Non-Competition Agreements

Depending on the nature of the job, an employee may have an obligation not to compete with their employer or to solicit their customers or other employees once they have parted ways. Most employees do not have this obligation unless it's specifically spelled out in their employment contract.

A written employment agreement gives an employer an opportunity to impose non-solicitation and non-competition obligations on employees who might otherwise not be bound by them. How does this affect you and your future job aspirations? The most important thing you have to offer a new employer is your expertise and experience. Is it reasonable that you are not allowed to take advantage of your experience? We can review your obligations, help you negotiate with your former employer and advise you on the paths available.Depending on the nature of the position, an employee may have an obligation not to compete with his/her employer or to solicit their customers or other employees following the end of employment. Most employees do not owe these obligations in the absence of an express term within the employment agreement. A written employment agreement gives the employer an opportunity to impose non-solicitation and non-competition obligations on key employees who might otherwise not be bound by them. It also enables the employer to define those obligations in the context of the particular employment relationship.

A non-competition clause, or restrictive covenant, between an employee and an employer is a restraint in trade and unenforceable unless it is demonstrated that the employer has legitimate business interests to protect and the restraint is reasonable – both between the parties and in the broader public interest. Courts will consider the following factors when determining if an agreement is enforceable:

a) Does the employer have a legitimate proprietary interest worthy of protection?

b) Is the restraint reasonable in terms of:

i) Duration?

ii) Spatial Limitations?

c) Are the terms of the covenant clear, certain, and not vague?

d) Is the covenant reasonable in terms of the public interest?

When assessing a non-competition agreement a good “rule of thumb” is the period of enforcement should not exceed the time period of an employees' right to common law reasonable notice.

The party seeking to enforce a restrictive covenant must demonstrate it is reasonable. The party seeking to avoid its application must prove the restrictive covenant violates the public interest. Non-solicitation covenants are generally easier to enforce than non-competition covenants because customer lists clearly belong to the employer and are usually critical to its business interests. Also, a departing employee is better able to earn a living subject to a restrictive covenant which prohibits contact with the former employer's customers, suppliers or employees than one which prohibits employment with a competitor.

The enforceability of a non-competition covenant is questionable when an employee is dismissed, allegedly for cause, and therefore does not receive any pay in lieu of notice of termination. Courts are loathe to restrict an employee from working for a competitor pending a determination about the existence of just cause, when he or she may otherwise have difficulty finding a job and is without income.