Notice Periods: What happens if a NZ employee fails to work?

Published 13 February 2025 | 2 min read

An employee resigns, but instead of working their notice period, they walk out immediately. Suddenly, you're left scrambling to cover their workload, reschedule projects, and manage frustrated clients.

The question is—can you hold them accountable and recover financial losses? Or are you simply out of luck?

The problem businesses face

New Zealand businesses frequently deal with employees who leave without notice, disrupting operations. While employment agreements typically require a set notice period, enforcing these clauses isn’t always straightforward.

Many employers assume they can deduct wages or claim compensation, but recent legal cases show that it’s not that simple.

The reality is that recovering financial losses due to a missed notice period is difficult—and often unsuccessful.

Legal Hurdle: Can you enforce a notice period?

The Employment Relations Authority (Te Ratonga Ahumana Taimahi) and the Employment Court have made it clear: simply writing a forfeiture or penalty clause into an employment agreement doesn’t guarantee enforceability.

A recent case proved this when the employer attempted to recover $3,157.67 after an employee gave just one day’s notice instead of the required one month.

The court ruled that the forfeiture clause was an unenforceable penalty, setting an important precedent for employers.

Employment court’s decision

• Penalties must be proportionate – Employers cannot impose financial penalties that exceed actual, quantifiable losses.
• Losses must be proven – Employers must provide clear evidence of financial harm caused by the lack of notice.
• Timing of assessment matters – Courts assess the fairness of clauses at the time the contract was signed, not when the employee resigns.
• Opportunity costs are difficult to quantify – The court rejected arguments that the business lost potential customers due to understaffing, as no concrete evidence was provided.
• Employment relationships involve power imbalances – Courts will scrutinise clauses that disproportionately disadvantage employees (kaimahi).

The bottom line for employers

While a notice period clause is enforceable, penalties for failing to work it are not. Employers seeking financial recovery must demonstrate real, calculable losses, which can be challenging.

Instead of relying on legal action, we should focus on practical solutions—such as strong hiring practices, retention strategies, and clear communication—to minimise disruption when an employee resigns.

If an employee does leave abruptly, negotiating an amicable transition plan will always prove more effective than attempting to enforce an unenforceable penalty.

Note: This information is based on official details from Employment New Zealand and is subject to change. Always refer to the latest guidelines for the most accurate information. Visit Employment New Zealand here.