A non-compete agreement is a form of a restrictive covenant, which is a clause in an employment contract setting out the rights and obligations of an employee post departure.
Commonly, non-compete agreements attempt to prohibit an employee from competing with an employer following his or her departure, however it was caused.
Non-compete agreements are viewed as restraints of trade. In other words, they are generally quite punitive, limiting an employee’s ability to earn a living following dismissal, for example. For this reason, they need to be carefully drafted to be enforceable. As well, courts have set out particular characteristics to ensure that the enforcement of these agreements is fair and just. For instance, the clause must be necessary to protect a legitimate proprietary interest of the employer and it must be drafted in such a way that it is not viewed as being overbroad, too lengthy or ambiguous.
This is an example of a non-competition clause in an employment contract:
Non-Compete: The Employee shall not, either during his or her employment or for a period of twelve (12) months following the termination of his or her employment for any reason including resignation, without the prior written consent of the Company, carry on, or be engaged in, or be concerned with, or interested in, or employed by, any person engaged in or concerned with or interested in a business which is the same as, or substantially similar to, or in competition with, the Company’s business at the time of any such termination within a radius of seventy-five (75) kilometres from any Company or Affiliated Corporation office where the Employee was employed during the last twelve (12) months of his or her employment.
If you have signed an employment contract with a non-compete clause or if your former employer is advising you that, following your departure, you are forbidden from working for competitors or other companies in the same industry, it is critical for you to meet with an employment lawyer who can advise you with respect to your obligations and responsibilities, if any, following your departure.
Read our employment law articles about Non-Competition Agreements for more information.