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Toronto Employment Lawyer discusses restrictive Covenants

Daniel Lublin | Feb 08, 2010

By: Cedric Lamarche

For many businesses, customers and clients are hot commodities. In an age where “googling” a few key words can generate an infinite list of hits, businesses attract and retain clients not only as a result of the good deals they offer, but also as a result of the relationships that exist between their clients and the business’ employees. Since employees frequently move from one employer to the other, it’s no surprise that many employers often try to protect their customer and client pools by including restrictive clauses in their employment contracts. Examples of restrictive clauses that have been included in employment contracts and that have been upheld by the courts include non-competition and non-solicitation provisions.

As one can imagine, when employees leave their employment to pursue other opportunities, legal issues often arise as a result of restrictive provisions. On the one hand, businesses want to protect their client base and their proprietary information and, on the other hand, employees want to continue working in the same industry and continue servicing those clients with whom they have cultivated relationships over time. The courts will generally deal with these types of disputes cautiously as a result of the various policy concerns, including the fact that restrictive clauses often limit an individual’s ability to work in their craft or in their field of expertise.

In a recent case before the Alberta Court of Queen’s Bench, the court considered how far an employer should be permitted to go in imposing restrictive clauses to an employee who was already working for the employer. In doing so, it confirmed many of the rules that employers should follow in order to ensure the existence of fair contractual terms between parties that are often on unequal footing.

Accordingly, employers who wish to protect themselves should consider playing by the following rules:

  • Employment agreements should ideally be concluded before an employee starts work.
  • If an employer wishes to create a written employment contract or modify an existing contract midway through an employer/employee relationship, it should:

o provide something of value to the employee in exchange for signing the contract;

o advise the employee to consult legal counsel, and confirm this in writing;

o explain the restrictive clauses to the employee;

o inform how, if at all, the employment role will change if the employee refuses to sign the contract

o Ensure that the restrictive clauses are relevant to the employee’s position (i.e. not overly broad and too onerous with respect to the position).

Cedric Lamarche is a lawyer with Whitten & Lublin LLP, an employment law office assisting employers and employees on various workplace legal matters. .