In today’s hyper competitive market, employers face the constant challenge of retaining clients and customers. This challenge is all the more daunting when former employees, armed with the training and experience provided by their former employer, compete for business in the same market or attempt to solicit work from clients for whom they previously provided services.
To combat this challenge, and as a proactive measure, an employer may require employees to sign a non-compete or non-solicitation agreement or make such an agreement part of an overall employment contract. These types of agreements or clauses are those which seek to prohibit a former employee from competing with their former employer or from soliciting work from former clients.
Non-Compete Agreements or Clauses
Courts typically view non-compete agreements and clauses as restraints of trade, meaning that they restrict free market competition, and, if considered unreasonable, are not enforceable. However, if an employer is able to establish that a non-compete agreement or clause satisfies the following criteria, then it may be considered reasonable and, as a result, enforceable:
• The agreement does not go beyond the scope of protecting an employer’s legitimate business interests because it is reasonable in duration, geography, and types of restricted of activities;
• The agreement will not unduly restrain the employee from utilizing their skill set and talents; and
• The agreement is not contrary to public interest.
Generally speaking, an employer cannot use a non-compete agreement or clause to protect its competitive position. Only an employer’s legitimate proprietary interests can be protected using such an agreement. In addition, these agreements cannot be overly broad or ambiguous. Therefore, it is challenging to draft a non-compete agreement or clause that is both reasonable and sufficiently safeguards an employer’s interests.
Non-Solicitation Agreements or Clauses
In order to make a non-solicitation agreement or clause enforceable, an employer must show that it is necessary based on the nature of the industry and the type of work undertaken by the employee. Employees who are subject to such agreements are those who acquired:
• Knowledge of the employer’s clients; and
• Influence over the employer’s clients through business interactions with them.
Non-solicitation agreements or clauses should be limited to those clients with whom the employee had direct contact or relationships. Therefore, clients with whom the employee did not have direct business dealings are not covered under such an agreement and will be viewed as too restrictive. If an agreement is unduly restrictive, and therefore unreasonable, a court will not enforce it or, alternatively, remove the unreasonable parts of the agreement or clause.
Employment and Labour Laws are not always straightforward, but whether you are an employee or an employer, understanding your rights and duties will only stand to benefit you. Reach out to an employment lawyer or labour lawyer today if you have any questions and be sure to get what you deserve and safeguard yourself for the future. The lawyers at Vey Willetts LLP have a proven track record and are happy to assist.
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