Client Poaching Contractor Clauses in New Zealand

A client who hires your contractor directly can turn a profitable account into a loss overnight.

The usual trigger is simple: your business introduces the worker, manages the relationship, carries the risk and trains them on the client's systems, then the client suggests they work together without you.

Common mistakes include relying on a vague handshake understanding, putting the restriction only in the contractor agreement, or charging a large fee that looks more like a penalty than a genuine protection. A well-drafted client poaching contractor clause can reduce that risk, but it needs to be reasonable and matched to how your service model actually works.

For agencies, consultants, IT providers, creative studios, trades businesses and labour-hire style teams, the right approach is usually a mix of clear non-solicitation wording, sensible carve-outs and practical evidence of the value your business brings to the introduction.

Where Contractor Poaching Risk Shows Up

Contractor poaching risk appears whenever your business supplies people, expertise or access to a talent network that a client could later use without paying you.

The risk is not limited to recruitment agencies. It can affect any service business with client terms and conditions where individual workers form strong relationships with clients. A marketing agency may place a freelance media buyer inside a client's team. A software consultancy may send a developer to work with a client's product manager. A facilities business may assign a cleaner, installer or technician to the same customer site each week.

The commercial problem is that your business has often done more than make an introduction. You may have screened the worker, checked references, trained them, managed availability, handled invoicing, covered insurance requirements, managed client consent, resolved performance issues and kept a backup option ready. If the client bypasses you after all of that, your margin, goodwill and pipeline can be damaged.

Businesses usually need protection in several places, not just one document:

• Client service agreement: The client promises not to solicit, hire or engage your staff or contractors outside your business for a defined period.
• Contractor agreement: The contractor promises not to accept direct work from your clients, or not to deal with them except through your business, for a reasonable period.
• Statement of work or booking terms: Each project or placement identifies the relevant client, worker, fees and any conversion fee or introduction fee.
• Internal process: Your team records who introduced whom, when the introduction happened and what work was performed.

A client hiring staff contract term can also apply to employees, not just contractors. If your account manager, consultant or technician is employed by your business, the client contract can say the client must not approach or employ them directly during the engagement and for a period afterwards. Separate employment agreement restraints may also be needed on the worker side, but the client-facing promise is a different obligation.

For founder-led businesses, the problem often emerges after a client relationship becomes friendly. The client asks whether they can pay the contractor privately for weekend work, or offers the worker a permanent role after a project ends. Without clear wording, the conversation can feel awkward and difficult to enforce because the client may say they did not realise there was any restriction.

The best time to address the issue is before the first introduction. Once the client and contractor already know each other, adding a new restraint can be harder commercially and legally, especially if it looks like you are trying to control a relationship after the value has already been created.

What a Client Non-Solicitation Clause Can Do

A non-solicitation clause in New Zealand can stop a client from actively approaching your contractors or staff, but it must be drafted with enough detail to match the behaviour you want to prevent.

Several related clauses are used in service agreements. They sound similar, but they do different jobs:

• Non-solicitation: The client must not approach, induce or encourage your worker to leave your business or accept work outside your business.
• No-hire clause: The client must not employ or engage the worker directly, even if the worker makes the first approach.
• Non-dealing clause: The client must not deal with the worker in relation to the relevant services except through your business.
• Introduction fee or conversion fee: The client can hire or engage the worker directly only if it pays an agreed fee.
• Confidentiality clause: The client must not misuse information about your pricing, worker rates, candidate pool, staffing methods or subcontractor network.

A contractor poaching clause is often strongest when it combines several of these ideas in a balanced way. For example, a labour-based business might say the client must not solicit or engage any worker introduced by the business during the contract and for six months after the worker last provided services to that client, unless the client pays a genuine conversion fee.

The difference between soliciting and hiring matters. A narrow non-solicitation clause may only catch the client if there is evidence that the client made an approach. If the worker contacts the client first, the client may argue there was no solicitation. A no-hire or non-dealing clause is broader because it focuses on the outcome, not only who started the conversation.

Broader clauses can be harder to justify, so the drafting should connect to a legitimate business interest. For many agencies and consultancies, that interest is protecting the value of introductions, client relationships, confidential commercial information and investment in recruitment, training and project management. The clause should not look like a blanket attempt to stop people earning a living or stop clients using ordinary market options.

A workable clause should usually cover:

• which workers are protected, such as employees, contractors, subcontractors, consultants or candidates introduced by your business;
• which client parties are bound, including related entities, managers, directors and procurement teams where appropriate;
• what conduct is restricted, such as soliciting, inducing, employing, engaging, contracting with or dealing directly;
• when the restriction applies, including during the engagement and for a defined period after it ends;
• what exceptions apply, such as responses to a general public job advertisement not targeted at your worker;
• what happens if the client wants to hire the worker, such as a pre-agreed conversion fee and approval process.

