Can An Employee Work For A Competitor After Resigning?

Can an employee work for a competitor after resigning? Usually, yes - unless you have a valid restraint, confidentiality or client non-solicit clause that reasonably protects your business.

It can feel personal when a good employee leaves for a competitor, especially if they know your pricing, systems, client list or upcoming plans. The reassuring part is that you do have options, but they depend heavily on what the employment agreement says and how reasonable the restrictions are.

New Zealand law generally lets people earn a living. So the aim isn't to stop someone from working altogether. It's to protect the parts of your business that are genuinely yours, like confidential information, customer relationships and intellectual property.

Can An Employee Work For A Competitor After Resigning?

Yes, an employee can usually work for a competitor after resigning, unless a reasonable and enforceable restraint or non-compete agreement stops them from doing certain things.

In New Zealand, the starting point is that restraints of trade are treated carefully because they limit a person's ability to work. A clause that says an employee can't work for any competitor, anywhere in New Zealand, for a long period of time is unlikely to be enforceable unless there's a very strong reason for it.

That doesn't mean your agreement is useless. A narrower clause may still protect your business by stopping the former employee from:

• using or disclosing your confidential information
• approaching clients they dealt with while working for you
• poaching your staff or contractors
• working in a very specific competing role for a limited time and area
• misusing intellectual property, documents, databases or systems they accessed in the job

You'll usually get a stronger outcome if your clauses are targeted to the employee's actual role. A senior salesperson with access to key accounts is different from a junior casual worker with no client relationships or strategic information.

The Employment Relations Act 2000 also requires good faith in employment relationships. While the employee is still employed, including during their notice period, they shouldn't undermine your business or secretly prepare to misuse your information. After employment ends, their ongoing obligations will mainly come from the agreement and general legal duties around confidentiality.

Can You Enforce A Non-Compete Clause In New Zealand?

It depends - a non-compete clause is only likely to be enforceable if it protects a legitimate business interest and is reasonable in scope.

A legitimate business interest might include confidential information, trade secrets, customer connections, pricing strategy, supplier terms, product plans or goodwill built through your business. A non-compete clause that simply tries to avoid ordinary competition is much harder to justify.

When assessing a non-compete, look closely at four things:

• Role: Did the employee have real access to sensitive information or client relationships?
• Time: Is the restraint period no longer than needed? A few months is usually easier to justify than a year or more.
• Area: Is the location tied to where your business actually operates?
• Activities: Does it stop only the work that could harm your business, or does it ban too much?

For example, say Maia runs a managed IT services business in Hamilton. Her senior account manager resigns with four weeks' notice and joins a competitor. The employment agreement has a 12-month non-compete covering all of New Zealand, plus a six-month client non-solicit for clients the employee dealt with in the previous 12 months.

The broad 12-month New Zealand-wide non-compete may be difficult to enforce because it stops too much work for too long. The six-month client non-solicit is likely to be a stronger starting point because it's tied to specific clients, a defined period and relationships the employee actually handled.

If you're thinking about formal enforcement, get tailored advice quickly. Timing matters, and you'll want to know whether the clause is strong enough before you send a heavy letter or escalate the issue.

What About Confidential Information After Resignation?

Yes, you can usually stop a former employee from using or sharing your confidential information after they leave.

Confidentiality is often your strongest protection because it doesn't rely only on a non-compete clause. If information is genuinely confidential and was shared for work purposes, the employee shouldn't take it to a competitor or use it for their own benefit.

Common examples include:

• client lists that aren't publicly available
• pricing models, margins and discount rules
• supplier arrangements and negotiated rates
• business plans, tenders and pitch documents
• software code, product roadmaps or technical know-how
• internal processes, manuals and templates
• marketing plans, campaign data and conversion information

The practical challenge is evidence. It's much easier to act if you can show what information the employee accessed, downloaded, emailed or printed before leaving.

Be careful how you check this. If you monitor email accounts, devices or workplace systems, make sure you follow your employee monitoring notice, policies and privacy obligations under the Privacy Act 2020. You should only collect and use personal information for a proper business reason, keep it secure and avoid overreaching.

A good confidentiality clause should survive the end of employment. It should also explain what counts as confidential information, how it can be used, what must be returned and what happens to copies stored on personal devices or cloud accounts.

Can You Stop A Former Employee Contacting Your Clients?

Yes, you may be able to stop a former employee from approaching your clients if you have a reasonable client non-solicit clause.

A client non-solicit clause is usually easier to justify than a full non-compete because it doesn't stop the employee from working. It focuses on protecting the customer relationships your business has built.

