.

In the US, 40% report turning down a job offer from a competitor because of one.

On the weight of all that, you might expect National and ACT would take a nuanced stance towards White’s bill with a view to improving it – especially lowering the very high $141,000 threshold.


Paul Goldsmith, left, said there was a “kernel of an issue” in the bill.


Paul Goldsmith, left, said there was a “kernel of an issue” in the bill.

National’s Paul Goldsmith did concede there was a kernel of an issue around excessive restraints and said National might consider a better bill, but not this one.

ACT’s Chris Baillie went full-naive, ignoring the inherent power imbalances in employment relations, ignoring the limits NCCs place on labour market mobility, and tuning a blind eye to the fact that most individual agreements are written by an employer’s lawyer.

“What happens now when a business needs a worker and a worker needs a job is they have a meeting, they work out what’s fair, agree to the terms of employment and sign a contract. Then they shake hands and they start work,” he said.

We may all want to live in that world, but unfortunately we only have the real one.

Baillie also rattled off all the benefits workers receive: pay, holidays, rest breaks, sick leave, KiwiSaver and numerous other rewards, alongside any NCCs.

“The employee just needs to do what they voluntarily agreed to do,” he said. “The disrespect is really patronising.”

National’s Simon Watts joined him in the wilfully naive camp, talking of hand shakes all round and the importance of restraining baristas from resigning and opening a coffee shop nearby.

You would think that was the essence of capitalism, competition and entrepreneurialism both parties of the right claim to stand for.

But it seems that the instincts of ACT and National to opt for greater powers for businesses in employment law has trumped their principles, trumped politics and, with the glare of the election just weeks away, left them unable to see the interests of most businesses and the economy.

Labour should not escape criticism, however.

Why did a party of the workers not adopt this principled bill as a government initiative rather than leave it to White and the vagaries of the biscuit-tin ballot to deliver it too late to pass before the election?

The bill now goes to a select committee.

Baillie thinks most submissions will oppose it.

Labour and the Greens expect submissions to disclose shocking misuses of NCCs.

Hopefully, when the election is in the rearview mirror, all parties will see the point of principle here and allow this worthwhile bill, or one similar, to be considered and delivered as good law.

Share post:



More like this