Can I Make A Contractor Sign A Non-Compete?

Yes, you can ask a contractor to sign a non-compete in New Zealand. But whether you can rely on it later is a different question.

Restraints of trade are treated carefully by New Zealand courts because they can stop someone from earning a living. A contractor non-compete in NZ will usually need to be narrow, fair and tied to a real business interest, not just a general fear of competition.

The good news is that you often don't need a broad non-compete to protect your business. For many contractor and subcontractor arrangements, a sharper mix of non-solicitation, confidentiality and intellectual property clauses will do a better job, with less risk of being challenged.

When Is A Contractor Non-Compete Enforceable In New Zealand?

It depends on whether the restriction is reasonable and protects a legitimate business interest. If the clause goes further than needed, it may not be enforceable.

In New Zealand, a restraint of trade clause is generally treated as unenforceable unless you can justify it. The starting point is that people should be free to work and compete. Your business then needs to show the restraint is reasonable between the parties and reasonable in the public interest.

For contractors, the business interests most likely to justify a restraint are things like:

• Confidential information, such as pricing, margins, supplier details, client strategies, source code or marketing plans.
• Client connections the contractor built or accessed through your business.
• Staff relationships, where the contractor could poach key people from your team.
• Special know-how that gives your business a real competitive advantage.

A clause that simply says the contractor can't work for any competitor in New Zealand for two years will usually be hard to defend. It may look like you're trying to stop normal competition rather than protect something specific.

The Contract and Commercial Law Act 2017 gives courts some power to deal with illegal or unreasonable contract terms, including modifying or cancelling certain provisions. But you shouldn't rely on a court to rewrite a bad restraint for you. A carefully drafted clause is much safer than an overly broad one that you hope can be rescued later.

What Makes A Contractor Restraint Clause Reasonable?

A contractor restraint clause is more likely to be reasonable when it's limited to the risk you're actually trying to manage. The tighter the clause, the better your chances.

When you're deciding what to include, think about the contractor's role in practical terms. Did they have direct access to your clients? Did they see sensitive pricing? Did they build your software? Or were they doing limited work with no real access to your business relationships or confidential information?

Courts will often look at factors like:

• Duration: a shorter restraint is usually easier to justify than a long one.
• Geographic area: a local restraint may be easier to justify than a nationwide one, unless your market is genuinely national or online.
• Type of work: the restriction should match the work the contractor actually did for you.
• Clients covered: naming recent clients or clients the contractor dealt with is usually stronger than covering every possible customer.
• Seniority and access: a contractor with deep access to strategy, pricing or key accounts is different from a contractor doing back-office tasks.
• Industry reality: fast-moving industries may justify different timeframes from industries where client cycles are longer.

Say Mia runs a Wellington digital marketing agency. She engages a contractor, Leo, for 10 hours a week to manage paid ads for 12 named clients. Leo can see those clients' ad budgets, landing page results and upcoming campaign plans.

A clause banning Leo from doing any digital marketing work anywhere in New Zealand for 24 months is likely to be too broad. A better approach may be:

• a 6 month restriction on soliciting the 12 clients Leo worked with;
• a confidentiality clause covering campaign data, pricing and strategy;
• a non-poaching clause for Mia's employees and regular contractors; and
• an IP clause making it clear who owns the ad copy, creative assets and account structures Leo creates.

That approach targets the real risk without stopping Leo from earning a living in his field.

Could A Non-Compete Affect Contractor Status?

Yes, a broad non-compete can create problems if you're trying to show the person is genuinely an independent contractor. This is especially relevant under the Employment Relations Act 2000 and the Employment Relations Amendment Act 2026 changes.

New Zealand law looks at the real nature of the working relationship, not just the label in your agreement. Calling someone a contractor won't make them one if the day-to-day relationship looks more like employment.

The 2026 contractor gateway test is designed to give more certainty where certain conditions are met. One key idea is that a genuine contractor should generally have the freedom to work for others, including other businesses in the market, subject to sensible protections for confidential information and client relationships.

That means a very wide non-compete can cut against the idea that the person is operating their own independent business. If your agreement says the contractor can't work for competitors, must be available at set times, can't send a substitute and risks termination for refusing extra work, you may be building an employment-style relationship without meaning to.

Getting contractor status wrong can have real consequences. You may face claims about minimum employment standards, holidays and leave under the Holidays Act 2003, tax and record-keeping issues, and obligations you didn't price into the engagement.

A safer contractor agreement, with tailored restraint clauses, usually balances both goals:

• give the contractor genuine independence where your business model allows it;
• protect the information, clients and IP that matter to your business;
• avoid controlling the contractor more than needed; and
• use targeted restrictions instead of a blanket ban on working elsewhere.

If your contractor is embedded in your team and working almost like an employee, get employee or contractor advice before adding a non-compete. The restraint may not be your biggest risk.

Is A Non-Solicitation Clause Safer Than A Non-Compete?

Often, yes. A non-solicitation clause is usually more targeted than a non-compete because it focuses on stopping the contractor from approaching specific clients, staff or suppliers.

A non-compete stops the contractor from doing certain work or working with competitors. A non-solicitation clause usually says they can't actively approach certain people or businesses after the engagement ends.

For many businesses, the real worry isn't that the contractor keeps working in the industry. It's that they might use your relationship to take your clients, employees or regular subcontractors with them.

Client Non-Solicitation

A client non-solicitation clause can stop the contractor from approaching clients they dealt with through your business. This is often more reasonable than banning them from the whole industry.

For example, instead of saying, 'You can't provide marketing services in New Zealand for 12 months,' you might say the contractor can't solicit clients they personally worked with in the final 12 months of the engagement, for 6 months after the agreement ends.

