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Posts tagged: Non-Compete

Non-Competition and Non-Solicitation: Assessing your risk

By , April 18, 2016 8:32 am

We often get calls from employees who are thinking about leaving their employment, have left their employment, or have been terminated, and are considering working for a competitor or starting their own business. They are often concerned about non-competition and non-solicitation clauses contained in their employment contract and whether such clauses are enforceable.

Non-Competition Clauses vs. Non-Solicitation Clauses

A non-competition clause is a provision which prohibits an employee from working for a competitor of a former employer, or opening up his or her own business in direct competition with the former employer.

A non-solicitation clause is a provision which prohibits an employee from encouraging the employer’s clients or staff to join the employee at a new business.

Enforceability

Typically, the courts have said that they will not enforce a non-competition clause where a non-solicitation clause would effectively protect the employer’s interests. The courts have said that there is a public interest for free trade and a non-competition interferes with that public interest.

The Courts will generally enforce a non-solicitation clause if the length of time it applies and the scope of the clients concerned are considered reasonable.

No Employment Contract with Non-Competition or Non-Solicitation Clauses

Even if an employee does not have an employment contract that contains a non-competition clause or a non-solicitation clause, it’s possible that he or she could be found to owe a fiduciary duty to the employer to not solicit clients. Where an employee held a position of senior management or could be described as a “key” employee, he or she may be precluded from exploiting that position to benefit his or her own business. There are a variety of factors that the courts will look at when determining if someone was a “key” employee.

The Costs of Breaching a Non-Solicitation Clause

If an employee breaches a non-solicitation clause, the employer will typically have to prove damages (i.e. the amount of money that was lost as a result of the solicitation).

If the employee is found to owe a fiduciary duty, there are two different approaches taken by the courts for awarding damages:

  • The amount of benefits that were wrongfully acquired because of the breach, which focuses on the employee’s gain as a result of the breach.
  • Restoring the employer to the position it would have been in if the breach had not occurred, which focuses on the employer’s losses.

If you are currently employed and thinking or starting your own business or moving to a competitor, or if you’ve been terminated and are considering either of those options, one of our lawyers would be happy to review your obligations under your employment contract and any possible fiduciary responsibilities. Please contact us at 647-204-8107 or [email protected].

“The material and information provided on this blog and this website are for general information only and should not, in any respect, be relied on as legal advice or opinion. The authors make no claims, promises or guarantees about the accuracy, completeness, or adequacy of any information linked or referred to or contained herein. No person should act or refrain from acting in reliance on any information found on this website or blog, without first retaining counsel and obtaining appropriate professional advice from a lawyer duly licensed to practice law in the relevant jurisdiction. These materials do not constitute legal advice and do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.”

Non-Compete Agreement

By , March 18, 2014 9:01 am

Many employees considering a job change are concerned about non-compete agreements and clauses in their contracts. Should you be?

What is a non-compete agreement or clause?

A non-compete clause is a provision found in an employment contract which prohibits an employee from working for a competitor for a period of time following his or her departure.

 Is it enforceable?

Canadian courts generally view non-compete clauses as unenforceable because they are “restraints on trade”. This means that the clause prevents the employee from earning a living by working for a competitor.

The courts will only enforce a non-compete agreement or clause where other protections for the employer would not be sufficient.  For example, in this case, the Supreme Court found a non-compete clause to be enforceable in the commercial context of a sale of a business where the parties involved were experienced and had legal counsel.

Soliciting company clients

While the courts may not uphold a non-compete clause, they will enforce a reasonably drafted non-solicitation clause. This clause in an employment contract should be a greater concern to employees considering a new position.

A non-solicitation clause prohibits a departing employee from encouraging the company’s clients or staff from joining the employee at a new business. This type of clause will be considered valid if it is reasonable in the length of time it applies to the employee and in the scope of the clients concerned. The employer typically cannot prohibit the employee from soliciting clients that he or she has never worked with and over whom he or she had no influence while employed at the company.

Where a non-solicitation clause would adequately protect an employer’s interests, the courts will prefer it to a non-compete clause.

