{"id":514641,"date":"2026-07-07T20:29:11","date_gmt":"2026-07-07T20:29:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/514641\/"},"modified":"2026-07-07T20:29:11","modified_gmt":"2026-07-07T20:29:11","slug":"oecd-flags-overuse-of-restraints-of-trade-and-ndas-in-nz-saying-such-clauses-are-hampering-productivity","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/514641\/","title":{"rendered":"OECD flags overuse of restraints of trade and NDAs in NZ, saying such clauses are hampering productivity"},"content":{"rendered":"
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.<\/p>\n
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.<\/p>\n
It argues this limits wage growth and innovation \u2013 ultimately hampering productivity.<\/p>\n
How widespread is the use of these clauses? <\/p>\n
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).<\/p>\n
It found non-solicitation of client clauses were most common in New Zealand, with employers reporting 43% of employees were \u201cprobably\u201d or \u201cdefinitely\u201d covered by them. This was above the 15-country average of 22%. <\/p>\n
NDAs were also common, with 42% of employees covered by these \u2013 below the average of 55%.<\/p>\n
Meanwhile, the portions of employees covered by repayment of training or bonus clauses were above-average in New Zealand, at 29% and 28% respectively. <\/p>\n
As for non-compete clauses, 23% of employees were probably or definitely covered by these \u2013 below the survey\u2019s average of 30%.<\/p>\n
\u201cThese 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%,\u201d the OECD said.<\/p>\n
\u201cThe 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 \u2013 protecting sensitive information or high-value investments \u2013 appears weak or absent.\u201d<\/p>\n
For example, about 30% of employees, who didn\u2019t 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. <\/p>\n
What are the odds of an employee successfully challenging a non-compete clause?<\/p>\n
The OECD found New Zealand\u2019s regulatory framework around non-compete clauses was among the most \u201cemployer-friendly\u201d of all OECD countries (not just the 15 included in the survey).<\/p>\n
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.<\/p>\n
\u201cAccording 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,\u201d the OECD said. <\/p>\n
\u201cLike in most other OECD countries, employers face no sanctions for including unenforceable clauses.\u201d<\/p>\n
The OECD believed non-compete clauses were particularly unenforceable in New Zealand because of how vague or broad they were \u2013 not defining duration, geography or the exact type of role they applied to.<\/p>\n
It made the point that though clauses were often unenforceable, people still tended to comply with them. <\/p>\n
\u201cWhat shapes behaviour is often not actual enforceability but workers\u2019 perceptions about the likelihood of enforcement \u2013 the so-called \u2018in terrorem\u2019 or chilling effect.\u201d<\/p>\n
Are there signs of employers colluding? <\/p>\n
Finally, the OECD noted the possible prevalence of employers wage-fixing and agreeing not to recruit each other\u2019s employees.<\/p>\n
\u201cAn 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,\u201d the OECD said.<\/p>\n
\u201cThis 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. <\/p>\n
\u201cThese findings, while at this stage essentially suggestive, align with the increasing attention that competition authorities around the world are devoting to labour market conduct.\u201d<\/p>\n
Jen\u00e9e Tibshraeny is the Herald\u2019s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.<\/p>\n