The Bill proposes that:

- restraints of trade have no effect wherever an employee earns less than three times the minimum wage;

- the use of restraints of trade is limited to those situations where the employer has a proprietary interest to protect through the use of the provision;

- employers have to pay employees who are subject to a restraint of trade provision an amount equal to half of the employee’s weekly earnings for each week that the restraint of trade remains in effect;

- the duration of restraints of trade cannot be more than six months.

The Bill only applies to non-compete and non-solicitation clauses, while common law duties of confidentiality and fidelity would be unaffected by the change.

Restraint of trade clauses are commonly used provisions in employment agreements to prevent, for specified periods and within specified geographical areas, ex-employees from working in competing for business and/or soliciting or dealing with clients of the ex-employer and/or soliciting of/hiring of employees or contractors of the ex-employer, after the employment relationship ends. 

If passed, this Bill would significantly impact when restraints of trade can be included or enforced, narrowing their application. 

A debate on such a sensitive topic is likely to be initiated. 

Employers have already pointed out that the Bill does not adequately address scenarios in which lower-paid employees have access to an employer's confidential information. According to the current draft, the employer will not be able to protect its proprietary interests due to the income threshold in the Bill. 

However, if the Bill becomes law, it will be the first time New Zealand labour legislation will include such a provision.