It acknowledges it is fair for companies to prevent employees from taking trade secrets, clients and colleagues with them when they leave, or for companies to get some employees to wait a while before starting to work for competitors.
However, it is worried companies are going overboard, getting even low-level employees to sign contracts with prohibitive clauses that make it hard for them to change jobs.
It argues this limits wage growth and innovation – ultimately hampering productivity.
How widespread is the use of these clauses?
The OECD reached its conclusions by surveying 2240 private sector employees and 406 firms in New Zealand in mid-2025 and comparing results with 14 other countries (Belgium, Britain, Canada, France, Germany, Italy, Japan, Korea, Mexico, Poland, Portugal, Spain, Sweden and Switzerland).
It found non-solicitation of client clauses were most common in New Zealand, with employers reporting 43% of employees were “probably” or “definitely” covered by them. This was above the 15-country average of 22%.
NDAs were also common, with 42% of employees covered by these – below the average of 55%.
Meanwhile, the portions of employees covered by repayment of training or bonus clauses were above-average in New Zealand, at 29% and 28% respectively.
As for non-compete clauses, 23% of employees were probably or definitely covered by these – below the survey’s average of 30%.
“These clauses are often used in bundles and applied indiscriminately across the workforce: among firms using non-compete clauses, 13% apply them to all employees, regardless of role or seniority; for NDAs, the share rises to 40%,” the OECD said.
“The surveys show that in New Zealand, as in several other OECD countries, non-compete clauses have spread into parts of the labour market where the traditional justification – protecting sensitive information or high-value investments – appears weak or absent.”
For example, about 30% of employees, who didn’t have access to confidential information, were on low incomes or had non-managerial or non-professional roles, believed they were probably or definitely bound by non-compete clauses.
What are the odds of an employee successfully challenging a non-compete clause?
The OECD found New Zealand’s regulatory framework around non-compete clauses was among the most “employer-friendly” of all OECD countries (not just the 15 included in the survey).
It said there was no statute for how non-compete clauses should be applied in New Zealand. Rather, the courts had defined the boundaries of enforceability through case law.
“According to case law, non-compete clauses must not extend beyond what is necessary to protect a legitimate proprietary interest, but no compensation is required and agreements may be entered into or amended at any stage of the employment relationship,” the OECD said.
“Like in most other OECD countries, employers face no sanctions for including unenforceable clauses.”
The OECD believed non-compete clauses were particularly unenforceable in New Zealand because of how vague or broad they were – not defining duration, geography or the exact type of role they applied to.
It made the point that though clauses were often unenforceable, people still tended to comply with them.
“What shapes behaviour is often not actual enforceability but workers’ perceptions about the likelihood of enforcement – the so-called ‘in terrorem’ or chilling effect.”
Are there signs of employers colluding?
Finally, the OECD noted the possible prevalence of employers wage-fixing and agreeing not to recruit each other’s employees.
“An above-median share of 53% of surveyed firms in New Zealand report knowledge of either no-poaching, wage-fixing, or both occurring within their industry,” the OECD said.
“This does not imply that 53% of firms engage in these practices themselves, but high reported awareness suggests that such practices may not be isolated occurrences, particularly in service sectors.
“These findings, while at this stage essentially suggestive, align with the increasing attention that competition authorities around the world are devoting to labour market conduct.”
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter – your essential weekly round-up of all the business news you need.