Many of our recent articles have focused on decisions involving
employees' breaches or threatened breaches of restrictive
covenants. Including restrictive covenants, such as
non-solicitation and non-competition covenants, into employment
contracts is important for employers to protect their business
interests. In order to be enforceable, however, such covenants must
be tailored to the specific business needs of the employer and the
context of the individual employment relationship. This article
steps back and takes a look at the governing principles.
Is the restriction reasonable?
Restrictive covenants must be reasonable, unambiguous, and
suitably limited in terms of scope, territory and
In order to determine if the covenant is reasonable, courts will
the circumstances regarding the nature of the business to be
protected by the covenant, including confidential information and
trade secrets; and
the role of the person to be bound by the covenant, including
whether he or she was an ordinary employee, whether his or her
activities were integral to the business, or whether he or she was
in a position of influence.
Non-competition provisions more broadly prohibit competition
with the employer's business. Non-solicitation provisions
usually impose restrictions on solicitation of the employer's
customers or employees. In the employment context, restrictive
covenants are subject to stringent scrutiny as to reasonableness
and courts are less likely to enforce a non-competition provision
where a less intrusive non-solicitation clause will suffice to
protect the employer's business interests.
Another element of the judicial analysis is that the (i) scope
of the activities prohibited, (ii) territory covered by the
covenant; and (iii) duration of the prohibition must all be seen to
be reasonable. Restrictive covenants will be struck down if they
are found to be unreasonable or otherwise contrary to public
Is the restriction clearly defined?
Any restrictive covenant must also clearly define the prohibited
activities, along with the territory and duration of the
prohibition. Where a clause is found to be ambiguous, courts will
generally not remove or rewrite the offending language in order to
give effect to the presumed intention of the parties. Rather, the
entire provision will be found to be unenforceable.
Take-Away for Employers
One size does not fit all when it comes to restrictive covenants
in employment contracts. In order to be enforceable, such covenants
must be carefully crafted to the specific circumstances of the
business and the employee in question.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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