Employers often share important confidential information with their employees, and at the commencement of the employment relationship, want to include provisions in an employment contract that brings a reasonable level of protection to their commercial interests. When that employee leaves their position, and may have had access to sensitive information, it can create legitimate concerns for the employer. This concern becomes greater when that employee then competes with his or her former employer or
becomes employed or otherwise engaged with a competitor of his or her former employer. That employee can take with them valuable information and knowledge concerning the former employer’s business practices and strategies, which can be exploited to an unfair advantage.
Non-Competition & Non-Solicitation
Restrictive covenants, also known as “non-compete” and “non-solicit” covenants, are a staple of many employment contracts. Many employers use these covenants in an attempt to protect their competitive edge in the marketplace.
A non-compete covenant refers to where employee agrees not to practice or start a business in a similar capacity in competition with their former employer. A non-solicit covenant, on the other hand, normally refers to the employee’s restrictions on the right to solicit clientele or employees of the employer after the end of the employment relationship, for a defined period.
At the heart of restrictive covenants lays the principle that it would be unfair for an employee to use sensitive information or other insider knowledge in competition against a former employer unfairly. Such a provision usually carries some geographic or temporal limits on the prohibition, but it remains a crucial tool for employers to protect their business against unfair competition.
Which Restrictive Covenants Are Enforceable?
Restrictive covenants, specifically non-competition agreements, are notoriously hard to enforce and their legal validity may always be subject to the careful scrutiny of the courts. This is because they have the potential to do significant harm to employees. For example, it is harmful where an employer is trying to stop a person from practicing in their chosen trade. Non-solicitation agreements, however, may be enforceable easier.
Terms Need To Be Clear, Unambiguous And Reasonable
However, employers have to ensure that when they require an employee to enter into an employment agreement that they do not place unnecessary or unreasonable restrictions on the employee’s activity post-employment, in light of the employee’s position, knowledge, and responsibilities. The restrictive provisions should contain reasonable and clear restrictions such as the length of the non-competition period, the geographic scope, the restricted activity and so on. When the courts see that an agreement is reasonable, clear and concise, they are more likely to enforce the agreement.
The courts look to determine if the terms of the clause are unreasonable or unnecessary to protect the legitimate business interests of the employer by examining the geographic scope, the length of the restriction, and the scope of the prohibited activity.
How Law Wise Can Help EMPLOYERS?
The employer can issue a claim for damages against the competing employee, which were suffered as a result of the breach of the contract, among other things. Further, the employer may also move promptly to obtain a court order (known as an interlocutory injunction) against the former competing employee to restrain the employee from competing pending the determination of all the issues at trial.
In certain cases involving key or high-ranking employees, the employer may be in the position to sue for damages and seek injunctive relief even in the absence of a written agreement.
LAW WISE can provide you with the legal advice needed to ensure that all of the proper steps are taken, including the drafting of non-solicitation and non-competition agreements; to try to combat problems employers may face in such situations. We can help provide representation against former competing employees including commencing an action and seeking court intervention to prevent serious economic loss to the business.
Call us at +1 647 948 7819 today!
How Law Wise Can Help EMPLOYEES?
Many employees needlessly abide by restrictive covenants that are unconscionable, unreasonable and unfair for fear that they may be sued. If an agreement is unenforceable, the courts will treat it as if you never signed it.
It is important to speak to an employment lawyer before making any decisions regarding how to interpret your agreement. If you have questions regarding a signed non-competition or non-solicitation provision (whether it can be enforced or whether you should sign such an agreement), contact LAW WISE employment lawyers to discuss your options.
Call us at +1 647 948 7819 today!