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The employees retired and established a rival company after their employer allegedly failed to comply with purchase agreements.
The Labor Relations Authority was out of line when it issued a court order against former employees who left a business and created their own rival company, a judge found.
In October, ERA member Geoff O’Sullivan granted an urgent request from NZ Technology Group Hawke’s Bay Ltd, which required the four former employees to comply with their employment contracts, including restricting trade, breaching confidentiality. and the non-application clauses.
The dispute has been the subject of numerous applications and filings with the Labor Court, with Labor Court Judge Bruce Corkill granting a request from NZTG Hawke’s Bay to freeze funds held in the bank accounts of the men and their newly formed company, Engage Technology. .
But after hearing the men’s challenge to the injunction and the freezing order on December 1, Judge Corkill found that the Authority had made a mistake.
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He had only considered the men’s employment contracts and not the contractual agreements they had with the company. That had led the Authority to assume that the company had assets that it cannot.
When formed in 2017, NZTG Hawke’s Bay agreed to buy three male-owned companies (Mint Technologies, Wasp New Zealand, and Taylor Communications) and signed an agreement to work with a fourth company, Need a Nerd Ltd.
These agreements were made at the same time as the employment contracts were signed.
SCOTT GRAHAM / UNSPLASH
The men signed employment contracts at the same time as they made purchase and sale agreements.
The companies place their assets and existing companies in the newly formed NZTG Hawke’s Bay.
Relations were strained and came to a head in the middle of this year, when employees said that NZTG Hawke’s Bay had failed to pay agreed purchase prices or meet numerous obligations included in purchase agreements.
Employees also said they had concerns about NZTG Hawke’s Bay’s billing and business practices.
When these could not be resolved, they opted to cut ties with the company and take with them the assets and clients they had contributed.
NZTG Hawke’s Bay director Dwayne Smith said the property the men removed “clearly belonged” to the company.
The men said the employment contracts they signed were subject to termination of business contracts.
Judge Corkill said the Authority had been wrong to assume that the company owned the property that required protection and only focused on labor agreements.
Concluding that there was a “well-documented employment relationship that contained clear contractual provisions to be applied after termination of employment,” the Authority found that the company had “a strongly debatable case” and weighed in favor of the injunction.
“Failure to consider the business context led [the Authority] put aside the questions about the ownership of the disputed property, assume that NZTG had a right to all that property and confidential information, and infer that the effect of the respondents’ case was that the IEAs were some kind of device, ”said the judge. Corkill said.
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How the Labor Relations Authority works.
It found the men’s claims to be “at least as debatable as the NZTG claims.”
He allowed the challenge and set aside the Authority’s decision. He also complied with the freezing order.
Judge Corkill noted that the men had initiated a High Court proceeding, in which they would allege that NZTG had made “significant misrepresentations” about their turnover and net assets, and would seek statements that the assets had never been transferred.
He urged the parties to consider mediation.
“Common sense would suggest that a very serious effort should be put into resolving the many issues I have referred to, taking into account the potential costs that will otherwise be incurred, as well as other adverse consequences of lengthy litigation.” said the judge.