Certain employees are required not to solicit clients or staff of their former employer even where a non-solicitation clause is not included in their employment contract. These employees are called “fiduciaries”. A fiduciary is typically a senior executive or a salesperson who is the face of the company to the customer.

For more information on things to consider as a departing employee, see here.

If you are considering changing jobs or want the assistance of an employment lawyer to review your non-compete agreement or employment contract, contact us at  [email protected] or 1-888-640-1728 (toll free) or 647-633-9894 (within the GTA).

 

 

Confidentiality Agreement

By , March 18, 2014 8:26 am

Many employment contracts these days include a confidentiality agreement or clause. Is this something that you should be concerned about?

Confidentiality clauses are a type of restrictive covenants that include non-competition and non-solicitation clauses. For more information about these clauses, see here.

What is confidential information?

Confidential information can include the employer’s trade secrets, commercial information about customers or knowledge about the employer’s policies or procedures which may make it possible to take customers away from that employer. It can also include product information or strategic plans of the company.

What is not confidential information?

Information which is trivial or easily accessible to the public is not confidential. General skills and knowledge that am employee gains while working is typically not confidential information.

Are confidentiality clauses valid?

The courts will uphold a confidentiality agreement that is well-drafted. That means a clear clause which sets out specifically what information is to be kept confidential (i.e. trade secrets, financial data, client lists, etc.). If the only purpose of the clause is to limit competition or prevent the employee from obtaining another position, the courts will often find it to be invalid. The clause must be drafted only as broad as necessary to protect the employer’s legitimate interests.

What employees should know

Employees often do not benefit from restrictive covenants such as confidentiality clauses. While a potential employer may require you to sign one, sometimes changes can be negotiated.

The obligation in an employment contract not to disclose confidential information lasts beyond the termination of the employment.  Employees, even non-fiduciaries, have a duty to keep trade secrets and other sensitive information confidential.

Should an employee use proprietary information in a new position, to the detriment of the former employer, the former employer could sue for breach of contract and the court may award compensation or other remedies such as an injunction.

If you have received an offer of employment or are considering leaving a position, and you would an employment lawyer to review your confidentiality agreement or contract, contact us at  [email protected] or 1-888-640-1728 (toll free) or 647-633-9894 (within the GTA).

Employment Contracts and Offer Letters | Can you do better?

By , January 15, 2013 3:01 pm

Employment Contracts and Offer Letters | Can you do better?

Reviewing employment contracts and offer letters carefully is always a good idea.  Having your lawyer review them for you is an even better idea.  Here’s why:

Increasingly, employers are asking new hires to sign employment contracts.  These employment contracts are prepared by lawyers hired to protect the employer’s interests.

There is no such thing as a “standard” employment contract. Many employers try to include the same terms of employment in every contract, however, some of the clauses are often negotiable.

We have reviewed hundreds of employment contracts over the years. Some are fair; some are not. Lawyers at the MacLeod Law Firm can tell you which clauses in the contract are not fair in your circumstances and why.

If you wish, we can negotiate changes in the initial job offer on your behalf.

At the MacLeod Law Firm, we view every employee as a person first and recognize that every negotiation is different. Regardless of the situation, we consider these three issues:

  1. The employee’s alternatives to accepting the job offer. These alternatives determine the person’s negotiating power. Does the person currently have a job? If not, does the employee have other job offers? In some cases, employees will turn down an offer and remain in their current job once they understand the terms of the offer. In other cases, employees use competing offers to improve an initial job offer.
  2.  Which  issues may be negotiable. We have helped scores of employees negotiate enhanced job offers. This experience helps us identify which issues are likely open for discussion in any particular situation.
  3. The employee’s obligations to his/her current employer. Unless there is a notice of resignation term in the employee’s current employment contract, the employee is generally required to provide reasonable notice of resignation. The employee may also have fiduciary or contractual duties which preclude them from soliciting customers for a reasonable period of time after resigning, among other such restrictions.

If you have been offered employment and asked to sign an employment contract, and you want to speak with an employment lawyer with experience in this area, contact us at  [email protected] or 1-888-640-1728 (toll free) or 647-633-9894 (within the GTA).

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