When a Non-Solicitation Clause is Actually a Non-Competition Clause

Employers often place a restrictive covenant, such as a non-competition or a non-solicitation clause, into their employment contracts in an attempt to protect their business interests from competition from departing employees. The challenge for employers is that a basic employment law concept is that a restrictive covenant in an employment contract will be presumed by a court to be void and will only be enforced if the covenant is reasonably limited to protect the employer’s legitimate business interests.

The difference between a non-competition clause and a non-solicitation clause is that a non-competition clause will restrict a former employee from any form of competition whereas a non-solicitation clause will only restrict the former employee from actively contacting clients (normally just specific clients) in search of business opportunities that are competitive with that of the former employee.

In Ontario a court will only enforce a non-competition clause in exceptional circumstances. This is because in the vast majority of cases the court will find that a more limited non-solicitation would have sufficient to protect the employer’s legitimate business interests.

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