Employment Contracts and Restrictive Covenants

A restrictive covenant in an employment contract is often intended to prohibit the employee from carrying out a specific action, such as solicitation of clients, a non-solicitation clause, or in the case of a non-compete clause, restrict direct competition from a former employee.

In Canada, the courts have generally been very critical of restrictive covenants in employment contracts and often take the position that the clauses intended to protect proprietary interests are too restrictive.  

As such, they often have the effect of restricting the employee’s ability to earn a living or to continue in their chosen profession. The courts are reluctant to uphold agreements, deeming them unenforceable unless the employer can prove that the restrictive nature is necessary to protect a proprietary interest. 

The Supreme Court of Canada, in KRG Insurance Brokers (Western) Inc v Shafron (2007) B C C A 79, [2007] B C J No. 261, (QL),  held that an unreasonable or ambiguous restrictive covenant in an employment contract will generally be void and unenforceable

Further, restrictive covenants that pertain to the disclosure of business information, a non-disclosure clause; but there may be a way, in common-law to avoid such a clause in the employment contract.  

Does your current employment contract contain restrictive covenants?  

Does your business have a proprietary interest in need of protection? 

Do you need to define the prohibited activities? 

Are the time constraints named reasonable?

Have you identified a geographic area which is restricted?

If you have answered Yes to any of these questions, call TPS to have your employment contract reviewed.

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