An employment lawyer provides the lay of the land on non-compete and non-solicitation agreements
Non-compete and non-solicitation agreements, also called restrictive covenants, have long been important tools for Canadian employers seeking to protect their legitimate business interests.
However, the legal landscape governing these restrictive covenants has evolved significantly in recent years, particularly with Ontario's ban on non-competes and proposed restrictions under the Canada Labour Code, the particulars of which are not yet decided.
Understanding how these agreements function, when they are enforceable, and what limitations exist is essential for employers looking to make use of them.
Canadian courts have historically taken a cautious approach to enforcing restrictive covenants. As restraints on trade, restrictive covenants will not be enforced unless they satisfy a three-part test established through decades of jurisprudence.
First, the restriction must unambiguously protect a legitimate proprietary interest of the employer. Courts recognize certain interests as worthy of protection, including trade secrets, confidential business information, and goodwill developed through customer relationships. An employer cannot simply prevent competition; there must be a genuine interest at stake that goes beyond merely limiting an employee's ability to earn a livelihood in their chosen field.
Second, the restriction must be...
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