Have you ever wondered whether the non-competition clause in your employment agreement is actually enforceable?
For many employers, it can be quite nerve wracking when a current or former employee begins working for a competing business, because employees may know trade secrets, important clients, or other specifics of the business which their competitors may try to take advantage of. This makes non-competition clauses in employment agreements very appealing to employers as they can prevent employees from working for a nearby competitor (for at least a little while).
However, restricting an employee’s ability to find similar work in their area of expertise can have a significant impact on an employee’s livelihood after their employment ends. Because of these impacts, courts in British Columbia have found that such restraints of trade are presumptively unenforceable.
To be enforceable, non-competition clauses must be clear, specific, and “reasonable.” When determining whether such a clause is reasonable, a judge will begin by looking at whether the business seeking to enforce a non-competition clause has a legitimate interest to protect and whether that legitimate interest can be adequately protected in other (less restrictive) ways. If a restriction on competition is truly necessary, the judge will then ask if the non-competition clause is reasonable in what kind of activities it prohibits, what geographical area it covers, and how long it lasts1.
This means that employers must think hard about what kind of competition would harm their business, where their customers live, and when the non-competition clause may expire. Such considerations are very fact dependent and will vary widely across each industry. It is best to consult with an employment lawyer to see if a certain clause might withstand scrutiny. If the non-competition clause is not reasonable, you may find yourself up against some fierce competition.
If you’d like to learn more about non-competition clauses, please reach out to Claire MacLeod at [email protected] or Leah Sorge at [email protected].
1 See IRIS The Visual Group Western Canada Inc. v. Park, 2017 BCCA 301 at para. 25
