A restrictive covenant is a clause in an employment contract that limits what the employee can do during and after employment.
A non-competition clause, specifically, limits the employee from working for a competitor or going into business themselves in a competitive nature against their former employer.
Not all employees have a non-competition agreement. Generally, sales-persons and higher-level managers have one in their written employment contract, if at all.
Non-competition clauses are restraints of trade, meaning they restrict an individual’s ability to work following the end of employment. For this reason, courts are reluctant to enforce them unless they are carefully crafted and limited in territory and in time. For example, a valid non-competition clause would describe a valid reason for limiting competition, and then limit the employee from competing in downtown Toronto for just 12 months. An unenforceable non-competition clause, on the other hand, would fail to define a valid reason for its existence and also fail to define a region, and then try and limit the employee from competing for three years.
Also, because non-competition clauses are restraints on trade, if an employee is terminated from his or her job, and he or she has a non-competition clause in their employment contract, a judge would likely award them a lengthier notice period if they sued for wrongful dismissal. This is because the employee was contractually limited in how quickly they could reasonably find new employment due to the fact they couldn’t apply to competitors.
Dutton Employment Law is a non-competition law firm.
If your employer has asked you to sign a non-competition agreement (or a non-competition clause in an employment contract), or if you have been threatened with breaching a non-competition agreement, contact a Toronto non-competition lawyer today. Your employer could launch an injunction to enforce the agreement against you, which would be expensive to defend if not dealt with swiftly.