What a restraint is
Employment NZ says an employer must have a specific restraint clause in the employment agreement, and even then it may not be enforceable. The two main kinds are non-compete (you can't work in a similar field) and non-solicitation (you can work in the industry but can't contact the former employer's clients or staff). Other ongoing obligations, like confidentiality and intellectual property, also continue after employment ends. These are different from restraints.
When courts will enforce one
| Question | What courts look at |
|---|---|
| Is there a legitimate interest? | Customer connections, confidential information, trade secrets. Not just avoiding competition. |
| How long? | No longer than needed. In one reported ERA case a non-compete was cut from three months to seven weeks. |
| How wide? | Area, industry and activities should be limited to what is reasonable. |
| Was anything paid for it? | Some commentary says employees should receive proper compensation for being bound. |
| Are other protections enough? | A non-solicitation or confidentiality clause may do the job, so a full non-compete is not necessary. |
Courts can modify or sever overly broad clauses or refuse to enforce them. Commentary differs on how receptive courts now are to reasonable non-competes; don't assume yours is void.
Why redundancy changes the picture
- If the employer ended your role because it no longer needed it, it's harder to argue they need to keep you out of the market.
- Courts consider whether enforcement is reasonable in the circumstances, including the employer's decision to end the relationship.
- That doesn't void the clause automatically. Treat it as negotiating leverage, not permission.
- Some agreements expressly say the restraint ends or is reduced on redundancy. Check.
Garden leave and restraint
Garden leave (staying employed and paid but not working) can be used to delay your start at a competitor. It needs your written agreement, and doesn't use up annual leave. If you are on it, you are still an employee and owe duties of good faith and loyalty. Don't start other work without checking.
Asking to be released
Request to release a restraint
Hi [Name], My role was disestablished with effect from [date]. Clause [x] of my agreement contains a [non-compete / non-solicitation] restraint. Given that the company has ended my employment, I don't believe enforcing the restraint is reasonable. I'm seeking work in [field] and would like written confirmation by [date] that the restraint will not be enforced, or that it is limited to [narrower scope]. Kind regards, [Name]
- Offer something: you won't use confidential information or approach named clients.
- Ask for it in the settlement if you're negotiating one.
- Keep their reply. If they won't release it, ask for advice on what is actually restricted.
Sources
- Employment NZ: Restraint of trade (opens in a new tab)
- Employment NZ: On or after last day of employment (opens in a new tab)
- Employment NZ: Notice periods (opens in a new tab)
General information only. Confirm with the agency for your situation. Spotted something out of date? Email help@unemployed.nz.