What types of covenants can be recognized in Canada?
Noncompete, nonsolicitation, confidentiality, and nondisclosure agreements, as well as intellectual property covenants, can be recognized and are included in our employee agreements depending on specific provincial compliance.
Please note that noncompete clauses are no longer recognized in Ontario. Further information can be found in Part XV.1 of the Working for Workers Act, 2021.
Can these covenants be enforced? How are they enforced?
The restrictive covenants, especially the noncompetition and nonsolicitation covenants, can only be enforced if they are considered reasonable (a typical noncompete has a 6- to 12-month restrictive clause, for example). We highly recommend against a duration for non-solicitation and non-competition clauses being longer than 6 months. 12 months should be used only in exceptional circumstances.
Generally, it is very difficult to enforce restrictive covenants, and the courts are more likely to rule in favor of your supported employee. The courts, historically, more readily enforce confidentiality and intellectual property covenants.
Do my supported employees need to be compensated in return for restrictive covenants?
No. In general, as long as restrictive covenants are included in the employee agreement at the time of hire, they will be seen as part of the terms and conditions associated with accepting employment. It is common to include a confidentiality provision within the employee agreement without including additional compensation. If your supported employee is asked to sign any sort of restrictive covenant after employment has begun, compensation or “consideration” will be necessary.