Locking Down Talent: Navigating the legalities of Non-Competition Clauses for Employer

Employers have historically relied upon non-competition agreements to prevent key employees from leveraging their acquired skills for a competing business after their departure.  

But just how enforceable are non-competition agreements, really? 

The Courts of British Columbia have consistently held that as a general principle, non-competition clauses are restraints of trade and presumed unenforceable.  

To rebut this presumption, the employer seeking to enforce the non-competition agreement must prove that it is reasonable in the specific context.  

First, the employer must demonstrate that they have a valid business interest that warrants protection and that the non-compete is necessary to safeguard that interest.  If a less restrictive alternative, such as a non-solicitation or confidentiality agreement, would offer sufficient protection, the non-compete could be deemed overly restrictive and unenforceable.  

Once the employer proves that the non-compete is necessary to protect a legitimate business interest, the employer must then prove that the non-compete is reasonable in scope, based upon geography, duration and the nature of the activities restricted. 

The geographic scope must directly correlate to the regions where the employer conducts business.   The more expansive the geographic scope, the less likely the agreement is to be enforced. 

The duration must be proportionate, extending only as long as necessary to counteract the employee’s influence, without unfairly restricting their ability to earn a living in their chosen profession.  The Courts have established a two-year maximum, reserving the outer limit for employees with significant influence.  

A non-compete agreement should restrict only those activities that the employee engaged in while employed with your company.  The prohibited activities must be clearly defined and unambiguously stated. 

An unduly restrictive or ambiguous non-competition agreement will be deemed unenforceable. 

The key to an enforceable non-competition agreement lies in careful and precise drafting.  If you’re considering the best ways to protect your business upon the departure of a key employee, contact Race & Company LLP at (604) 892-5254.  To arrange a consultation with Kelly Fortune, please email info@raceandco.com.