# Restraint of trade Official source: https://www.employment.govt.nz/starting-employment/employment-agreements/restraint-of-trade Scanned: 2026-06-07T03:31:31.402Z Use this as a current official guidance reference, not as a substitute for legal advice. ## Page Text Home Starting employment Employment agreements Restraint of trade Employment agreements Starting employment Rights and responsibilities Types of worker Hiring Employment agreements Creating an employment agreement Collective and individual employment agreements Negotiating and accepting as an employee Offering and negotiating as an employer Restraint of trade Employers Restraint of trade A restraint of trade clause prevents former employees from working in similar businesses in a way that may affect your business. When you can include a restraint of trade in an employment agreement You can include a restraint of trade clause in your employee’s employment agreement A written document setting out the terms and conditions of employment agreed by the employer and employee (also known as a ‘contract of service’). It can include other contractual documents and agreements made by the employer and employee. Every employee must have a written employment agreement. if they also agree to it. These clauses are designed to protect a business’ commercially sensitive information by restricting the employee‘s business activities when they finish working for you. They are usually limited to a specific geographical area and only last for a specific period after the end of the employee’s work. Restraint of trade clauses should be reasonable Restraint of trade clauses should be reasonable otherwise they may not be enforceable. If you are considering creating a restraint of trade clause, you should get independent legal advice. 2 main types of restraint of trade clause The 2 main types of restraint of trade clause are: non-competition - where a former employee is prevented from working in a similar field to your business non-solicitation - where a former employee is allowed to take another job in the same or similar industry but is restricted from contacting your clients about their new business. You can find a restraint of trade clause in our Employment agreement builder. Employment agreement builder - business.govt.nz (external link) How to protect confidential information Your employees must act in good faith An underlying principle in employment law which requires employers and employees to deal with each other honestly, openly, and in a fair and timely way. . This includes keeping ‘trade secrets’ and other highly confidential information private during their employment and after they stop working for you. This applies even if there is not a specific clause in their employment agreement. Make sure your employees know what information is confidential and how to keep it safe. Some employers add a confidentiality clause to employment agreements A written document setting out the terms and conditions of employment agreed by the employer and employee (also known as a ‘contract of service’). It can include other contractual documents and agreements made by the employer and employee. Every employee must have a written employment agreement. to protect their business. This clause should clearly explain what information is considered confidential. If you include a confidentiality clause, when your employee leaves remind them that the confidentiality clause continues after they’ve stopped working for you. There may be consequences if they use or share confidential information. Employment agreement builder - business.govt.nz (external link) Simple steps to protect your intellectual property - business.govt.nz (external link) What happens if an employee breaches a restraint of trade clause If an employee breaches An act of breaking a law, promise, agreement or relationship. a restraint of trade clause or misuses confidential information, you may be able to apply to the Employment Relations Authority The tribunal established under the Employment Relations Act to resolve employment relationship problems. or the Employment Court The court that hears and determines cases relating to employment disputes. It also hears challenges to determinations of the Employment Relations Authority and questions of interpretation of law. It has initial jurisdiction over matters like strikes and lockouts. for an injunction restraining the employee from continuing such activities. You may also be able to ask for damages to cover any loss they may have experienced because of the breach, and penalties for the breach of contract or a breach of the duty of good faith An underlying principle in employment law which requires employers and employees to deal with each other honestly, openly, and in a fair and timely way. . Employment Relations Authority (external link) Published: 18 December 2023 Last modified: 6 November 2025 Written for: Employers Share this page: Print this page: