Is My Employer’s Non-Compete Clause Stopping Me From Earning a Living?

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Introducing Pivot HR911-a new monthly blog feature: At Pivot HR Services, we work with employers to help them to build respectful workplaces in compliance with current employment legislation. This blog is dedicated to sharing the information that will help them achieve those goals. However, from time to time we receive requests from employees seeking our advice, so we have decided to post their questions and our answers in our new monthly blog feature, Pivot HR911.  

This week’s blog post features a question we received from an employee concerned about the non-compete clause in her employment contract. We encourage employees and employers alike to take note of the following important information about non-compete agreements.

Question: Is my employer’s non-compete clause stopping me from earning a living?

The employee who contacted us was concerned that the non-compete clause in her employment contract would bar her from practicing her chosen career as a real estate advertising professional. The clause stipulated that she could not perform the type of work she’d been doing for her employer for a period of 48 months (4 years). Additionally, although the company operated in both Canada and the U.S., no geographic location was specified in the clause. She was worried this meant that the non-compete clause applied to all regions in both of these countries rather than just in the geographic area where she currently lives and works, thus preventing her from moving to a nearby job market to continue earning a living in her field.

 

Our Answer: To be enforceable, non-compete agreements must be reasonable.

If non-compete agreements do not pass the test of reasonableness, they likely will not be upheld by a court of law – regardless if the employee signed it as part of their employment contract at the time of hire.The terms of the non-compete clause described above are not reasonable, and therefore not enforceable for several key reasons:

1) A non-compete agreement should not bar someone from practicing their chosen career. By stipulating that she cannot perform the same line of work for 4 years, the clause in her employment contract would effectively prevent her from doing so, and for a such a period of time as to render her irrelevant in her industry.

2) A specific geographic location should be named in the clause, including a specified distance (for example, within 5kms of the employers’ premises) in the region where the employee has been conducting their work for the employer. All of the geographic areas in which a company operates should not apply, especially for companies that operate in multiple cities, provinces, states, and countries.

3) One purpose of non-compete agreements is to protect an organization’s trade secrets, financial information, or other intellectual property. For example, WestJet would not want one of their executives to go work for Air Canada as they may (rightly) be concerned about their sensitive corporate information being passed on to a major competitor. Our caller was a employee in her company, not a top executive. She did not have had access to highly confidential information; therefore, such a stringent non-compete clause was not in keeping with the nature of her position within the organization.

Non-compete agreements are intended to prevent employees from competing directly with their former employer, but they cannot prevent them from their right to earn a living. As the Globe and Mail’s Report on Business has reported, Canadian courts are generally sympathetic to employees and do not often uphold non-compete clauses that will stop them from practicing their profession. Employers must be careful to draft non-compete clauses that will protect their interests but not in a way that is unreasonable. To do so is at their folly.

NOTE: This blog post is intended to provide generalized information and is not be construed as legal advice. We encourage any employee contemplating competing with his or her former employer to seek counsel from a qualified lawyer.

If you would like to submit a question for the Pivot HR911 blog feature, please email your query to info@pivothrservices.ca. Your answer may be featured here on our blog; your anonymity will be preserved. 

 

 

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