Non-compete agreements, also known as restrictive covenants, are commonly used by employers to prevent their employees from competing with them in the same field for a certain period of time after they leave the company. These agreements are becoming increasingly popular in Canada, prompting many employees and employers to question whether they are enforceable under Canadian law.
The answer is yes, non-compete agreements can be enforced in Canada. However, they must be reasonable in terms of their duration, geographic scope, and the nature of the restriction.
The duration of a non-compete agreement must be reasonable. It cannot be indefinite, as this would be considered overly restrictive and contrary to public policy. Generally, a non-compete agreement should not exceed two years.
The geographic scope of the agreement must also be reasonable. It should be limited to the area where the employer conducts business and where the employee’s knowledge and expertise could be used to compete against the employer. If the geographic scope is too wide, the agreement may be unenforceable.
The Nature of the Restriction
The nature of the restriction must also be reasonable. The employee must not be prevented from making a living in their chosen field. For example, a non-compete agreement that prevents a chef from working in any restaurant in the city for two years would be unreasonable, as it would prevent the chef from making a living in the food industry.
If a non-compete agreement is deemed reasonable, it can be enforced by a court. If an employee breaches the agreement, the employer can seek an injunction to prevent them from competing and can also seek damages.
In Canada, non-compete agreements are generally more enforceable in industries where there is a high level of competition and where a departing employee could cause significant harm to their former employer by using their knowledge, expertise, and contacts to compete against them.
In conclusion, non-compete agreements can be enforced in Canada if they are reasonable in terms of their duration, geographic scope, and the nature of the restriction. If you are an employer considering using a non-compete agreement, it is important to seek legal advice to ensure that it is enforceable. If you are an employee who has signed a non-compete agreement, it is important to understand your rights and obligations under the agreement.