Non-Solicitation Clause Enforceability in Canada Explained

Non-solicitation clauses are common in employment contracts that aim to prevent former employees from contacting clients, customers, or staff after leaving a company. Unlike non-compete agreements, which restrict employees from working in the same industry or region, non-solicitation clauses focus on protecting business relationships. 

Understanding the enforceability of these clauses is important for both employers, who want to safeguard their business interests, and employees, who want to make informed decisions about their career.

What Are Non-Solicitation Agreements?

This type of agreement is a clause in an employment contract that prohibits a former employee from approaching or soliciting the company’s clients, customers, or staff for a certain period after leaving the company. The purpose of this agreement is to protect a business’s relationships and prevent former employees from using knowledge gained during their employment to unfairly compete with their former employer.

Common Industries Using Non-Solicitation Agreements

This type of clause is particularly common in industries where client relationships and business connections are crucial, such as:

• Sales and marketing
• Financial services
• Oil and gas services
• Technology and software development

Why Employers Include Non-Solicitation Clauses

Employers typically include these clauses in contracts for several reasons:

Protect client relationships: Ensuring that employees who leave the company don’t take clients or customers with them, which can result in significant business losses.

Safeguard business interests: Preserving the value of the business by preventing former employees from using confidential information or relationships to gain a competitive advantage.

Prevent unfair competition: Stop former employees from leveraging the knowledge gained in their previous roles to directly compete with their former employer in an unfair manner.

Are Non-Solicitation Agreements Enforceable in Canada?

Yes, they are enforceable in Canada, but their enforceability depends on several factors.

Key Factors That Impact Enforceability

Legitimate Business Interest

Employers must show the agreement is necessary to protect confidential information, client relationships, or other critical business interests.

Scope of Restriction

The clause must be specific and not overly broad. Restrictions should focus on clients, employees, or business partners the employee had direct involvement with during their employment.

Duration of Restriction

The length of the clause should be reasonable. Typically, courts uphold agreements lasting 6 to 24 months. Longer restrictions may be considered too burdensome.

Clarity in Language

Vague or unclear terms can make the agreement unenforceable. The terms should be precise to avoid legal challenges.

By ensuring the agreement is reasonable in scope, duration, and clear in language, employers can better protect their business interests while avoiding enforceability issues. If the agreement is deemed too restrictive or unreasonable, the court may decide to modify or limit the scope of the clause to make it more reasonable.

Employer Obligations in Ensuring Enforceability

Employers must take steps to ensure the enforceability of non-solicitation agreements, including:

• Clear drafting: These clauses should be carefully worded to avoid ambiguity or overly broad restrictions.
• Regular updates: Employers should review and update their contracts periodically to ensure compliance with changing laws and industry standards.
• Reasonable consideration: Employers should offer something of value, such as compensation or benefits, to employees in exchange for agreeing to the clause.

By taking these precautions, employers can better protect their business interests while ensuring that their agreements are likely to be enforceable in court.

Employee Rights Under Non-Solicitation Agreements

Non-solicitation agreements can have a significant impact on an employee’s career, so it’s important for employees to understand their rights and how they can challenge an unfair or overly restrictive clause. There are several scenarios where an employee may dispute an agreement, particularly if the terms are deemed unreasonable or violate legal protections.

Challenging an Unfair Restriction

Employees have the right to challenge any clauses they believe are unfair. In Canada, employees can dispute a non-solicitation clause under the following circumstances:

• Overly broad scope or duration: If the clause covers too many clients, employees, or lasts for an unreasonable length of time, an employee could argue it goes beyond what’s necessary to protect the employer’s legitimate business interests.
• Unreasonable impact on career: If the agreement significantly restricts the employee’s ability to pursue a reasonable career path, it may be challenged in court.
• Improper agreement: If the clause was added to the contract after employment began without proper consideration (such as compensation in exchange for agreeing), it may be deemed unenforceable.
• Lack of clear communication: If the employee wasn’t fully informed of the clause at the time of hiring or during employment, they may have grounds to dispute it.

Employer Best Practices for Drafting Enforceable Agreements

To ensure non-solicitation agreements are enforceable and protect legitimate business interests, employers should follow best practices when drafting these clauses. Properly crafted agreements reduce the risk of legal challenges and help maintain clear expectations between employers and employees.

1. Defining Scope and Duration Clearly

The scope and duration of a non-solicitation clause must be precise and tailored to protect specific business interests without being overly restrictive. 

• Scope: Clearly define who and what is included in the restriction.
• Duration: Limit the length of the restriction to a reasonable period (typically 6 to 24 months). 

2. Ensuring Restrictions Are Reasonable and Necessary

Employers should ensure that the restrictions are essential to protect legitimate business interests and are not excessively burdensome on the employee.

