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302, 15252 – 32nd Avenue | Surrey, British Columbia V3Z 0R7 Explore the legal intricacies of non-competition and non-solicitation agreements to protect your business interests.
Non-competition and non-solicitation agreements are designed to protect workers from undue employment hardships and to protect employers from losing their competitive edge. Because employees are entitled to considerable protections, enforceability is complicated.
As an employee, you may have signed an employment contract that includes language restricting specific actions during your employment – and after. The idea is safeguarding the employer’s business interests, but these contractual agreements are not without legal limits and employees’ rights matter. If you’re facing an issue with a non-competition or non-solicitation agreement, an experienced British Columbia employment lawyer is standing by to help.
In British Columbia, non-compete agreements are only enforceable when all of the following apply:
Because non-compete agreements – or clauses – limit the ability of employees to earn a living and because they determine where employees can and can’t work in some cases, they are scrutinized by BC courts. Ultimately, a non-compete agreement is only enforceable if it is considered reasonable in relation to both employer and employee and regarding public interest.
Reasonable in this context includes all the following considerations:
Ultimately, non-compete agreements are designed to prevent unfair competitive advantages on the part of a former employee – such as by bringing their intimate knowledge of their former employer’s business to a new job that competes with that former employer.
Non-compete agreements typically outline restrictions that apply after the employment relationship has ended, and they generally specify that the employee in question won’t compete with the business for a limited period of time and within a limited geographic area. In those situations in which a non-solicitation agreement would suffice, the court is less likely to find a non-compete agreement enforceable.
While non-solicitation agreements are similar to non-compete agreements, they serve a distinct role. Non-solicitation agreements or clauses are intended to prevent former employees from poaching clients or current employees from their former employers, and they apply for a specific amount of time after employment ends.
Non-solicitation agreements generally restrain or restrict employees from contacting prior, present, or even prospective clients of the employer for the purpose of selling goods or services. While a non-solicitation agreement can be set for a specific amount of time in a specific geographical area, it’s only enforceable if the restrictions included are deemed reasonable.
Both non-compete and non-solicitation agreements address restrictions that apply to former employees, but they have distinct goals. A non-competition clause stops an employee from taking their unique knowledge of their former employer’s business – such as trade secrets and confidential information – to a new employer or to a new business altogether for a specific period of time. A non-solicitation clause, on the other hand, addresses the solicitation of clients or employees by a former employee.
Non-solicitation agreements tend to be less restrictive than non-compete agreements because they do not restrict where employees can work, and this makes them less challenging to enforce. Courts in British Columbia take the rights of employees very seriously, and as a result, they carefully assess these contractual agreements in relation to all the following:
The matter of what is clear and reasonable is determined on a case-by-case analysis that takes the unique circumstances involved into consideration.
It’s also important to note that both non-compete and non-solicitation agreements lose enforceability when the employee can prove they were wrongfully dismissed or when they received nothing in exchange for signing the contractual clause. For a contract to be legally binding, consideration must go both ways. When an employee enters an employment relationship, they perform work that the employer compensates them for. If the employee also signs a non-compete or non-solicitation agreement, enforceability can hinge on whether or not they receive additional consideration in exchange.
Non-compete clauses directly address former employees by implementing restrictions that apply to the employee in their next work endeavor, whether that means working for a new employer or starting their own business. The involved restrictions state the amount of time the employee must wait to work for or start a business that is a direct competitor of their former employer in a specific geographic region. In other words, the former employee is the subject of the non-compete clause.
The idea behind a non-compete clause is preventing a former employee from gaining an unfair competitive advantage that could prove detrimental to their former employer’s bottom line. An enforceable non-compete clause can stop a former employee from taking the unique skills or business secrets they learned on the job to a new workplace – benefitting a competitor of their former employer in the process.
Because Canadian courts recognize that the playing field is far from level when it comes to employers and employees, they place special emphasis on employee rights. The fact that a non-compete clause can interfere with the employee’s employment freedoms leads to careful scrutiny by the courts.
