Non-Compete and Non-Solicitation Clauses: Protecting Your Business While Staying Legally Compliant

In today’s competitive job market, businesses must safeguard their intellectual property, client relationships, and workforce. Non-compete clauses and non-solicitation clauses are two key legal tools often included in employment agreements to prevent former employees from engaging in activities that could harm the employer’s business. However, these restrictive covenants differ in scope, enforceability, and legal scrutiny—especially under Canadian employment law.

What Is a Non-Compete Clause?

A non-compete clause prohibits former employees from working for a competitor or starting a competing business within a defined geographic area and timeframe after leaving the company. The intent is to protect the employer from unfair competition, particularly when an employee has access to confidential information, trade secrets, or specialized training.

Are Non-Compete Clauses Enforceable in Canada?

In most cases, non-compete agreements are difficult to enforce in Canada, as courts consider them restrictive to an individual’s ability to earn a livelihood.

Ontario: Non-compete clauses are outright prohibited for most employees, except for C-suite executives or in cases involving the sale of a business.
Other Provinces: Courts closely examine whether a non-compete restriction is reasonable and necessary to protect legitimate business interests.
Overly Broad Clauses: If a non-compete has vague geographic restrictions or extended timeframes, courts will likely strike it down.
Alternative Protections: Courts often favor non-solicitation clauses over non-compete agreements, as they are less restrictive while still offering business protection.

What Is a Non-Solicitation Clause?

A non-solicitation clause is a more enforceable alternative to a non-compete. It prevents former employees from poaching clients, customers, or staff for a specified period after leaving the company.

These clauses aim to safeguard a company’s customer base and workforce, ensuring that departing employees do not undermine the employer’s business relationships.

How to Draft an Enforceable Non-Solicitation Clause

To increase the likelihood of enforcement, non-solicitation clauses should be:

1. Scope-Specific

Courts prefer narrowly tailored non-solicitation agreements that only restrict solicitation of individuals with whom the employee had direct contact.

✅ Example: A sales representative is restricted from soliciting their assigned client accounts.
❌ Example: A blanket ban preventing contact with all company clients, even those the employee never interacted with.

2. Reasonable in Duration

The timeframe of restriction should be proportional to the employer’s business interests:

6 to 24 months is generally considered reasonable.
Longer restrictions (beyond 24 months) are often deemed excessive unless exceptional circumstances apply (e.g., senior executive roles).
✅ Example: A 12-month restriction in a sales role, allowing the employer to reassign clients and maintain business continuity.

3. Geographically Relevant

The geographic reach must align with the employee’s area of influence during their employment. Courts strike down restrictions that are too broad or unjustified.

✅ Example: A restriction limited to the province where the employee worked.
❌ Example: A nationwide ban for an employee who only served local clients.

HR Best Practices for Non-Compete and Non-Solicitation Clauses

To maximize enforceability and business protection, HR professionals and employers should:

✅ Use Non-Solicitation Clauses Instead of Non-Compete Agreements

Non-solicitation clauses are more likely to withstand legal scrutiny.
Courts often strike down non-compete clauses if a non-solicit would have been sufficient.

✅ Reserve Non-Competes for Senior Executives or Business Sales

Only apply non-compete agreements to high-level executives with significant access to company strategies.
Use non-competes in business sale agreements to prevent the seller from competing post-sale.

✅ Customize Restrictions by Role

A bookkeeper’s non-solicitation clause should look very different from that of a sales director.
Restrictive covenants should reflect industry standards and role-specific risks.

Final Thoughts: Protecting Your Business with Legally Sound Agreements

Both non-compete clauses and non-solicitation clauses can help protect a business, but their enforceability depends on how they are drafted. Since non-competes are generally disfavored under Canadian law, employers should prioritize non-solicitation clauses to prevent unfair competition while staying compliant with employment regulations.

For more information on HR best practices, download the HireEase HR Essentials Guidebook today.

For template employment agreements with legally compliant restrictive covenants, visit https://www.hireease.ca/ to ensure your business is protected today.