The best client restraints are specific. They usually define:

• which clients are protected, such as clients the employee dealt with in the last 6 or 12 months
• what conduct is restricted, such as soliciting, canvassing or encouraging clients to move
• how long the restriction lasts
• whether it covers prospective clients the employee helped pitch to
• whether it applies directly or indirectly, such as through a new employer

There's an important difference between a client choosing to follow the employee and the employee actively soliciting the client. If a client independently contacts the former employee, your position may be weaker unless your clause also restricts accepting work from certain clients. Clauses that ban accepting work are more restrictive, so they need to be drafted carefully.

For a practical example, imagine Tom runs a commercial cleaning business in Christchurch. His operations manager resigns and, during the last week of employment, downloads a client pricing spreadsheet and emails three major clients saying he can offer a cheaper service next month. Tom's best options are likely to focus on confidentiality, misuse of business information and breach of a client non-solicit clause, rather than trying to stop the former employee from working in cleaning altogether.

If the former employee makes misleading statements to clients, the Fair Trading Act 1986 may also be relevant. For example, it may be an issue if they suggest your business has closed, merged or authorised the move when that isn't true.

What Should You Do Before Confidential Information Walks Out?

You should act quickly, calmly and in a way that preserves evidence without overstepping your legal obligations.

Once an employee resigns to join a competitor, your first few days are crucial. You don't need to panic, but you should move from a normal offboarding process to a protected exit process.

Step 1: Review The Employment Agreement

Check the clauses on restraints, confidentiality, intellectual property, return of property, notice, garden leave and termination documents. Also check whether the employee has signed the current version of the agreement.

Step 2: Control Access

Limit access to systems the employee no longer needs during notice. This might include CRM exports, pricing folders, finance data, product roadmaps and shared drives.

Step 3: Preserve Evidence

Keep records of downloads, unusual forwarding, device access, client contact and messages about the new role. Don't edit or delete records. If you use IT support, ask them to preserve logs before accounts are closed.

Step 4: Hold An Exit Meeting

Remind the employee of their ongoing obligations in a professional way. Ask them to return devices, documents, access cards and any business information stored outside your systems.

Step 5: Confirm In Writing

Send a short letter or email setting out their post-employment obligations. Keep it factual. If you make allegations without enough evidence, you can make the situation harder to manage.

Garden leave can be useful if your agreement allows it. For example, if the employee has four weeks' notice, you may be able to direct them not to work during that period while they remain employed and paid. This can reduce the risk of client contact and information misuse during the transition.

What Clauses Should Your Employment Agreement Include?

Your employment agreement should include clear, tailored clauses that match the employee's role and the risks in your business.

New Zealand employment agreements must meet the requirements of the Employment Relations Act 2000 and sit alongside minimum entitlements under laws such as the Holidays Act 2003. Restraints and confidentiality clauses are extra protections, so they need careful drafting.

Templates can be a helpful starting point, but they often use broad wording that's hard to enforce, especially without employee or contractor advice. The more senior or client-facing the role, the more worthwhile it's to have the agreement tailored before you use it.

Fill-In Outline For Key Clauses

1. Role And Access: Describe the employee's position, client exposure and access to sensitive information.
2. Confidential Information: Define what is confidential, including databases, pricing, systems, strategy and non-public client information.
3. Permitted Use: Say the information can only be used for your business and authorised work duties.
4. Return And Deletion: Require return of devices, documents and copies, including anything saved to personal accounts or cloud storage.
5. Client Non-Solicit: Set out which clients are covered, what contact is restricted and for how long.
6. Employee And Contractor Non-Poach: Restrict approaches to your team for a reasonable period after employment ends.
7. Non-Compete: Use only where needed, with narrow limits on time, area and restricted activities.
8. Intellectual Property: Confirm work created in the role belongs to your business where appropriate.
9. Garden Leave: Allow you to keep the employee away from work during notice while they're paid.
10. Consequences: Explain that breaches may lead to legal action or other remedies available under New Zealand law.

A lawyer should tailor these clauses before you rely on them. For example, a restraint for a national SaaS sales director will look very different from a restraint for a part-time retail assistant.

If your business uses contractors as well as employees, employee or contractor classification and the Employment Relations Amendment Act 2026 contractor gateway test may affect whether a worker is treated as a contractor or employee in some cases. That classification question is separate from restraints, but it can change which agreement and protections you should use from the start.

Key Takeaways

• An employee can usually work for a competitor after resigning, unless a valid and reasonable clause restricts specific conduct.
• Non-compete clauses are harder to enforce if they're broad, long or not clearly tied to a genuine business interest.
• Confidentiality obligations are often your strongest protection, especially where pricing, client lists, systems or trade secrets are involved.
• Client non-solicit clauses are usually more practical than trying to stop someone from working in the industry altogether.
• Act quickly during the notice period by limiting access, preserving records and reminding the employee of their obligations.
• Tailored employment agreements are much easier to rely on than generic templates when someone leaves for a competitor.

If you'd like help with your employment agreements, restraint and confidentiality clauses, client non-solicit wording or exit process documents, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.