Employers have good reasons for implementing non-compete agreements, including safeguarding proprietary knowledge, trade secrets, and other closely held information that allows them to keep their competitive edge. Employees, however, have the right to work and make a living, and as a result, non-compete agreements must be within the legal guidelines for purposes of enforceability. When a non-compete agreement is overly restrictive or interferes with the worker’s employment opportunities to an unreasonable degree, the court can deem it unenforceable.
Non-competition agreements are not solely focused on keeping employees from working for the competition but also help protect the former employer’s intellectual property that the employee had access to during their employment tenure. Employment contracts often include language that is expressly designed to protect the employer’s intellectual property.
In Canada, there is a legal presumption that employees benefit from patent ownership in relation to anything they invent while employed – even when the invention benefits the employer’s business directly. The only exceptions are when one of the following applies:
When the employee is a company executive, they owe their employer a more considerable duty of care, and this heightens the enforceability of any non-compete agreement they enter. As long as the senior employee wasn’t hired for the specific purpose of innovating or inventing, however, they’re not prevented from claiming patent rights.
Non-compete clauses, which are also called restrictive covenants, are specifically designed to prevent employees from gaining an unfair competitive advantage over their former employers. Employees, on the other hand, have the right to make a living and take advantage of employment opportunities, and non-compete agreements are intended to strike a balance between these competing rights, with an eye toward the imbalance of power involved.
When the restrictions included are overly broad or vague, are too harsh, or are otherwise deemed unfair, the court is very likely to find the non-compete agreement unenforceable. An enforceable non-complete clause can afford an employer a competitive advantage. When the employer, however, takes unfair contractual liberties that place too many limits on the employee, the non-compete clause is unlikely to hold.
When it comes to enforcing non-compete agreements, courts in British Columbia employ heightened scrutiny that addresses the power imbalance, and in the process, they carefully assess factors like the following:
Ontario has seriously limited the use of non-compete agreements, but a recent case heard by The Supreme Court of British Columbia Quick Pass Master Tutorial School Ltd. v Zhao highlights the fact that they remain enforceable in BC – when the applicable guidelines are followed. The basic facts include:
Ultimately, the Court found Quick Pass’s non-compete agreement both reasonable and enforceable. A deciding factor was that Mr. Zhao had been paid an additional $15 an hour, which was the consideration he received in exchange for accepting the non-compete clause in the first place.
An important element of employer-employee relationships is the power differential. An employer can fire an employee for any reason – or for no reason – which puts employees in a vulnerable position. As a result, courts take matters of enforceability in the context of non-compete clauses very seriously. Enforceability in these non-compete tends to hinge on factors like the following:
If you’re asked to sign a non-compete agreement, there are several important considerations to keep in mind, including:
Businesses gain an advantage by securing exclusive use of their proprietary and confidential information, which makes protecting this resource paramount. Failure to do so can lead to a loss in terms of market advantage. In Canada, employees owe their employers a duty of good faith that translates to acting with honesty and concern regarding the employer’s best interests, which includes protecting confidential information. This responsibility on the part of the employee applies in all the following situations:
While a written contract isn’t specifically required to protect the employer’s confidential information, having one puts employees on notice about which information is considered confidential and their associated obligations. Addressing confidentiality in a written contract, in other words, affords employers greater protections in terms of business interests.
Non-compete and non-solicitation agreements go into effect when the employment relationship begins, but the terms of the agreement often apply to the employee’s actions post-employment. By signing the agreement, the employee agrees to the restrictions included – as long as the agreement is considered reasonable in relation to the unique circumstances involved. Suppose the contractual agreement is deemed unreasonable, overly restrictive, overly broad, or overly vague. In that case, it won’t be enforceable in the first place and will have no effect on the employee’s post-employment actions.
Other factors that can affect enforceability include wrongful dismissal and failure to include consideration for the employee’s contractual agreement. While non-competition and non-solicitation clauses can be effective, they must be exacting to retain the force of the law.
Non-compete agreements are enforceable in relation to common law, but this is true only when the employer can demonstrate that the restrictions included are reasonable in all regards. When the language used lacks specificity or is ambiguous regarding the geographic restrictions, the duration, or the terms, the non-compete clause will very likely be found unenforceable.
