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Should Canadian employers enforce non-compete clauses?

Some employers in Calgary and other cities include special clauses in their employees' contracts. These addenda vary, but one relatively common addition is the non-compete clause, which typically prohibits an employee from going into business as a competitor after they leave their current employer. Non-compete stipulations are especially common in high-level executive contracts, and sales personnel may be asked to agree to similar non-solicitation requirements, but courts don't always uphold them the way employers might expect.

According to an article from the Globe and Mail, legal personnel have varying opinions on how enforceable non-compete contracts are. In one instance, the Ontario Court of Appeal decided that a man who had worked for a global chemical supplier for 17 years shouldn't be held to a non-compete contract after he was terminated. In this case, the justification behind the ruling centred on the idea that the employer was demanding too much.

Courts also maintain that these clauses may be invalidated if employees were coerced or otherwise pressured into signing them; for instance, a contract signed at risk of employment forfeiture may not be legal. In the majority of formal disputes, non-compete clauses were decided to be excessive, but some non-solicitation clauses make it through trial without being deemed invalid if their terms are sufficiently open.

Non-compete and non-solicitation clauses have their roles in employment contracts, but human resources professionals shouldn't rely on them as if they're infallible. Employment contract disputes that arise following terminations or other events may force employers to spend money on legal defence, so in the end, they might not be worth what a firm could potentially save through the use of a contract clause.

Source: The Globe and Mail, "Can my employer force me to sign a non-compete clause? ", Daniel A. Lublin , February 29, 2012

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