In this video, we’re going to take a look at non-competitions and non-solicitation clauses. These types of clauses are often found in employment agreements, contractor agreements and shareholder & partnership agreements.
Today we’re going to take a look at non-competition and non-solicitation clauses.
These types of clauses are often found in employment agreements contracts or agreements and also shareholder and partnership agreements. So they’re very important to understand.
What’s a non-competition clause?
In a non-competition clause, the employer is prohibiting the employee from competing with the business both for the term of employment and for a period of time after the employment is over. So, whether the employee leaves or is fired, it doesn’t really matter but for period of time usually, six months to a year that employee is going to be prohibited from competing with the business. This Clause can further be scoped down on a geographic basis. So this can only take effect say within the city of Vancouver or within some other parameters.
Now the thing that both employers and employees should know about non-competition clauses is that they may not actually be enforceable. So that is if the contract comes under dispute if somebody alleges that another party has breached the non-competition clause and decides to take them to court and this contract shows up before a judge the judge may not actually enforce that provision.
And the reason for that is because this type of restriction represents a restraint on trade it’s restricting the ability of the employee to go out into the economy and participate in it. It’s restricting their ability to be entrepreneurial or to even join up with another company.
How does a non-solicitation clause differ from a non-competition clause?
However, what’s easier to enforce is what’s called a non-solicitation clause and these clauses work similarly to non-competition clauses. The drafting will look something like – for the term of the employee’s engagement with the company and for a period of time thereafter, usually, six months to a year. Again, although this could be up to two years or even three years. The employee is prohibited from soliciting the company’s customers. Has its clients its supplier’s other employees other contractors in essence.
It’s saying this employee cannot poach the contacts of the business and this is a much more narrowly drafted restraint. So it doesn’t actually prohibit the person from going out there and competing with that business. They can strike out on their own they can do whatever they like, but they just can’t solicit the customers the employees and all the other business contacts from the original company. So that kind of constraint is looked upon more favorably by the courts. So it has a higher chance of being enforceable.
So for both non-competition and non-solicitation clauses, if you are considering putting them into your employment agreements or any other type of business agreement that is vital to your business.
It’s essential that you review them with a lawyer first, ideally, you should have a lawyer draft them because they’re very technical and they can turn on recent developments in case law so if you have any other questions about about them, please feel free to drop a comment below or you can book a consultation with me.