Author: Sarah Nadon - Law Student
Edited By: Ryan Carson
A restrictive covenant is an express term in an employment contract which is set out to protect the employer. Whether it be trade secrets or the company’s employees, restrictive covenants protect against the exploitation from current or past employees.
Non-Compete
A non-compete clause is a clause in an employment contract which forbids the employee from working for another company or starting their own business which would compete with their former employer. Without any form of non-compete, employees are free to compete against their employer should they choose.
Are Non-Compete Agreements Enforceable?
In order to be enforceable, a non-compete clause must be perfectly drafted and must strike a reasonable balance between allowing the employee to use their trade and skills while still protecting the employer and allowing them to maintain their competitive edge, meaning that courts look at the duration of the clause and the nature of the prohibited activity.
Courts are much more reluctant to enforce a non-compete clause against an employee. Some contracts can be struck down on the ground of unconscionability, but most courts are concerned with the employee not being able to make a respectable living.
A non-solicitation covenant typically prohibits an employee from soliciting clients, customers or employees from their employer.
Are Non-Solicitation Agreements Enforceable?
The same principles are used to determine if a non-solicitation clause is enforceable. Again, the courts will look at the duration and the nature of the prohibited activity. On numerous occasions the courts have concluded that it is necessary for non-solicitation clauses to be restricted geographically.1
Non-Disclosure
A non-disclosure covenant, commonly referred to as Non-Disclosure Agreement or NDA, prohibits employees from exposing confidential information about the employer which they had obtained over the course of their employment. An NDA is an essential tool for managing the disclosure of a business’s private information. NDA’s are frequently found in employment contracts.
Are Non-Disclosure Agreements Enforceable?
When compared to a non-solicitation clause and a non-compete, a non-disclosure agreement is more likely to be enforced as they prevent employees from divulging company secrets as opposed to earning a livelihood.
Articles written by Sarah Nadon:
Registered and Unregistered Trademarks
Fiduciary Duty
Trust Basics
Trademark Registrability
Test for Breach of Confidence What is Frustration of Contract? Important Clauses in a Letter of Intent Valid, Void and Voidable Contracts What Is Trademark Confusion?
Understanding Construction Liens Force Majeure Determining Which Business Venture is Right for You! Kawhi Leonard Loses Copyright Lawsuit against Nike
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References
1 Trademarks Act RSC, 1985, c T-13, s.19