Service businesses sometimes rely on an informal email saying the client cannot poach contractors. That may help prove the parties discussed the issue, but it is rarely as effective as a clear clause in the signed client agreement. The clause should sit with your payment terms, scope of services, confidentiality obligations and termination rights so it forms part of the bargain from the start.

When a Restraint Clause Is Likely to Be Enforceable

A restraint clause for a contractor in NZ is more likely to be enforceable when it protects a legitimate business interest and goes no further than reasonably necessary.

New Zealand courts generally treat restraint of trade clauses carefully because they can limit competition and work opportunities. A restraint is not automatically invalid, but the business seeking to rely on it usually needs to show that the restriction is reasonable between the parties and not contrary to the public interest.

Reasonableness depends on the facts. A court will look at the parties' bargaining position, the type of business, the worker's role, the client's knowledge of the restriction, the duration of the restraint, the scope of the restricted activities and whether the clause protects something more than ordinary competition.

For a client poaching clause, the strongest legitimate interests often include:

• Introductions: Your business identified, vetted or supplied the worker and created the opportunity for the client and worker to meet.
• Goodwill: Your business built the client relationship and assigned a worker as part of that relationship.
• Confidential information: The client or worker may know your rates, margins, resourcing model, contractor database, training materials or internal processes.
• Investment: Your business spent time and money on recruitment, onboarding, supervision, compliance and account management.
• Continuity of service: Direct poaching could destabilise a team or make it harder for you to deliver to other clients.

A clause is more vulnerable if it applies to every person who has ever worked for your business, every client in New Zealand, every type of work and an excessive period after the relationship ends. A narrow clause linked to workers introduced to that particular client is usually easier to justify than a blanket ban across your entire workforce.

Duration is a major factor. Many service businesses use a period measured in months after the last relevant contact, project or introduction. The right period depends on the sales cycle, the industry and the investment made in placing the worker. For example, a six-month restriction after the contractor last worked with that client may be easier to defend than a multi-year ban applying to all possible services.

Geography may not matter as much where the restraint is tied to a specific client and worker. A nationwide geographic restraint may add little if the clause already only applies to the client you introduced. For remote and digital services, a geographic limit can also feel artificial. The more targeted approach is often to define the restricted relationship rather than a broad territory.

Payment provisions need special care. If your agreement says the client must pay a fee if it hires your contractor, the fee should reflect a genuine commercial estimate of your lost margin, recruitment value, replacement cost or introduction value. If the amount is extravagant or designed only to punish the client, it may be challenged as a penalty.

Employment law can also affect the overall strategy. If your own worker is an employee, any restraint in their employment contract needs to be considered alongside the Employment Relations Act 2000 and the duty of good faith in employment relationships. If the worker is an independent contractor, employee or contractor advice may help because the restraint still needs to be reasonable, but the context and bargaining dynamics may differ. Either way, the client contract should not be your only control if the worker could also agree to bypass you.

Competition law should not be ignored. Clauses that restrict a client from hiring a particular worker introduced by your business are common in service contracts. However, broad no-poach arrangements between competing businesses, especially agreements not to hire each other's staff generally, can raise concerns under the Commerce Act 1986. A narrow vertical clause protecting a genuine introduction is different from a market-wide arrangement that suppresses labour competition.

The Fair Trading Act 1986 is also relevant to how you describe your rights. Avoid telling clients that the law automatically prevents them hiring any contractor they meet through you if your contract does not say that. Your communications should match the actual signed terms and should not overstate the restriction.

Drafting Tips for Agencies and Labour-Based Businesses

The best contractor poaching clauses are practical enough for sales teams to explain, finance teams to invoice and account managers to enforce without damaging the client relationship.

Start with the business model. A recruitment agency placing candidates permanently needs different wording from an IT consultancy assigning developers under a managed services arrangement. A disability support provider, events staffing business or home services company may need wording that reflects ongoing rosters, client continuity and sensitive relationship boundaries.

A strong clause usually answers these drafting questions:

1. Who is protected? Define whether the clause covers employees, contractors, subcontractors, consultants, candidates, temporary workers, secondees and anyone introduced or supplied by your business.
2. Who is restricted? Bind the client and, where reasonable, related companies, officers, employees and representatives who may make the approach.
3. What counts as an introduction? Include introductions by email, interviews, proposals, placements, site visits, project access, CV submission or any work performed for the client.
4. What conduct is banned? List soliciting, canvassing, enticing, inducing, employing, engaging, contracting with or otherwise dealing directly in relation to the services.
5. How long does it last? Use a period that matches your placement value and industry, measured from the last introduction, last service date or end of the contract.
6. What fee applies? Set a genuine conversion or introduction fee, or a formula that can be calculated from the worker's rate, expected margin or annual remuneration.
7. What approvals are needed? Require written consent before any direct engagement and explain when that consent may be conditional on payment.
8. What exceptions are fair? Consider general job advertisements, pre-existing relationships disclosed before the introduction and workers who were already known to the client.

