Why 90% of NZ Employment Contracts Are Legally Dangerous
Ron Mckenzie | Februarty 28, 2025
If you’re running a business in New Zealand, your employment agreements may be exposing you to serious legal risk — without you even realising it.
At McKenzie Law, we regularly review employment agreements across industries. A worrying pattern emerges: most contracts are outdated, copied from templates, or missing critical protections required under New Zealand employment law.
Here’s the truth — poorly drafted employment agreements are one of the biggest hidden liabilities for NZ employers.
Let’s break down why.
The Risk Most NZ Employers Don’t See
Many business owners assume that once an employment agreement is signed, they’re protected.
Unfortunately, that’s not how it works.
Under the Employment Relations Act 2000, every employee in New Zealand must have a written employment agreement that meets strict legal requirements. If your agreement:
Omits mandatory clauses
Includes unenforceable provisions
Copies overseas templates (especially Australian ones)
Fails to reflect current law
Is inconsistent with your workplace practices
You could face:
Personal grievance claims
Costly mediation or ERA proceedings
Financial penalties
Compensation awards
Reputational damage
Even minor drafting errors can have major consequences.
Common Legal Dangers Found in NZ Employment Agreements
1. Invalid 90-Day Trial Period Clauses
This is one of the most common and expensive mistakes.
If the 90-day trial clause is not drafted correctly — or if the employee starts work before signing — the clause becomes invalid. That means the employee can bring a personal grievance for unjustified dismissal.
Many employers think they are protected. Often, they’re not.
2. Unenforceable Restraint of Trade Clauses
Non-compete and non-solicitation clauses must be reasonable in scope, time, and geography.
If your restraint clause is too broad, the Employment Relations Authority may refuse to enforce it entirely. That could leave your business vulnerable to former employees taking clients or confidential information.
3. Missing Mandatory Clauses
NZ employment agreements must include specific provisions, such as:
Plain language explanation of dispute resolution
Reference to mediation services
Description of hours of work
Wages or salary details
Public holiday entitlements
Failing to include required terms can result in penalties and weaken your position in disputes.
4. “Template” Contracts That Don’t Match Reality
One of the biggest legal dangers is when contracts don’t reflect how the workplace actually operates.
For example:
Contract says “9am–5pm” but staff regularly work variable shifts
Contract states “casual” but employee works consistent full-time hours
Overtime expectations are unclear
When there is a conflict between written terms and real practice, the Authority often sides with the employee.
5. Outdated Leave & Flexible Work Provisions
Employment law evolves. Contracts drafted five years ago may not reflect:
Changes in leave entitlements
Flexible working rights
Health and safety obligations
Contractor vs employee classification rulings
If your agreement hasn’t been reviewed recently, it may already be behind the law.
Why Employment Agreements Matter More Than You Think
Employment agreements are not just paperwork — they are your first line of defence.
A well-drafted agreement can:
Reduce personal grievance risk
Clarify expectations
Protect intellectual property
Strengthen confidentiality
Set lawful performance management processes
Support lawful termination decisions
From a transactional employment law perspective, prevention is always cheaper than litigation.
The Cost of Getting It Wrong
Many employers only call an employment contract lawyer after receiving:
A personal grievance letter
A mediation notice
An ERA claim
A complaint from MBIE
By that stage, the issue may already be expensive to resolve.
In contrast, reviewing and updating your employment agreements proactively is a small investment compared to the cost of defending a claim.
How McKenzie Law Can Help
At McKenzie Law, we assist NZ businesses with:
Drafting compliant employment agreements
Reviewing and updating existing contracts
Advising on 90-day trial clauses
Drafting enforceable restraint clauses
Structuring contractor vs employee arrangements
Supporting businesses through mediation and ERA disputes
Whether you’re hiring your first employee or managing a growing team, having legally sound employment agreements is essential.
When Should You Review Your Employment Contracts?
We recommend reviewing your employment agreements if:
They are more than 2–3 years old
You copied them from another business
You downloaded them online
Your business has grown or changed structure
You’ve recently faced an employment dispute
If you’re unsure, a professional review can quickly identify risk areas.
Most NZ employers don’t intentionally break employment law — they simply rely on contracts that aren’t legally robust.
The good news? This risk is preventable.
A properly drafted employment agreement gives clarity, protection, and confidence.
If you would like your employment agreements reviewed by an experienced employment contract lawyer in NZ, contact McKenzie Law today for practical, commercially focused advice.