The exact wording matters. You should be clear about:

• which clients are covered;
• what counts as solicitation;
• whether the clause covers only direct approaches or also indirect approaches;
• whether the contractor can accept work if the client approaches them first; and
• how long the restriction lasts.

Staff And Contractor Non-Poaching

A non-poaching clause can stop the contractor from encouraging your employees or regular contractors to leave your business. This can be useful if the contractor works closely with your team or has influence over key people.

Again, keep it narrow. A clause covering people the contractor actually worked with will usually be easier to justify than a clause covering every person connected to your business.

What Clauses Should I Use Instead Of A Broad Non-Compete?

You should use the clauses that match the risk you're trying to control. A well-drafted contractor agreement usually protects your business through a set of practical, targeted clauses rather than one heavy restraint.

Here are the clauses to consider.

Confidentiality

A confidentiality clause should cover the information the contractor can and can't use. This may include customer lists, pricing, product roadmaps, supplier terms, strategy documents, code, designs, training materials, processes and financial information.

If the contractor handles personal information, your agreement should also line up with your obligations under the Privacy Act 2020. For example, you may need rules about secure storage, access limits, data return or deletion, and what happens if there's a privacy breach.

Intellectual Property

Don't assume your business owns everything a contractor creates just because you paid for it. Copyright, trade marks, designs, software and other IP should be dealt with clearly in the contract.

Your agreement should say whether the contractor assigns IP to your business, grants you a licence to use it, or keeps ownership of certain background materials. If your brand name or logo is part of the arrangement, you may also want to think about trade mark protection through IPONZ.

Non-Solicitation And Non-Poaching

These clauses focus on protecting your client and team relationships. They're often more defensible than a blanket non-compete because they don't stop the contractor from working generally.

Return Or Deletion Of Materials

When the engagement ends, the contractor should return or delete business documents, logins, devices, files and data. This clause is especially useful if the contractor has access to client files, software systems or cloud folders.

Conflict Of Interest

A conflict clause can require the contractor to tell you if they're working with a direct competitor or if another engagement could affect your project. This can be a sensible middle ground where a full non-compete is too much.

What Should A Contractor Agreement Include?

A contractor agreement should clearly explain the work, payment terms, IP ownership, confidentiality obligations and any restraint clauses. Templates can be a useful starting point, but they often miss the details that make a restraint clause workable.

Here's a fill-in outline you can use to plan the agreement before getting it tailored.

1. Parties And Business Details: write the legal names, NZBNs if relevant, contact details and who is engaging whom.
2. Services: describe the services, deliverables, standards, deadlines and any reporting requirements.
3. Fees And Payment: set out rates, invoicing timing, expenses, GST treatment and what happens if work changes.
4. Contractor Independence: explain that the contractor controls how the work is performed, subject to your agreed requirements.
5. Confidentiality: list the types of confidential information and how it must be protected during and after the engagement.
6. Privacy And Data Security: include rules for handling personal information, security measures, breach notification and data return or deletion.
7. Intellectual Property: state who owns new work, who owns pre-existing materials and what licences or assignments apply.
8. Non-Solicitation: describe any client, staff or contractor restrictions, including duration and who is covered.
9. Non-Compete: only include this if genuinely needed, and keep it limited by work type, time and scope.
10. Conflicts Of Interest: require disclosure of work that may conflict with your business or client obligations.
11. Insurance And Compliance: set out any industry licences, health and safety duties, insurance and legal compliance requirements.
12. Termination: explain how either side can end the arrangement and what happens to files, access and final invoices.

This outline isn't a finished legal document. A lawyer should tailor it before you use it, especially if you're including a restraint of trade clause or the contractor will have access to sensitive client information.

How Do I Choose The Right Restraint For My Contractor?

You should start with the business risk, then choose the narrowest clause that deals with it. If you begin with a broad non-compete, you may end up with a clause that looks tough but doesn't help much in practice.

Use this simple process before you send the agreement.

1. List What The Contractor Will Access: include clients, systems, pricing, code, strategy, designs, staff and supplier relationships.
2. Identify The Real Risk: decide whether you're worried about client poaching, misuse of confidential information, staff poaching, IP ownership or direct competition.
3. Match The Clause To The Risk: use confidentiality for information, IP clauses for ownership, non-solicitation for clients and non-poaching for staff.
4. Keep Any Non-Compete Narrow: limit it by time, activity and market, and avoid covering work the contractor never did for you.
5. Check Contractor Status: make sure the level of control in the agreement doesn't undermine the contractor relationship under employment law.
6. Review Before Renewal: if the contractor's role grows, update the agreement instead of relying on an old clause.

Also think about how the clause will feel commercially. If you're engaging a specialist under a contractor agreement who works with several clients in the same industry, a broad ban may be unrealistic. A targeted confidentiality and non-solicitation package may protect you without making the contractor walk away.

If the contractor refuses to sign any restraint, ask why. Sometimes the issue is the clause is too broad. You may be able to agree on a narrower restriction that protects your business and still lets the contractor keep operating independently.

Key Takeaways

• You can ask a contractor to sign a non-compete in New Zealand, but it needs to be reasonable and tied to a real business interest.
• Broad restraints are risky, especially if they stop the contractor from working in their industry or undermine genuine contractor status.
• Non-solicitation, non-poaching, confidentiality and IP clauses are often safer and more practical than a blanket non-compete.
• The Employment Relations Amendment Act 2026 contractor gateway test makes independence and freedom to work for others especially relevant.
• Your contractor agreement should be tailored to the role, the information the contractor can access and the relationships you need to protect.

If you'd like help with your contractor agreements, restraint clauses, confidentiality protections or IP ownership terms, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.