Recently, the highest court in British Columbia made it clear that a non-compete with all the following can hold up in court:
While employment law affords employees considerable protection, a fair non-compete agreement that meets all the legal requirements can be enforced.
Non-compete agreements have been around in one form or another for centuries, but the modern standard began with King George I. While non-competes have deep historical roots in North America, they are among the most contentious employment provisions. When Ontario recently banned non-compete agreements – except under highly restrictive circumstances – they were only the second jurisdiction in North America to do so. British Columbia has no such ban. Canada supports a competitive labour market and, therefore, employs exacting legal scrutiny in response to non-compete agreements.
Non-competition contracts are only enforceable in BC when the restrictions included are deemed reasonable. Canada is invested in protecting every employee’s right to find work and, as such, takes serious precautions in relation to non-compete clauses. The basic legal governing factors include all the following:
Only when the non-compete clause meets all these requirements is it legally enforceable.
In the 2022 case Quick Pass Master Tutorial School Ltd. v Zhao, the Supreme Court in British Columbia made it clear that non-compete agreements are enforceable. This is in contrast to Ontario’s 2021 prohibition against non-competes – other than in highly specific situations that include the following:
An entire agreement clause – or whole agreement clause – is a contractual provision that is designed to shield the party relying on it from liability in relation to any statements or representations made – including those made prior to the contract – except in those situations that are expressly laid out in the agreement. In effect, this means that all the terms of the agreement are included within it – ensuring that no additional restrictions or terms apply. Employment agreements in British Columbia generally include entire agreement clauses.
Non-solicitation agreements are generally used to stop employees from luring their employers’ clients or employees away from them. While the same standard of reasonableness applies to non-solicitation agreements that apply to non-compete agreements, this form of employment agreement tends to have greater enforceability.
Non-solicitation clauses put limitations on former employees in terms of soliciting talent or clients, but it doesn’t limit where the employees can work, which makes them less restrictive. Canada is motivated to protect employees, and toward this end, the courts attempt to limit restrictions related to employability. The fact that a non-compete clause can directly affect where an individual can find work makes it more challenging to enforce.
Non-solicitation agreements are highly effective at helping employers limit the influence a former employee may have over their clients and current employees. This said the restrictions included must be deemed reasonable by the court for enforceability to attach. Such restrictions include those related to geographic location and duration.
While non-solicitation clauses have greater enforceability than non-compete agreements do, they are not without limitations and challenges that include all the following:
The employee’s position in the company can also affect the enforceability of a non-solicitation clause. For example, if the employee is a senior executive, you can expect the non-solicitation agreement to have more enforceability
Canada recognizes the imbalance of power between employees and employers, and courts throughout the country favor comprehensive employee rights. While Ontario has done away with non-compete agreements – with very few exceptions – the same is not true of British Columbia. In fact, a recent Supreme Court finding demonstrates that, when the non-compete agreement is reasonable, specific, and not overly restrictive, it can be enforceable.
Non-solicitation clauses – on the other hand – are less restrictive in terms of where an employer can work and, therefore, have greater enforceability. Nevertheless, Canada is protective of employees’ rights and treats every non-solicitation dispute on a case-by-case basis that takes factors – such as whether or not the restrictions are reasonable are how specific the language used is – into careful consideration.
Non-compete agreements and non-solicitation agreements can be enforceable in British Columbia, but they must follow exacting legal guidelines that also protect employees’ rights. Vague terms and ambiguous language lack the specificity that courts in British Columbia are looking for. However, when the restrictions laid out in the agreement are reasonable in relation to the employee’s rights and the terms are clear, enforceability becomes far more likely – as a recent Supreme Court case indicates.
If you have a non-compete claim – whether as an employer or an employee – having the professional legal counsel of a dedicated non-compete agreement lawyer on your side can greatly improve the outcome. Robert Doran at Doran Law – proudly serving Metro Surrey and Vancouver since 1981 – is an accomplished non-compete agreement lawyer with more than four decades of experience helping clients like you effectively and efficiently resolve their non-compete disputes with their rights intact. We look forward to also serving you, and because your rights as an employee or employer are important to your future success, we encourage you to reach out and contact or call us at 604-542-9455 for more information about what we can do to help you today.
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