Restraint of Trade Checker
This checker takes a restraint of trade clause apart into the things that actually decide whether it holds, and shows you where the weight sits. You enter the duration, how wide the geography is, how broadly the restricted activity is described, the seniority of the person, whether there is a genuine proprietary interest to protect, and whether anything was paid for the restraint, and it returns a reasonableness indication with the factors ranked. The starting position in New Zealand is worth being clear about, because it surprises employers. A restraint of trade is presumptively unenforceable as a restraint on trade, and it is for the employer to show the clause goes no further than reasonably necessary to protect a genuine proprietary interest, such as established client connections or confidential information. Protection from ordinary competition is not such an interest, and a clause that does only that will not hold however carefully it is worded. Two further points shape how these clauses actually play out. Courts have power under the Contract and Commercial Law Act to modify or delete a restraint rather than simply refusing to enforce it, so an overreaching clause may be narrowed rather than lost entirely, though drafting broadly and hoping invites a less sympathetic reading of everything else. And separate consideration, particularly for a restraint added during employment rather than at the start, helps while its absence hurts, without ever making an unreasonable clause reasonable.
The geographic scope and the range of activity restricted are the weakest parts of this clause. A restraint is only as strong as its weakest element, because a court assesses the whole clause against what is reasonably necessary. Take advice before relying on it.
How it works
Each factor is rated against how New Zealand courts have generally approached it. Duration is judged against how long the protected interest genuinely needs protecting rather than against a fixed limit, so short periods rate well and long ones need strong justification. Geography and activity are both about width: the narrower the clause, the easier it is to justify as reasonably necessary, and a clause with no geographic limit or one that prevents any work at all is very difficult to defend. Seniority raises what can be justified, because a leader with real client connections holds something worth protecting in a way a junior employee does not. The genuineness of the interest is treated as the gateway rather than as one factor among equals, because without a proprietary interest the clause fails regardless of how narrow it is. The overall indication takes the weakest element seriously rather than averaging, since a court assesses the clause as a whole against what is reasonably necessary and one badly overreaching element colours everything.
Worked example
A client facing specialist has a six month restraint covering the city they work in, preventing them from working for a direct competitor, with real client connections to protect and the clause agreed at the start of employment. Six months rates as reasonable. Geographic scope and the range of activity both come out as arguable and tie as the weakest elements, so the page names both rather than picking one. Preventing work for any direct competitor across a whole city is wider than preventing solicitation of their own former clients, which is what the protected interest actually consists of. The overall indication is arguable rather than sound, and the practical move follows from the weakest factors rather than the average: narrowing the clause to non-solicitation of clients they personally dealt with would strengthen it considerably without giving up what it is really for.
Related calculators
- Garden Leave Cost: the other way to protect a notice period.
- Notice Period: how long notice runs.
- Final Pay: settling up when they go.
- Employee Turnover Cost: what the departure costs.