The answer is that depends. Non-competition clauses in employment contracts are to protect the interests of your company or business by contractually preventing your employees from either talking to competitors or using, to their own advantage, any employer-specific product information, knowledge of customers or business opportunities. They are tough to uphold however. Courts often do not look well on non-competitions since they may restrict the individual employee’s right to use the skills and experience acquired while working with the former employer.

A great non-competition case to read is the 1978 SCC case of Elsley Estate v. J.G. Collins Insurance. It involved a 17-year employee of an insurance company who, at his previous employer, essentially had all the contact with customers/clients and whom all customers contacted. His former partner sued him when he left with over 200 clients. The court upheld the contract and set the standard for acceptable restrictive covenants.

Specifically, the court concluded that a restraint of trade (non-competition) covenant in an agreement might only be upheld if it is “reasonable”. When determining the reasonableness of a clause the court will look at three things:

1.         whether the employer has a proprietary interest entitled to protection;

2.         whether the time and space provisions of the clause are too broad; and

3.         whether the covenant is unenforceable as it is really against competition generally and not just limiting solicitation of former clients.

Also, you need to remember that the general proposition is that non-competition clauses will not be upheld except in extraordinary circumstances.  If you have any questions please do not hesitate to contact Matt Lalande.