Restrictive Covenants In Employment Agreements

Restrictive agreements in an employment contract are often not viewed positively by the courts. This is a direct consequence of the traditional view that restrictive agreements constitute a restriction on trade and that an employer and a worker have unequal bargaining power in negotiating contracts. With the development of more demanding employees in the modern world, this may be a factor that will change in the future. A restrictive agreement is usually a clause in a contract that prohibits a worker from competing with his former employer for a certain period of time after the worker has left the company or prevents the former employee from soliciting or trading with the company`s customers by taking advantage of the knowledge of those customers, which he earned during his former employment. It is now routine to include restrictive agreements in employment contracts. However, restrictive contractual clauses are not applicable solely because of their presence in the employment contract. Compliance by courts with a restrictive pact depends on whether the pact itself is “appropriate”, a burden imposed on the party that wants to impose it. Whether a restrictive agreement is “appropriate” depends on the agreement and all the conditions that flow from it. In its recent restrictive covenant case (KRG Insurance Brokers (Western) Inc. v. Shafron[5], the Supreme Court of Canada held that an ambiguous restrictive covenant would not be applicable.

Therefore, before applying the Elsley test, it would be desirable to examine the clause objectively in order to determine whether it is ambiguous and therefore prima facie inapplicable. Therefore, in order to be valid, restrictive agreements are examined in order to determine the standards of acceptability, taking into account the duration and geographical area of the limitation clause. The High Court issued an injunction to enforce an agreement preventing a manager from employing or attracting those who held management positions in the last six months of his employment (either in the company in which he worked or in a related company). The court may consider what is common in the employer`s sector with respect to these agreements and the above factors. This advice, which Dodd received, described the covenants as more unenforceable than unenforceable, because: (a) no consideration had been taken into account and (b) the time frames for which they would have limited Mr. Pollock`s work were exaggerated. Dodd & Co was therefore said that restrictive alliances were “probably” unenforceable. While this is not a strictly restrictive agreement, non-poaching agreements are in vogue. These agreements are concluded between two competitors in which they undertake not to encourage or attract the employees of the other party. Here are some best practices that help you better understand the limitations of appropriate restrictive agreements: The simple fact is that a well-constructed and reasonable restrictive agreement is the most effective way for an employer to protect their business from future competition from outgoing employees and the theft of confidential data by outgoing employees. Increasingly, courts are unwilling to grant employers the protection of implied contractual clauses when they have not included explicit restrictions in their employment contracts, either through a combination of ignorance or laziness, at the beginning of employment.

Prohibitions of competition must be precisely defined in order to define the nature of the undertaking in which the worker is not to be employed during the implementation of the restriction. In short, it must be a case of the type in which the worker was employed by the employer. . . .