Non-Compete Agreement
Many employees considering a job change are concerned about non-compete agreements and clauses in their contracts. Should you be?
What is a non-compete agreement or clause?
A non-compete clause is a provision found in an employment contract which prohibits an employee from working for a competitor for a period of time following his or her departure.
Is it enforceable?
Canadian courts generally view non-compete clauses as unenforceable because they are “restraints on trade”. This means that the clause prevents the employee from earning a living by working for a competitor.
The courts will only enforce a non-compete agreement or clause where other protections for the employer would not be sufficient. For example, in this case, the Supreme Court found a non-compete clause to be enforceable in the commercial context of a sale of a business where the parties involved were experienced and had legal counsel.
Soliciting company clients
While the courts may not uphold a non-compete clause, they will enforce a reasonably drafted non-solicitation clause. This clause in an employment contract should be a greater concern to employees considering a new position.
A non-solicitation clause prohibits a departing employee from encouraging the company’s clients or staff from joining the employee at a new business. This type of clause will be considered valid if it is reasonable in the length of time it applies to the employee and in the scope of the clients concerned. The employer typically cannot prohibit the employee from soliciting clients that he or she has never worked with and over whom he or she had no influence while employed at the company.
Where a non-solicitation clause would adequately protect an employer’s interests, the courts will prefer it to a non-compete clause.
Certain employees are required not to solicit clients or staff of their former employer even where a non-solicitation clause is not included in their employment contract. These employees are called “fiduciaries”. A fiduciary is typically a senior executive or a salesperson who is the face of the company to the customer.
For more information on things to consider as a departing employee, see here.
If you are considering changing jobs or want the assistance of an employment lawyer to review your non-compete agreement or employment contract, contact us at [email protected] or 1-888-640-1728 (toll free) or 647-633-9894 (within the GTA).
The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.
Recent Posts
Recent Posts
Justice for Unionized Employees
Unionized employees often seek our advice regarding human rights issues in their workplace. Sometimes this is because human rights violations have occurred and the union is not assisting them. Other times, the union itself may be part of the problem. The rights of...
Employee Entitlements Upon Termination
Termination is a stressful experience for any employee. An employee who has been fired needs to understand what their employer owes them, and what their employer is offering them. When employers do not make this clear, additional damages could be due to the employee....
Notice of Termination: Appeal Court Weighs in
When terminated, an employee should generally receive reasonable notice of termination or pay instead of notice. This is unless the employee has signed a contract that contains an enforceable termination clause (which we’ve written about here). The calculation of the...