What are Non-Compete Agreements and Are They
Enforceable in an Employment Contract?
Employees are frequently in positions to get in-depth knowledge and information about their employer’s business operations, as well as their clientele, during the course of their job. Non-compete, non-solicitation, and confidentiality agreements are common in employment contracts, and they demand careful attention by employers when drafted.
Non-compete clauses are a type of contract where an employer will not allow the employee to work with another company that is competing.
Enforceability of Non-Compete Clauses
Under Canadian law, courts have generally been reluctant to uphold non-compete clauses, as they can restrict an employee’s ability to earn a living or pursue job opportunities as they wish. Such clauses are generally unenforceable unless the employer can demonstrate a legitimate need for the clause.
In doing so, they consider a number of factors, such as:
The duration of employment of the employee with the employer
The amount of contact the employee had with the employer’s clients (i.e. how much service was provided, and was it provided exclusively? How much influence did the employee have over the clients?)
The amount of confidential information the employee had access to and contact with during their employment
The vulnerability of the employer to competition and their ability to compete in a market. How much damage could a competing/soliciting employee do in the same market as the employer?)
The nature of the employer’s business with respect to the strength of customer loyalty
Considerations for Employers
A non-solicitation clause in a contract is an important part of any employment agreement. Employers should try to use such restrictive covenants in a way that is as minimally restrictive as possible. Such provisions would need to be drafted in a strict and narrow manner.
– Be limited in duration and geography (not too long nor too broad, respectively);
– List the specific prohibited activities;
– Avoid vague or ambiguous language; and
– Generally have a public interest in enforcing it.
It is important to craft employee contracts carefully and with due diligence in order to avoid future disputes.
We highly discourage anyone from seeking out legal advice through this article. This article only provides general information and should you have any further questions regarding non-compete agreements or employment contract matters in general, please contact us to book a free initial consultation 905-366-0202 or through our website here.