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).
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