A non-solicitation clause restricts a former employee from actively soliciting the employer’s clients after the employment relationship ends. For the clause to be enforceable, its terms must be reasonable, especially in relation to duration. Geographic limits are less common in non-solicitation clauses and may not be necessary, particularly where business is conducted through telecommunications or remote service models. If the restriction extends beyond protecting the employer’s legitimate business interests, it may be found unenforceable.
Non-Compete Agreements and Enforceability
While non-solicitation clauses may be enforceable, non-compete clauses entered into after October 25, 2021 are automatically void per the Ontario Employment Standards Act.
What is a non-compete agreement?
A non-compete agreement is defined as an agreement, or any part of an agreement, between an employer and employee that prohibits the employee from engaging in any business, work, occupation, profession, project or other activity that is in competition with the employer’s business, after the employment relationship between the employee and the employer ends.
Exceptions to the prohibition
There are two exceptions to non-compete agreements being prohibited under the ESA:
- If there is a sale or lease of a business or a part of a business that is operated as a sole proprietorship or a partnership; and
- immediately following the sale, the seller becomes an employee of the purchaser;
- and as part of the sale, the purchaser and seller enter into an agreement that prohibits the seller from engaging in any business, work, occupation, profession, project or other activity that is in competition with the purchaser’s business after the sale.
- If the employee is an executive.
An executive is any person who holds the office of:- chief executive officer
- president
- chief administrative officer
- chief operating officer
- chief financial officer
- chief information officer
- chief legal officer
- chief human resources officer
- chief corporate development officer
- any other chief executive position
What if the agreement was made before October 25, 2021?
The ESA does not prohibit non-compete agreements that were entered into before October 25, 2021. However, the clause must be clear and reasonable in scope.
How Employment Law Advice From Whitten & Lublin Can Help
Overall, restrictive covenants must only be used when necessary. Where the ESA allows a restrictive covenant the clause must be carefully drafted, as any ambiguity may render the clause unenforceable. It is important that employers seek the advice of a Toronto employment lawyer when considering a non-compete clause as such instances are rare and need legal expert analysis. Contact us today to get help assessing the risk and make informed decisions before problems arise.
Frequently Asked Questions About Non-Solicitation Clauses
What is a non-solicitation clause?
A non-solicitation clause restricts a former employee from soliciting the employer’s clients, prospective clients, business partners, or other employees after the employment relationship ends. Its purpose is to protect legitimate business interests without going as far as a non-competition clause.
How does a non-solicitation clause work in an employment contract?
A non-solicitation clause sets out what a former employee cannot do for a specified period after leaving the employer. In most employment contracts, that means the employee cannot contact the company’s clients, solicit business, or try to move business relationships from the former employer to a new employer. A carefully drafted solicitation clause can protect the employer’s business interests, while an overly broad clause may be deemed unenforceable.
Are non-solicitation clauses enforceable in Ontario?
Yes, non-solicitation clauses can be enforceable in Ontario, but only where the clause is reasonable and limited to protecting legitimate business interests. If the non-solicitation agreement goes further than necessary, or tries to restrain fair competition rather than protect the employer’s interests, the court may refuse to enforce it.
How long can a non-solicitation clause last?
A non-solicitation clause must last for a reasonable time period. What counts as reasonable depends on the role, the nature of the business, the client relationships involved, and the interest the employer is trying to protect. A short, defined period is more likely to be enforceable than a lengthy restriction with no clear business justification.
What activities are considered “solicitation”?
Solicitation usually includes directly contacting clients, former clients, potential clients, or prospective clients to move business away from the previous employer. It can also include asking business partners or other employees to leave and join a competing business. Courts may focus on the employee’s actions, not just the label attached to them.
Does a non-solicitation clause prevent me from working for a competitor?
Not usually. A non-solicitation clause does not normally stop a person from joining a new employer in the same industry. It restricts solicitation, not employment itself. That is one of the main differences between a non-solicitation clause and a non-competition clause. A non-compete clause places broader limits on the employee’s ability to earn a living, which is why non-compete clauses can face greater scrutiny in court.
Can I accept business from a former client if they contact me first?
Possibly, but the answer depends on the wording of the clause and the facts surrounding the contact. A clause may prohibit active solicitation, but it may not automatically prohibit accepting business that arrives without prompting. That said, this area can become complicated very quickly and therefore requires a review from expert lawyers such as at Whitten & Lublin. If there was prior contact, indirect outreach, or a pattern of communication that looks like solicitation, the former employer may still claim there was a breach.
What makes a non-solicitation clause unenforceable?
A non-solicitation clause may be unenforceable if it is overly broad, vague, or wider than necessary to protect legitimate business interests. Problems often arise when the clause covers too many clients, too large a geographic area, too long a specified period, or activities unrelated to the employer’s actual business interests. If the language is unclear, inconsistent with the employment agreement, or broader than needed to protect client relationships, confidential information, trade secrets, or proprietary interests, a court may strike it down.
What happens if I breach a non-solicitation clause?
A former employer may start legal action and ask the court for damages, an injunction, or both. That can include claims tied to lost clients, unfair competition, misuse of confidential information, or interference with a business relationship. The strength of the claim will depend on the clause itself, the employee’s conduct, and the evidence showing what happened after the employment relationship ended.
Should I speak to an employment lawyer before signing a contract with a non-solicitation clause?
Yes. It is a good idea to seek legal advice before signing employment contracts that contain a non-solicitation clause, non-compete term, or confidentiality clause. Early advice can help you understand how the clause may affect your future employment, your ability to contact clients, and the risks tied to moving to a new employer. Whitten & Lublin helps clients on restrictive covenants in employment agreements, including when a clause is enforceable, when it is overly broad, and when stronger legal counsel is needed before signing or leaving a role.
When is a non-solicitation clause not enough?
A non-solicitation clause may not be enough if the employer’s legitimate business interests cannot be adequately protected by restricting solicitation alone. That issue usually arises with senior employees, direct control over client relationships, or access to confidential information could seriously harm the business in the hands of a competitor. In that setting, an employer may argue that a non-competition clause is necessary if the employee is an executive, though courts still treat non-compete clauses with caution where they limit the employee’s ability to earn a living or conflict with the public interest.