• Assess business needs: Only restrict solicitation of clients, employees, or business partners that the employee had direct contact with or significant knowledge of.
• Limit unnecessary restrictions: Avoid including overly broad restrictions that might harm the employee’s career opportunities or appear unreasonable to a court.

3. Avoiding Overly Broad Language

Non-solicitation clauses must be specific and clear to avoid ambiguity. Overly broad or vague language can lead to unenforceability. Define key terms like “solicitation” and “clients” to avoid confusion about what actions are prohibited.

By following these best practices, employers can draft non-solicitation agreements that are clear, fair, and more likely to be upheld in court.

Common Misconceptions About Non-Solicitation Agreements

These types of agreements are often misunderstood, leading to confusion among both employers and employees. Here are some common misconceptions about how they work.

Misconception #1: These agreements always prevent employees from working in their industry

Many people believe that non-solicitation agreements prevent employees from working in the same industry after leaving a company. However, this is not the case. These clauses are designed to prevent the solicitation of clients, employees, or business partners—not to restrict an employee’s overall career in the same field. Non-compete agreements impose broader restrictions on working in the same industry or region.

Misconception #2: Employers can enforce these agreements without limits

While employers can include non-solicitation clauses in contracts, these agreements are not unlimited. They must be reasonable in terms of scope, duration, and geography, and they cannot restrict an employee’s ability to earn a living.

Misconception #3: Any client interaction is a violation

A common misunderstanding is that any interaction with a client, even if initiated by the client, violates a non-solicitation agreement. In reality, these clauses typically only prevent direct solicitation or targeted efforts to encourage clients to switch businesses.

If a former employee simply responds to a client’s inquiry or engages in a business relationship without actively soliciting, it may not constitute a violation.

Steps to Take if Facing a Non-Solicitation Dispute

If you are involved in a dispute, it’s important to understand the next steps you should take, whether you’re an employee or an employer. Here’s a guide to help navigate potential challenges.

For Employees

1. Review Contract Terms

• The first step is to carefully review the non-solicitation agreement in your contract. Look for specific terms related to the scope, duration, and geographic restrictions to understand what is being asked of you.
• Ensure that the terms are clear and precise. Vague language may work in your favour if you decide to challenge the agreement.

2. Determine Enforceability

• Consider whether the agreement seems reasonable in scope and duration. Are they limited to the clients, employees, or business interests you were directly involved with? Do they last for an appropriate amount of time?
• If it feels overly broad or restrictive, it may be unenforceable.

3. Seek Legal Advice

• If you believe the non-solicitation agreement is too restrictive, seek legal advice to understand your rights. 
• A lawyer can help you evaluate the enforceability of the agreement and advise you on potential steps to challenge it.

For Employers

1. Ensuring Agreements Are Legally Sound

• Before enforcing a non-solicitation agreement, review the contract for clarity, scope, and duration, ensuring it aligns with employment law standards.
• Double-check that the terms of the clause are reasonable and clearly defined to avoid future disputes.

2. Assessing the Need for Enforcement

• If a former employee is violating the clause, assess whether the violation is significant enough to harm your business and if it justifies legal action.
• Determine whether the employee’s actions are truly damaging to your business relationships or if other approaches (e.g., negotiation) might resolve the issue.

3. Consulting with Legal Counsel

• Before taking any legal action, consult with a lawyer to assess your options. 
• Legal counsel can guide you through the process of enforcing the agreement and help ensure your actions are compliant with employment laws.

How Canadian Courts Handle Non-Solicitation Disputes

When an agreement is disputed in Canada, courts evaluate the terms based on several key factors. The goal is to balance the employer’s right to protect legitimate business interests with the employee’s right to earn a living and pursue their career. 

Key Factors Courts Consider

• Legitimacy: Courts will first examine whether the non-solicitation agreement protects the employer’s legitimate business interests, such as client relationships, confidential information, or employee knowledge.
• Scope, duration, and geographical area: Courts will assess whether the restrictions are reasonable and not overly burdensome on the employee’s ability to find new work.
• Right to pursue career: Courts will consider whether the agreement is so restrictive that it prevents an employee from earning a living or pursuing opportunities in their field.

Why You Should Consult an Employment Lawyer

Reviewing Agreements Before Signing
An employment lawyer can review your non-solicitation clause, explaining its impact and ensuring the terms are fair and reasonable before you sign.

Challenging Overly Restrictive Terms
If the clause is too broad or unfair, a lawyer can help challenge it, ensuring your rights and future opportunities are protected.

Legal Representation in Disputes
In case of a dispute, a lawyer can represent you in negotiations or legal proceedings, helping you navigate the complexities of Alberta employment law.

Get the Clarity You Need

If you’re dealing with a non-solicitation agreement, understanding its enforceability is crucial.

Book a consultation with us today to assess your agreement, explore your rights, and develop a strategy for moving forward.

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