Canada: Restrictive Covenants In The Employment Context: How To Achieve Enforceability

Restrictive covenants in employment agreements, commonly known as non-competition or non-solicitation clauses, are notoriously difficult to enforce. Employers seeking recourse after an employee has left to start or join a competing business are often frustrated and disappointed to learn that the non-compete provisions of their employment agreement are unenforceable. Usually, this is because the clauses are too vague or too broad. Through an established body of court cases, Canadian judges have set out very strict requirements for a restrictive covenant to be enforceable.

Courts have justified this approach on the grounds that employees have very little bargaining power upon entering the employment relationship, and that to unnecessarily restrict their ability to earn a living post-employment would be unjust. Accordingly, restrictive covenants contained within an employment agreement are subjected to a higher scrutiny than those found within an agreement to purchase a business, where the purchaser has paid for obtaining the goodwill of the business. This higher scrutiny has also been applied to independent contractor agreements, in which a similar imbalance of power often occurs.

There are two main types of restrictive covenant clauses in employment agreements: non-solicitation provisions (in which the employee is preventing from soliciting customers or employees of the former employer for a time, but can compete generally) and non-competition clauses (the employee is prohibited from competing against the former employer, usually for a defined period and within a defined geographical area).

Courts have held that these types of restrictive covenants are on their face unenforceable as being a restraint of trade, and thus contrary to public policy. The onus is on the party seeking to rely on the clause (i.e., the employer) to establish that it is reasonable.

In demonstrating that a restrictive covenant is reasonable, the employer must establish that it has a proprietary interest in need of protection. While trade secrets, trade connections, confidential information, customer lists, and goodwill have been recognized as legitimate proprietary interests, an employer has no proprietary right per se to its customers.

Once the employer has established a proprietary interest entitled to protection, the Court will consider whether that interest could have been adequately protected by other less restrictive measures. A non-competition provision is usually only required in "exceptional" circumstances, and will not be enforced where a non-solicitation clause would have been adequate.

The Manitoba Court of Appeal has listed a number of factors to be considered when determining whether exceptional circumstances exist so as to justify the use of a non-competition clause:

  • the length of service of the employee with the employer;
  • the amount of personal service provided by the employee to the client;
  • whether the employee dealt with clients exclusively, or on a sustained or recurring basis;
  • whether the knowledge about the client which the employee gained was of a confidential nature, or involved an intimate knowledge of the client's particular needs, preferences or idiosyncrasies;
  • whether the nature of the employee's work meant that the employee had influence over clients in the sense that the clients relied upon the employee's advice, or trusted the employee;
  • if competition by the employee has already occurred, whether there is evidence that clients have switched their custom to that employee, especially without direct solicitation;
  • the nature of the business with respect to whether personal knowledge of the clients' confidential matters is required;
  • the nature of the business with respect to the strength of customer loyalty, how clients are "won" and kept, and whether the clientele is recurring; and
  • the community involved and whether there were clientele yet to be exploited by anyone.

After satisfied the restrictive covenant is necessary, a Court will look to whether the scope of the clause is reasonable by reference to the activity prohibited, the geographical area of the prohibition and the duration of the prohibition. The clause should be no broader than is absolutely necessary to protect the interest of the employer and the language of the clause cannot be ambiguous.

If the language of the clause fails as too broad or ambiguous, will the Court "save" it by reading it down? In most cases, the answer is no. The Supreme Court of Canada has held that notional severance (reading down a contractual provision so as to make it legally enforceable) is not an appropriate mechanism to cure a defective restrictive covenant. Blue-pencil severance (removing part of a contractual provision) may only be resorted to in rare cases where the part being removed is trivial, and not part of the main purpose of the restrictive covenant.

A recent decision dealing with the enforceability of a non-competition clause is IRIS The Visual Group Western Canada Inc. v. Park, 2017 BCCA 301. IRIS the Visual Group Western Canada Inc. ("IRIS") delivered eye care services and sold eyewear products through outlets where its customers could have their eyes examined by an optometrist and purchase corrective lenses or eyewear. In order to deliver these services IRIS contracted directly with individual optometrists, including the respondent Dr. Park. Dr. Park provided services for IRIS from 2007-2016 when she resigned to set up her own optometry business 3.5 km away.

IRIS sought to enforce a non-compete provision within its contractual agreement with Dr. Park that prohibited competition within 5 km for a period of 3 years. The language used prohibited the departing optometrists from being in partnership with, or "in conjunction with" or employed by any person or company "carrying on, engaged in, interested in or concerned with a business that competes with" IRIS.

At trial, the judge held that while the temporal and spatial limitations in the clause were reasonable, the description of prohibited activities was unenforceable as being too broad. IRIS appealed.

The British Columbia Court of Appeal agreed with the trial judge, finding that the clause was both ambiguous and overbroad. The Court queried how to determine the nature of the connection required to compete "in conjunction with" another person, or how to determine whether an individual is "concerned with" a competing business. Further, the clause defined a business that competes with IRIS as extending to an entity that dispensed non-prescription optical appliances. If enforced, such a restriction would prevent Dr. Park from engaging in a wide range of work, including work that had nothing to do with the practice of optometry, and could not be said to be the minimal restriction necessary to protect IRIS's proprietary interests.

IRIS argued that the Court should excise the words "non-prescription" to narrow the list of prohibited activities to render the clause enforceable. The Court declined to do so, finding that it was not at all clear that the words "or non-prescription" were trivial, and that IRIS clearly intended to prevent Dr. Park from competing in any way, however remotely. It would not be appropriate to rewrite the contract to create a more moderate restriction which was not in the intention of the parties.

The IRIS decision illustrates the importance of careful drafting in employment contracts. While restrictive covenants can offer protection to employers, it is important that such clauses meet the relevant legal requirements. It is recommended that an employer seek legal advice when drafting a restrictive covenant clause so as to maximize the likelihood of enforceability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Roper Greyell LLP – Employment and Labour Lawyers
Integritas Workplace Law Corporation
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Roper Greyell LLP – Employment and Labour Lawyers
Integritas Workplace Law Corporation
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions