Prohibiting competition a fine balance

Restrictive covenants in employment contracts
By Mark Mason
|Canadian Employment Law Today

Background

Employers often attempt to protect themselves from competition from former employees by including non-competition and non-solicitation clauses, known as restrictive covenants, in employment contracts. Non-competition clauses prohibit competition from former employees for a prescribed period of time and within a defined geographic area. Non-solicitation clauses prohibit solicitation of company clients or other employees by former employees.

Courts generally treat restrictive covenants as unenforceable because they limit a former employee's ability to earn a living. Such covenants will only be found enforceable if they are reasonable between the parties and with reference to the public interest. When determining whether a restrictive covenant is reasonable, the courts are required to balance the competing interests of free and open competition against the right of parties to enter into contracts.