High Court tackles non-competition clauses in real estate agent employment contracts

At the heart of the dispute was the use of client leads and property appraisals

High Court tackles non-competition clauses in real estate agent employment contracts

In a recent ruling, the High Court granted an interim injunction against four former real estate agents of Harcourts who are now working for Bayleys in the Paremata and Porirua areas.

The court's decision in Team Group Realty Limited t/a Harcourts Paremata v Cardno [2024] NZHC 553 restricted the agents from engaging in business activities that directly compete with Harcourts within a specified geographic area, highlighting the enforceability of non-competition clauses in employment contracts.

Team Group Realty Ltd, operating under the Harcourts franchise, brought the action after the agents resigned en masse in December 2023 and subsequently joined Bayleys, a rival real estate agency. The move prompted concerns over the potential misuse of Harcourts' confidential information, and client leads, culminating in the legal challenge.

The court's deliberation focused on whether the agents, by their actions, breached the confidentiality, non-solicitation, and non-competition obligations outlined in their contracts with Harcourts. The court underlined the significance of protecting legitimate business interests through such contractual provisions.

At the heart of the dispute was the agents' use of client leads and property appraisals obtained during their tenure at Harcourts to secure listings for Bayleys shortly after their move. The court found sufficient grounds to believe that Harcourts' confidential information might have been exploited, granting the injunction to prevent further damage to Harcourts' business.

The court underscored the legal principles governing interim injunctions, restraints of trade, and the protection of confidential information in the context of employment relationships. In deciding to issue a three-month injunction, the court considered the balance between safeguarding Harcourts' interests and the potential impact on the agents' ability to earn a livelihood.

The court also addressed the issue of confidential information, with specific reference to client leads and the process of converting these leads into property listings—a crucial aspect of the real estate business. The agents argued that leads are personal to an agent and not confidential information belonging to Harcourts. However, the court found that leads obtained during employment could constitute confidential information protected under their contracts.

While the injunction directly affected the four agents, Harcourts had also sought relief against a fifth individual, alleging he had received confidential information from the agents. The court declined this request, indicating that employment-related claims against this person should be pursued through the Employment Relations Authority.

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