How To Draft An Enforceable Non-Solicitation Clause

By: Brandon Howl

Court decisions show the reluctance of Canadian courts to enforce restrictive covenants that are unreasonable when it comes to protecting the employer’s interests. A restrictive covenant is one that acts to restrict the activities of a former worker once he or she has left that employment. These usually come as non-solicitation clauses and non-competition clauses. Non-solicitation clauses, which this post will address, are an attempt to stop departing employees from taking customers with them.

The law to date on these is that they are unenforceable since they restrict trade. To be enforced, the party that seeks to have them enforced must show that they are a reasonable limit on trade.

In a non-solicitation clause, the employee will agree to neither:

  1. solicit certain customers for a certain period of time
  2. take advantage of any business opportunities that came to attention during his or her employment

To be enforceable, the non-solicitation clause has to be reasonable; the court will balance the public interest in keeping open competition and discouraging restraints on trade on one side, and the right of an employer to protect its client relationships on the other side.

If the clause is ambiguous, it is “prima facie unreasonable and unenforceable.” (Supreme Court of Canada.)

When deciding if it should enforce a non-solicitation clause, the court has to consider if the prohibition is too broad. Is the worker forbidden from getting in touch with clients with whom she had no prior contact? Does it stop the employee from working in a location where he hasn’t worked before? Does the non-solicitation clause impose a time period that exceeds the employer’s normal sales cycle?

If an employer wishes to draft an enforceable non-solicitation clause, the employer has to make it fit his or her specific circumstances. The courts will not amend it in any way to make it enforceable; therefore it has to be right before it gets before the judge. An employment law firm such as Whitten & Lublin LLP might be able to provide more information to prepare you before going to a judge.

Any good judge will look to see if the non-solicitation clause was written to reasonably protect the employer’s interest without unduly affected the worker’s ability to earn a living. It needs to be only as restrictive as it has to in order to protect the employer’s interests.

A Recipe for Success

If you wish to make your non-solicitation agreements enforceable, here is a list of things you definitely should do.

  • Always have your new employees wait a few days or even weeks after they start working before they sign the agreement.
  • Don’t make everyone sign: the delivery person who works for you isn’t going to be held to a non-compete or non-solicitation clause.
  • Avoid cryptic or vague language. An employee has to be able to tell what he is prohibited from doing and who he is prohibited from contacting, where competition would be considered as prohibited, and how long these restrictions apply.
  • Stake your claim as narrowly as possible. Make your agreements as specific and narrow as possible when it comes to geographic boundaries to which the restrictions will apply. If you only do business in Toronto, you shouldn't make the agreement cover all of Ontario.
  • Specify which activities are restricted. Protect your business from unfair competition just in those markets and activities in which the worker was directly involved.
  • Keep the time frame reasonable. If six months is long enough to enforce client relationships, there is no reason to insist an employee sign a three-year non-solicitation agreement. Don’t forget to look around to see what other similar industry leaders are requesting in their agreements.