Non-compete clauses are one of the most restrictive provisions that can appear in an employment contract in Canada. These clauses attempt to prevent employees from working for competitors or starting a competing business after leaving their job.
While employers sometimes include non-compete clauses to protect business interests, courts across Canada carefully scrutinize these provisions. In many cases, overly broad restrictions are unenforceable.
If you’ve been asked to sign an employment agreement containing a non-compete clause — or your employer is attempting to enforce one — it’s important to understand your legal rights. A non-compete clause may not prevent you from pursuing new employment opportunities.
What Is a Non-Compete Clause?
A non-complete clause is a contractual provision that restricts an employee from working for a competitor or starting a competing business after leaving their employer.
These clauses typically appear in employment contracts and may limit a former employee’s ability to:
- Work for a competing company
- Start a similar business
- Provide competing services
- Operate within a defined geographic area
Non-compete clauses usually apply for a specific period of time after employment ends.
Because these restrictions can significantly limit a person’s ability to earn a living, Canadian courts treat them with caution.
Why Employers Use Non-Compete Clauses
Employers sometimes include non-compete clauses in contracts to protect legitimate business interests.
These may include:
- Confidential information
- Trade secrets
- Client relationships
- Business strategies
- Competitive advantages
However, courts often determine that these interests can be adequately protected through less restrictive provisions, such as a non-solicitation clause or confidentiality agreement.
Are Non-Compete Clauses Enforceable in Canada?
Non-compete clauses can be enforceable in Canada, but only if they meet strict legal requirements.
Courts will typically consider whether the clause is:
- Reasonable in duration
- Limited in geographic scope
- Clear and unambiguous
- Necessary to protect legitimate business interests
If a clause is overly broad or unclear, courts may refuse to enforce it.
Canadian courts generally prefer narrower restrictions, such as non-solicitation clauses, which allow employees to continue working while protecting employer relationships.
How Long Can a Non-Compete Clause Last?
The enforceability of a non-compete clause often depends on how long the restriction lasts.
Common durations in employment contracts include:
- 6 months
- 12 months
- 24 months
Courts analyze each case individually to determine whether a restriction is justified.
Non-Compete vs Non-Solicitation Clauses
Employment contracts sometimes contain both non-compete clauses and non-solicitation clauses, but these restrictions serve different purposes.
Non-Compete Clause
Restricts a former employee from:
- Working for a competing company
- Start a competing business
- Operating within a specific industry or region
Non-Solicitation Clause
Restricts a former employee from:
- Contacting former clients or customers
- Recruiting former coworkers
- Redirecting business opportunities
What Happens If You Breach a Non-Compete Clause?
If an employer believes a former employee violated a non-complete clause, they may attempt to take legal action.
Possible legal remedies could include:
- A court injunction preventing further competition
- Claiming financial damages
- Demanding that the employee stop working for a competitor
However, employers must still prove the clause is legally enforceable and that an actual breach occurred.
Provincial Differences in Non-Compete Clauses
Employment law in Canada is largely governed by provincial legislation and court decisions. As a result, the enforceability of non-compete clauses can vary depending on the province.
Learn more about non-compete clauses in your province:
- Non-Compete Clauses in Ontario
- Non-Compete Clauses in Alberta
- Non-Compete Clauses in British Columbia
Concerned About a Non-Compete Clause in Your Contract?
Many employees sign restrictive clauses without realizing how they may affect future career opportunities.
Before assuming a non-compete clause prevents you from accepting a new job, it’s important to have your agreement reviewed.
An experienced employment lawyer can determine:
- Whether a clause is likely enforceable
- Whether the restriction is too broad
- Whether your employer has grounds to enforce it
Speak With an Employment Lawyer
If you’re dealing with a non-compete clause in your employment contract, getting legal advice before making career decisions can help you protect your rights.
The employment lawyers at Samfiru Tumarkin LLP have helped tens of thousands of employees across Canada understand their rights and resolve workplace disputes.