Non-Solicitation and Non-Compete clauses are popular with employers who want to restrict their former employees from soliciting their clients or employees and/or competing for those same clients in the same area.
But employers should be careful when drafting these clauses, and ensure they do not over reach.
Courts are generally reluctant to uphold agreements that limit an employee’s ability to earn a living. Indeed, non-solicitation and non-compete clauses in employment contracts are presumptively unenforceable (unlike those in an agreement of purchase and sale). The Employer has a burden to prove that the clause is no more broad than is reasonably necessary to protect their legitimate business interests. If a clause is too broadly drafted, it will be unenforceable and the Courts will not read them down to fix it.
The good news is that it is possible to draft these clauses so that they are enforceable. Employers just have to draft them carefully and narrowly so that they protect no more than what is truly necessary. Generally speaking, non-solicitation clauses are often easier to enforce than non-competition clauses.
These are clauses that limit the former employee’s ability to work for a competitor or open a competing business. They are usually unenforceable, and are only upheld in exceptional circumstances.
When considering whether non-competition clauses are overly broad, a Court will consider things like:
A non-solicitation clause allows a former employee to work for a competitor but prevents them from soliciting the clients or employees of their former employer for a certain period of time.
When considering whether non-solicitation clauses are overly broad, a Court will consider things like:
The moral of the story is that employers should not get over zealous when drafting non-solicitation and non-competition clauses. These clauses are more likely to be enforceable when they are drafted narrowly.
Note that non-competition clauses in agreements for purchase and sale of a business are much more likely to be enforceable because the parties are more likely to have equal bargaining power and because the clause might be necessary to ensure the buyer’s newly acquired business is not subverted by the previous owners.
All of the above constitutes legal information and not legal advice. For more information, advice or assistance about restrictive covenants in your specific workplace please contact me at firstname.lastname@example.org or 905-842-8030.
The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.