Definitions should not be an afterthought. If the clause only says the client must not hire our staff, it may not cover independent contractors, subcontractors or candidates who were never technically staff. A better definition might refer to any person introduced, supplied or made available by your business for the purpose of providing or discussing the services.

Pre-existing relationships are a common source of disputes. A client may say it already knew the contractor from a previous job, LinkedIn contact or supplier relationship. Your agreement can require the client to disclose any pre-existing relationship in writing before the introduction or within a short period after receiving the worker's details. If the client stays silent, it becomes harder for them to later deny the value of your introduction.

Conversion fees should be commercially explainable. For example, a recruitment-style fee may be based on a percentage of the worker's annual remuneration if the client employs them. A contractor conversion fee may be based on a set number of weeks or months of expected margin. For project consultancies, the fee might reflect the cost of replacing the worker and the value of the client relationship.

Avoid drafting a fee that applies in every situation without context. If a contractor did one minor task two years ago and the client later hires them for unrelated work, a very large fee may be hard to justify. A narrower trigger, such as direct engagement within a defined period for services similar to those supplied by your business, is usually more defensible.

Layered restraints can help, but they need to be used carefully. Some contracts use cascading periods, such as 12 months, then 9 months, then 6 months, so a decision-maker can apply a shorter period if a longer one is unreasonable. Cascading clauses can be useful, but they should not be a substitute for thinking through what is genuinely reasonable for the business.

Make the clause operational. Your sales proposal, onboarding email and statement of work should use the same concepts as the main agreement. If the contract says introduced personnel are protected, your team should record the date each worker's profile was sent, when interviews occurred and when work began. Good records make enforcement conversations much easier.

The wording should also fit your relationship tone. A high-trust consulting client may respond badly to aggressive language accusing them of poaching before anything has happened. Clear commercial wording can be firm without being hostile: if the client wants to hire a person introduced by your business, it must obtain written consent and pay the agreed fee.

For contractor agreements, use matching obligations. The contractor should agree not to approach or accept direct work from clients they meet through your business, except with written approval. They should also protect confidential information, return materials, respect intellectual property ownership and notify you if a client makes a direct approach. If the contractor is genuinely running an independent business, the restriction should not go further than needed to protect your client relationships.

Staff training matters. Account managers should know how to respond if a client asks to hire a contractor.

A calm response might be: we can consider a direct hire, but our agreement requires written approval and a conversion fee because we introduced and supplied that person. That keeps the conversation commercial rather than personal.

Do not forget purchase orders and client procurement terms. Larger clients may send their own terms, head contract or subcontractor agreement that override or conflict with your standard agreement. If their terms exclude all additional fees, allow direct hiring or delete restraints, your protection may disappear. Review the order of precedence so your non-solicitation and conversion fee clauses are not accidentally replaced.

FAQs

Can I Stop a Client Hiring My Contractor Directly?

You can reduce the risk with a clear client contract that restricts solicitation, direct engagement or hiring of workers introduced by your business. The clause needs to be reasonable, specific and connected to your legitimate business interests, such as protecting introductions, goodwill and confidential information.

Is a Non-Solicitation Clause Enforceable in New Zealand?

A non-solicitation clause can be enforceable in New Zealand if it is reasonable in scope, duration and purpose. A targeted restriction applying to workers introduced to a particular client is usually easier to justify than a broad ban covering every worker and every type of role.

What Is the Difference Between a No-Hire Clause and a Non-Solicitation Clause?

A non-solicitation clause focuses on preventing the client from approaching or enticing the worker. A no-hire clause goes further and prevents the client from employing or engaging the worker directly, even if the worker initiates the discussion. Broader wording can be useful, but it needs stronger justification.

Can I Charge an Introduction Fee if the Client Hires My Contractor?

You can include an introduction or conversion fee if the client hires a contractor you introduced. The fee should be a genuine commercial amount linked to the value of the introduction, lost margin or replacement cost, rather than an excessive amount designed only to punish the client.

Should the Clause Be in the Client Contract or the Contractor Agreement?

It should usually be in both. The client contract controls the client's conduct, while the contractor agreement controls the worker's conduct. Matching obligations make it harder for either party to bypass your business and say the restriction did not apply to them.

Key Takeaways

• A client poaching contractor clause helps protect the value your business creates when it introduces, supplies or manages workers for clients.
• Non-solicitation, no-hire, non-dealing and conversion fee clauses do different jobs, so the wording should match the risk you want to control.
• New Zealand restraint clauses are more likely to be enforceable when they are reasonable, targeted and linked to legitimate business interests.
• Conversion fees should be commercially justifiable and not drafted as excessive penalties.
• Put matching obligations in your client service agreement, contractor agreement and project documents, then keep records of introductions and placements.

If you would like help tightening your client service agreement, contractor terms, non-solicitation wording or introduction fee structure, Sprintlaw's online legal team can help. Contact us on 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.