Non-Compete Agreements in Ontario: What You Need to Know
As an employee, you may be asked to sign a non-compete agreement by your employer. A non-compete agreement is a contract that prevents you from working for a competitor or starting your own business in the same industry for a certain period of time after leaving your current employer. In Ontario, there are certain rules and regulations surrounding these agreements that both employees and employers should be aware of.
What is a non-compete agreement?
A non-compete agreement is a legal contract that restricts an employee`s ability to compete with their employer`s business for a specified period of time after leaving the company. These agreements are designed to protect an employer`s trade secrets, confidential information, and customer relationships. In exchange for agreeing to the terms of a non-compete agreement, an employee may receive certain benefits, such as financial compensation or access to proprietary information.
Are non-compete agreements enforceable in Ontario?
Non-compete agreements are generally upheld in Ontario, but they must be reasonable in terms of their scope, duration, and geographic area. If a non-compete agreement is too broad or restrictive, it may be considered unenforceable by a court.
In order to be considered reasonable, a non-compete agreement must:
– Be limited in scope: The agreement must only restrict an employee`s ability to compete in the specific industry or field in which they worked for their employer. It cannot prevent them from working in a different industry or starting a business that is not in direct competition with their former employer.
– Be limited in duration: The agreement must have a specific time period for which it is valid. This period must be reasonable and not excessively long. Typically, a non-compete agreement will be valid for 6 months to 2 years.
– Be limited in geographic area: The agreement must only restrict an employee`s ability to compete in a specific geographic region. It cannot restrict an employee from working in an entire province or country.
What happens if a non-compete agreement is breached?
If an employee breaches a non-compete agreement, their former employer may seek damages or injunctive relief from a court. Damages may include lost profits or revenue that resulted from the breach of the agreement. Injunctive relief may include a court order preventing the employee from competing with their former employer or disclosing confidential information.
It is important to note that courts in Ontario will not enforce a non-compete agreement if it is found to be unreasonable or oppressive. Additionally, if an employer breaches the terms of a non-compete agreement, their former employee may also seek damages or injunctive relief.
While non-compete agreements are generally enforceable in Ontario, they must be reasonable in scope, duration, and geographic area. Employers should carefully consider the terms of these agreements before asking employees to sign them, and employees should understand the implications of signing such an agreement. If you have questions or concerns about a non-compete agreement, it is best to seek legal advice from a qualified lawyer.