Ask A Lawyer – Non-Competition Clauses?
I am leaving my long-term employer to work for a competitor. I have not signed any agreements restricting my ability to compete. I have nothing to worry about right?
Believe it or not, a departing employee may have obligations which arise outside of a written contract.
Contractual provisions which restrict the ability of employees to compete with an employer are called non-competition and non-solicitation clauses.
Non-competition clauses purport to limit the ability of an employee to compete with the employer for a certain period of time and usually within a certain geographical area. These clauses not enforceable if they go beyond the protection reasonably necessary for the employer in the circumstances.
Non-solicitation clauses are generally more enforceable. They typically stipulate that an employee will not directly solicit business from the existing or prospective customers of the former employer for a fixed period of time.
What is not generally known is that even without these types of clauses the common-law in Canada provides two types of further protection for employers:
Fiduciary duties – certain high level employees enjoying a great deal of discretion and privy to the most confidential information in an organization may have an obligation not to use such information in a manner detrimental to the former employer. For example, if an employee were negotiating the acquisition of an invention for his employer but instead decided that he would take advantage of the opportunity on his own or for his new employer, rather than allow the employer to capitalize on the opportunity, he would likely be found to be breach of his fiduciary duty.
Misappropriation of confidential information – the duty of fidelity and good faith – employees of all types are required by the law to respect the proprietary information of an employer. For example, if a plumber specializing in commercial repair work for a plumbing company left that employer with a list of the commercial customers as well as a history of their requirements he could be forced to return such information and would be liable if he used that information to disadvantage his former employer. Generally speaking, the plumber can compete for the work of his former employer if he does not unfairly rely on the employer’s proprietary information in doing so. He is entitled to leave his employment and open his own business. He can even advertise that fact. Some cases suggest that he could contact his former employer’s customers to advise them of his new business and ask for their work if he relies only on his memory for the names of the customers.
The cases which consider these situations attempt to balance three very important principles of our society:
a) competition is good;
b) we are all entitled to better ourselves by taking advantage of opportunities; and
c) owners of commercial enterprises are entitled to some protection of opportunities and information that they have created or acquired.
However, when a former employee steals a true trade secret, or abuses of a trust placed in him, an employer will likely have a remedy against the employee.
This article is not intended to apply to situations involving breaches of patents or copyright. Certain trade secrets are not capable of being patented and are not entitled to copyright protection. Nevertheless, in the manner indicated above there is some protection for this type of information.
Alf Kempf is the Chair of Pushor Mitchell’s Employment Law Group. He can be reached by phone at (250) 869-1215, or by email at firstname.lastname@example.org.