An employment agreement typically contains clauses that govern the relationship between the employee and employer, such as the employee’s right to wages, vacation, and benefits. Less commonly, it can include other clauses that alter an employee’s rights, such as non-compete and non-solicit clauses.

This blog will discuss the implications of each of these clauses on the employee’s obligations post-employment.

The Limited Enforceability of Non-Compete Clauses

Non-compete clauses are generally straightforward as they typically restrict employees from working for a competitor or starting a competing business for a specified period after leaving their current employment. However, depending on the status of the individual’s relationship with the employer, a non-compete agreement may not be enforceable. Ontario’s Employment Standards Act explicitly prohibits non-compete agreements for employees, which include any individuals providing work or services for wages, being trained in a skill used by the employer, or homeworkers. If the individual meets the definition of employee, any non-compete clause is void at law.

However, there are some exceptions. If a business is sold and the seller agrees not to compete with the buyer’s business after the sale, and the seller becomes an employee of the buyer, the non-compete clauses can be enforced. Secondly, non-compete clauses can be enforced against “executives,” which are defined as “any person who holds the office of chief executive officer, president, chief administrative officer, chief operating officer, chief financial officer, chief information officer, chief legal officer, chief human resources officer or chief corporate development officer, or holds any other chief executive position.” If the individual holds any of the above positions, it is possible that the non-compete clause may be enforceable depending on its construction.

To be enforceable, non-compete clauses must not be too restrictive. In other words, they must be limited in scope, duration, and geographic area. The courts can assess the reasonableness of a non-compete clause if they are found overly broad or unreasonable; the courts may refuse to uphold it.

The Basics of Non-Solicitation Clauses

Non-solicitation clauses are designed to prevent employees from soliciting clients, customers, or employees of their former employer after leaving their job. These clauses are intended to protect the employer’s business interests and relationships. Depending on their construction, they may be permitted if they can pass the enforceability test developed in the common law.

In Elsley v J.G. Collins Insurance Agencies, the Supreme Court of Canada established a test to be used when examining the enforceability of non-solicitation clauses. The case involved an ex-employee leaving a company after 17 years and starting his own business, taking employees and clients with him. The ex-employer sued under a non-compete clause of the original employment contract. The Court refused to uphold the clause. It found that such clauses are prima facie unenforceable, and the employer must prove that it is reasonable. This includes examining the features of the clause, such as the temporal and special restrictions on the employee, as well as the types of business that the employee is restricted from practicing.

Generally, the Court will not uphold non-competition clauses, which restrict an employee from participating in an industry entirely. However, the enforceability of these clauses will depend on what may be considered reasonable based on the circumstances of the case.

The Importance of Reviewing Employment Contracts

When beginning an employment relationship, employees must review their employment agreements to ensure that their rights and obligations are clearly defined and do not include invalid restrictions. Reviewing employment agreements is vital for employees to understand their rights, benefits, and job expectations. It also allows for negotiating better terms, such as salary, benefits, working hours, and termination clauses. Additionally, understanding the contract terms can help employees identify potential issues or discrepancies that must be addressed before signing. Overall, reviewing employment contracts empowers employees to protect their interests, ensure fair treatment, and establish a clear and transparent employment relationship with their employer.

Contact the Employment Lawyers at Grosman Gale Fletcher Hopkins LLP for Assistance Drafting and Reviewing Employment Agreements

The trusted employment lawyers at Grosman Gale Fletcher Hopkins LLP help demystify employment law matters and human rights laws for employees and employers. Our experienced employment law team helps simplify the law so that clients can understand their options in any situation and make informed decisions in the event of a workplace dispute. Our employment lawyers regularly advise clients on matters involving discrimination, accommodation of disability and illness, harassment, wrongful dismissal, severance packages, and more. To schedule a consultation with a member of our team, call us at 289-652-9092 or contact us online.