What Are The Types Of Restraint Clauses? (2025 Updated)

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Successful businesses thrive on having an edge – that competitive advantage – over their competitors. In 2025, as markets continue to evolve rapidly, safeguarding your commercial secrets remains more crucial than ever.

And often you’d want to keep that competitive advantage a secret from your competitors.

However, you can’t keep all that information to yourself. You can’t run a successful business without the support of your team – with whom you’ll need to share confidential business know‐how and resources.

If you share such information with an employee or contractor but they later depart your organisation, what happens then?

How do you stop your own team from becoming your competitors?

Restraint Clauses

This is where well‐tailored restraints can come in very handy. It’s now standard practice for businesses, particularly those keen to protect intellectual property and proprietary information, to include restraint clauses in contracts.

Firstly, ensure you have a solid contract with anyone engaged in work for your business – whether they are employees or contractors. For detailed guidance on drafting robust employment terms, you might want to check our employment contract page.

In your employment and contractor agreements, it is often a good idea to include a restraint clause. The three main types of restraints you should be aware of are:

Non-compete
Non-solicitation
Non-poach

Understanding the different types of restraints and their limitations can help you decide how best to protect your business. For more insights on drafting enforceable clauses, have a look at our contract review service.

Non-Compete

Non-compete clauses are designed to prevent a former worker from joining a competitor or starting a similar business within New Zealand. In 2025, courts continue to enforce these clauses only if they are reasonably tailored to protect your true business interests.

You can’t simply prevent someone from ever working in a similar field – that would be an undue restraint on their right to earn a living.

That is why courts will only enforce non-compete clauses which are proportionate, time-limited and geographically appropriate. This criteria ensures that they safeguard legitimate interests without unfairly restricting an individual’s future opportunities.

If you’re keen to know more about what constitutes ‘legitimate business interests’, our Intellectual Property Guide provides further clarity.

Non-Solicitation

A non-solicitation clause prevents a departing party from taking away key clients or other business affiliates from your organisation. With access to crucial client databases and strong working relationships, your team can unintentionally be a source of competitive edge.

This clause ensures that client loyalty built up during their tenure remains with the business even after they leave. It is vital, however, that such clauses are reasonable; overly stringent restrictions may be deemed unenforceable.

Non-Poach

The third type of restraint is a non-poach clause – which is essentially a restraint on recruiting your own staff away from the business. This type of clause protects against the risk of former employees targeting your key talent.

It is very similar to the non-solicitation clause but is focused internally rather than on external client relationships. For more details on safeguarding your team dynamics, see our contractor agreement guidelines.

Legitimate Commercial Interests

All of these restraints will only be enforceable in New Zealand if they are reasonable and designed to protect the ‘legitimate commercial interests’ of the business, as stipulated by current law.

This measure ensures that unlimited restraints, which would unreasonably hamper an individual’s ability to secure employment post-departure, are not enforced. Updated legal frameworks in 2025 continue to stress fair balance.

Typically, the interests that may be protected include intellectual property, confidential information and business know‐how, trade secrets, and the specific goodwill of the business. Reviewing our intellectual property services can be beneficial in understanding the nuances.

How To Enforce A Restraint Clause

Having a well‐drafted restraint clause in your contracts is paramount in 2025. Should the clause be too weak, your business interests might not be adequately protected; if it’s overly restrictive, the courts may refuse to enforce it.

In today’s competitive environment, having an experienced lawyer review or draft your contracts is the most reliable way to achieve a balanced and enforceable clause. For expert advice tailored to your situation, our team at Sprintlaw is ready to help.

Moreover, regularly reviewing your contracts to ensure they comply with the latest legal standards is a proactive measure that can prevent disputes and litigation. Consider scheduling periodic legal reviews with us – our guides on contract law are an excellent starting point.

Things To Think About

When determining what constitutes a reasonable restraint, it is advisable to consult with your lawyer for tailored guidance. A few reflective questions might include:

What key information and processes drive the value of my business?
Who are my main competitors and what geographical areas do they operate in?
How critical is it to limit certain business activities for a defined period?
Would restricting specific actions within a particular geographical area better protect my business?

Such questions can help shape a restraint clause that is both effective and fair.

What To Take Away…

It is impossible – and impractical – to keep all your intellectual property and business know‐how entirely secret from those you work with. As we advance further into 2025, striking that balance between open collaboration and protecting competitive advantages is crucial.

Including non-compete, non-solicitation, non-poach and other restraint clauses in your employment and contractor agreements can be a powerful tool to safeguard your commercial interests if team members leave your business.

Restraints are designed to defend your business, but they must never be so onerous as to unreasonably limit the career opportunities of former employees. For comprehensive support in drafting balanced contracts, consider our contract services that cover a wide range of business needs.

Remember, regular review and professional legal advice can ensure your arrangements remain robust and compliant with the latest legal developments. For further expert guidance, don’t hesitate to contact us on 0800 002 184 or check out our detailed guides on setting up your business. The peace of mind that comes with knowing you’re well-protected – and won’t find yourself in court over an unenforceable restraint clause – is always worth the investment.

Minna Boyle

Minna is the Head of People & Culture at Sprintlaw. After completing a law degree and working in a top-tier firm, Minna moved to NewLaw and now manages the people operations across Sprintlaw.

Tomoyuki Hachigo

Tomo is the co-founder of Sprintlaw and a commercial lawyer with a broad range of legal experience. Before starting Sprintlaw, he was an M&A lawyer at a top-tier law firm advising businesses of all sizes from large corporates to startups.