Restrictive Covenants in Employment Contracts

There are two common types of clauses that employers may include in employment contracts to protect themselves; non-competition clauses & non-solicitation clauses. Employees should be made aware that these clauses are not always reasonable or enforceable. There is a concern that the use of these clauses by employers may too heavily restrict labour mobility and therefore courts frown on overly broad clauses of this nature.

Non-Competition Clauses
What is a non-competition clause? Non-competition clauses are inserted into contracts by employers to prevent employees from engaging in a business that competes with that of the employer. They may specify that employees are barred from taking actions that would compete with or injure the employer’s business, either during the term of employment, or for a period following termination.
The courts have made it clear that non-competition clauses are generally analyzed on a case-by-case basis; it is therefore difficult to state whether one will be found reasonable or enforceable. Courts will generally only allow these clauses when they are as limited as possible in scope to accomplish the reasonable objectives of the employer. The courts want to ensure that the employee is free to seek and take up other employment.

Non-Solicitation Clauses
What is a non-solicitation clause? Non-solicitation clauses are similar to non-competition clauses. They limit the extent to which former employees may solicit current employees to leave/join the formers new business. Courts have a general preference towards the use of non-solicitation clauses over non-competition clauses and the latter will often be held invalid when a non-solicitation agreement would have been sufficient to protect the employer’s interest.

For more information or for employment law concerns, please contact SMG and consult with one of our Civil Litigation Lawyers.

By Ciara Pittam – Law Student

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