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Non-Compete Clause: Everything You Should Know

A non-compete clause (also known as a non-competition clause) is a formalized agreement between an employee and an employer, preventing the employee from engaging in work that would be in competition with the employer’s area of work.

These restrictive clauses are oftentimes used as an insurance method to protect employers from suffering damages in case the employment contract has been terminated. It aims to protect the employer’s confidentiality and rights when it comes to their way of conducting business or industry secrets. In addition, the employee’s rights can also be restricted in regards to their freedom in starting similar businesses in the same niche.

However, there are some limitations to these restrictive clauses that could benefit employees. Besides the limitation period on these clauses, the “competitors” must also be limited to the employer’s direct competition. These restrictions give employees more freedom when it comes to the practicality and enforceability of these clauses.

Is a Non-Compete Clause Enforceable in Canada?

The Canadian courts are often reluctant to enforce these restrictive clauses, only allowing it under specific circumstances. Legally, these types of  agreements will only be enforceable in limited geographic locations, under a limited period of time, and will only restrict a limited range of business activities of the former employees. In general, these clauses must be specific, narrow and fair. It is crucial to have your contract of employment reviewed by a lawyer to better understand the enforceability of any restrictive clauses.

Is the Non-Compete Clause Still Enforceable if Your employer Fires You?

In cases where the employee has been terminated wrongfully and without just cause, the non-compete clause will not be upheld in the court of law. By breaching the employment agreement by wrongfully dismissing the employee, the employer can no longer rely on the non compete clauses in the employment contract. There are, however, some exceptions to these rules. In order to determine whether you are restricted by the non-competition clause in your employment contract, you must consult with an established employment lawyer such as De Bousquet PC in Mississauga.

What Happens If You Violate a Non-Compete Clause?

In case there has been a violation of a non-compete clause, we must first determine if the clause is enforceable. If the clause is considered enforceable, the contract will also have to mention the agreed-upon amount of damages in case the clause has been breached. It is important to ensure the amount of damages is determined in the contract. If the contract lacks this element, the employer can later advance the claim by adding an additional amount.

Under certain circumstances, If the non-compete clause is not enforceable, the employee can still be held legally responsible. These circumstances are complex and must be looked into deeply. It is crucial to obtain legal advice in order to prevent such situations.

Are You Subject to a Non-Compete Agreement?

You will not automatically be imposed to a non-compete clause by signing an employment contract. A restrictive clause must be signed by both the employee and the employer. If the clause was added on a later date from the original contract of employment, there must be extra consideration for the employee.

Non-Competition clauses can have a significant impact on your professional life and should not be taken lightly. You must pay close attention to the clauses added to your contract of employment. It is always best to have your non-compete clause reviewed by De Bousquet PC in Mississauga to protect yourself.