Non-Solicitation Clauses: Ontario’s Legal Landscapeachkarlaw-admin
At the end of an employment relationship, employees are often motivated to use the contacts and networks they have developed to pursue new work or even to create a business of their own, in other words, solicitate.
Industries including sales, software, and technology rely on their goodwill and contacts—in other words, their business interests that need protection. Well-drafted agreements and policies can prevent employees from soliciting former work colleagues, clients, or other business contacts, or at least, provide the employer with remedies should the employee breach their agreement.
While non-solicitation clauses can help protect a business, employers should be aware of the limits of such clauses, as well as the risks involved when they are not included in an employment contract.
Important Features of a Non-Solicitation Clause in Ontario
The most common way for employers to protect their business contacts and employees from being lured by a departed employee is through an employment contract which includes a non-solicitation clause.
Employers should be cautious with the phrasing of such clauses, as restrictive covenants are considered presumptively unenforceable, and employers will be required to justify the clauses if they are ever challenged. The employer must have a legitimate proprietary interest to protect, such as their book of business or their current staff, and any restrictions on an employee after their employment ends must be reasonable.
To demonstrate that a non-solicitation clause is reasonable, it must be minimally restrictive to the employee to the extent necessary to protect the employer’s interests.
A valid non-solicitation agreement will include a reasonable limited geographic scope that specifies the region where the restriction will apply. This scope should not include areas where the employer has no presence or interests.
An enforceable non-solicitation clause will also limit the duration of its restrictions. The presumptive maximum is twenty-four (24) months for high-level employees with special knowledge of the employer’s affairs. However, for most employees, a modest six to twelve (6 – 12) months is the typical limit.
Vague or ambiguous non-solicitation clauses will be fatal. An employee must be clear about how the clause will restrict them legally—to have to guess and to be incorrect is unfair to the employee. Therefore, unclear terms will be interpreted against the drafter, i.e. the employer. To ensure your terms are sufficiently clear, it is best to consult with an employment lawyer at the drafting stage.
Risks of Not Having a Drafted Non-Solicitation Clause in Ontario
Employers may put their business and contacts at risk if their employment contract is an oral agreement or fails to include a written non-solicitation clause or policy.
While a fiduciary employees may have a common-law obligation to not solicit employees or clients, other employees are not prohibited from soliciting and may bring the knowledge they acquired with their former employer to a new business.
A fiduciary employee may still accept business from former clients, but they cannot directly solicit these former clients.
Given that employers cannot rely on the common law to enforce a non-solicitation obligation for many of their employees, it is best that the employer outlines clearly in writing what the employee’s obligations are after a dismissal, so that the employee understands the employer’s proprietary interests and agrees to do what is expected from them.
Otherwise, having no non-solicitation clause in Ontario may leave the employer with no practical remedy when a former employee takes another employee or a client.