Can Your Boss Stop You Working Elsewhere? Restraint of Trade Clauses in New Zealand

You’ve found a better job, or you’re ready to start your own venture, and then you spot it buried in your old employment agreement: a clause saying you can’t work for a competitor for the next 12 months. Panic sets in. But here’s the reassuring truth: in New Zealand, restraint of trade clauses are not automatically enforceable, and many are drafted far more broadly than a court would ever allow.

What is a restraint of trade?

A restraint of trade is a clause that limits what you can do after you leave a job. The three most common types are non-competition clauses (you can’t work for a competitor), non-solicitation clauses (you can’t poach clients or customers), and non-poaching clauses (you can’t recruit former colleagues). Employers use them to protect genuine business interests, but they can’t use them simply to stop ordinary competition.

The starting point: restraints are void unless reasonable

Under the common law and the Contracts and Commercial Law Act 2017 (which carried over the old Illegal Contracts Act provisions), a restraint of trade is presumed void unless the employer can show it is reasonable. Reasonableness is assessed on three things:

A legitimate proprietary interest. The employer must have something real to protect, like confidential information, trade secrets, or genuine client connections. General skills and experience you’ve built up are yours, not theirs.
Reasonable scope. The geographic area, the length of time, and the activities restricted must be no wider than necessary. A nationwide, two-year ban on a junior employee will almost never hold.
The public interest. Courts are reluctant to stop people earning a living in their chosen field.

The court can rewrite an unreasonable clause

This is a New Zealand quirk worth knowing. Under section 83 of the Contracts and Commercial Law Act, the Employment Relations Authority or courts have the power to modify an unreasonable restraint rather than simply strike it out. So a six-month restraint that’s too long might be trimmed to three, rather than thrown away entirely. That cuts both ways, so don’t assume an overly broad clause is automatically worthless.

What to do if you're facing a restraint

Read the exact wording. Vague or overly broad clauses are the most vulnerable to challenge.
Ask what interest it protects. If there’s no real confidential information or client relationship at stake, the restraint is on shaky ground.
Don’t just ignore it. Breaching a valid restraint can lead to an injunction and damages.
Get advice before you sign the new contract. Early advice can save you an expensive dispute later.

We offer a free initial consultation to review your situation and make sure your rights are protected. If you have received a restructure proposal, been told your role is at risk, or already been made redundant, contact McKenzie Law today. The earlier we are involved, the more options you have.

Disclaimer: this article is general information only and is not legal advice. Every situation turns on its own facts. For advice on your circumstances, please contact us directly.

FAQs

My employer said the decision was already made when they “consulted” me — is that legal?

No. Consultation must take place before the decision is finalised, with a genuinely open mind. An employer who has already decided the outcome before consulting has not met the legal standard. This is one of the most common procedural failures in NZ redundancy processes — and one of the strongest bases for a personal grievance.

My role was made redundant, but someone else is now doing very similar work — what does that mean?

It is a strong indicator of a sham redundancy. If the substance of your role has effectively been redistributed or a near-identical position has been created or filled shortly after your disestablishment, the redundancy may not have been genuine. Seek legal advice and document everything you know about what happened to your duties.

Am I entitled to a redundancy payout?

Only if your employment agreement provides for one, or you successfully negotiate one. There is no statutory minimum in New Zealand. However, if the redundancy process was flawed, you may be entitled to remedies through a personal grievance — including compensation for hurt and humiliation and lost remuneration — which can exceed any contractual payout.

My employer gave me 48 hours to respond to the restructuring proposal — is that enough time?

It depends on the complexity of the proposal, but 48 hours is generally very short for a significant restructure affecting your employment. Best practice under NZ law is to provide adequate time to seek independent advice, prepare a response, and genuinely engage. A tight deadline that prevents meaningful consultation is a procedural flaw that can undermine the entire process.

Can I challenge a redundancy if I’ve already signed my exit documents?

If the documents were signed and countersigned by an MBIE mediator, the settlement is likely full and final. However, if you signed an agreement directly with your employer without MBIE involvement, the position may be more complex. Either way, seek legal advice immediately — the window to act may still be open depending on the circumstances.

Talk to McKenzie Law before your next move

At McKenzie Law, we represent employees only — and we have seen every variation of a rushed, predetermined, or retaliatory redundancy there is. If you have received a redundancy proposal, if your consultation felt like a formality, or if you believe your role was not genuinely surplus — we want to hear from you.

McKenzie Law is an Auckland-based employment law firm representing employees across New Zealand — including Auckland, Wellington, Christchurch, Hamilton, Tauranga, and all regions. All content is general in nature and does not constitute legal advice. For advice specific to your situation, contact us directly.