What is a Restraint of Trade Clause (‘RTC’)?   

A RTC ultimately acts to hinder an employee’s option post-employment when they’ve decided it’s time to ‘throw in the towel’.  A RTC operates to protect an employers’ interests first and foremost. 


Why are Restraint of Trade Clauses used? 

Employers include RTC’s as a way to prevent the sharing of; 


Types of Restraints 0f Trade Clauses  


…Is it actually just a crock of sh*t?  

Enforcing a RTC is generally deemed as anti-competitive behaviour by the Authority and unfavourably looked upon due to its impact on the individual pursuing work in their chosen field! The clause is only beneficial to the employer therefore the onus to determine and explain the restraint terms is on them.  



Fun Fact #1: If an employee has been unjustifiably dismissed, a restraint of trade clause may no longer apply. 

Recent determinations from the Employment Relations Authority show that through use of section 83 of the Contract and Commercial Law Act 2017, employee restraints are typically eased and shortened. 


For a RTC to be enforceable it must be reasonable and drafted on a ‘catch-all’ approach.  



Plenty of factors come into consideration here, such as;  


Fun fact #2: It’s uncommon for a restraint clause to withstand for more than 12 months

At the end of the day, Employment Law in New Zealand always requires that both parties act in Good Faith, even at the end of engagement.  




If you are believe your rights may be infringed or even just have questions about restraint of trade claused feel free to call Sacked Kiwis toll-free hotline: 0508 22 77 99. Our Team of Legal Experts is ready to help you, who you can meet here on our “Our Team” Page.


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