In both Ontario and Alberta, non-compete clauses can be included in employment contracts, but they are subject to strict scrutiny by the courts. Generally, these clauses must be reasonable in scope, duration, and geographical area to be enforceable.
Ontario: The enforceability of non-compete clauses is assessed under the principles of reasonableness. The courts have consistently emphasized that such clauses should protect legitimate business interests without unduly restricting an employee's right to earn a living.
Alberta: Similar to Ontario, Alberta courts evaluate the reasonableness of non-compete agreements. In Keays v. Honda Canada Inc., 2008 ONCA 218, the court ruled that non-compete clauses must be limited to protect the employer's legitimate interests, such as trade secrets or confidential information.
Scope and Limitations
Non-compete clauses must clearly define their scope. The breadth of these clauses can significantly impact their enforceability:
Duration: Typically, a duration of six months to two years is considered reasonable, depending on the industry and position. Longer durations may face scrutiny.
Geographical Area: The geographical scope should be limited to areas where the employer operates and where the employee had influence or access during their employment. Overly broad geographical restrictions can render the clause unenforceable.
Nature of Activities: The clause should specify the types of activities prohibited post-employment. General prohibitions against "any competitive activities" may be too vague and, therefore, unenforceable.
Case Law Examples
Dunlop v. McGavin (1971): The Ontario court emphasized that non-compete clauses must protect legitimate business interests and be reasonable in their limitations.
Massey v. Hogg (1979): This Alberta case reinforced the notion that any restriction imposed on an employee must be reasonable, fair, and necessary for the protection of the employer’s interests.
How a Lawyer Can Help
Engaging a lawyer experienced in employment law can be invaluable in several ways:
Drafting Effective Clauses: A lawyer can help draft non-compete clauses that are clear, reasonable, and tailored to your specific business needs, ensuring they stand up to legal scrutiny.
Legal Compliance: Lawyers stay updated on legal precedents and changes in employment law, helping ensure that your clauses comply with current legal standards.
Negotiation Support: A lawyer can assist in negotiating the terms of the employment contract, ensuring both parties understand their rights and obligations regarding non-compete clauses.
Litigation and Dispute Resolution: Should disputes arise regarding the enforcement of a non-compete clause, a lawyer can provide guidance and representation to navigate the legal process effectively.
Non-compete clauses can be a useful tool for protecting business interests in Ontario and Alberta, but they must be crafted carefully to be enforceable. Understanding the legal framework and working with a knowledgeable lawyer can help employers navigate the complexities of non-compete agreements, ensuring they are both effective and legally compliant.