Does a non-solicitation agreement impact your employment? Are you an employer who has used a non-solicitation agreement as a tool to protect your business?

The aim of this blog is to delve into the topic of non-solicitation agreements. Specifically, we will investigate the nature and key aspects of non-solicitation agreements, how non-solicitation agreements are enforced in Ontario and what are the differences between non-solicitation agreements and non-compete agreements.

What are Non-Solicitation Agreements?

Non-solicitation clauses in employment agreements can also be called “restrictive covenants.” They are a staple of many employment contracts but also may be contained in their own separate agreement. Many employers use these restrictive covenants to protect their competitive edge in the marketplace by restricting a departing employee’s ability to “poach” the employer’s important clients or customers. Employers often share important confidential information with their employees and wish to include clauses in an employment contract that brings a reasonable level of protection to their commercial interests.

Specifically, a non-solicitation clause or agreement stops the employee from actively engaging with or pursuing the employer’s clients, customers, suppliers, vendors, sellers or business parters after the employee’s employment with the employer ends.

What is the difference between Non-Solicitation Agreements and Non-Compete Agreements?

Both a non-solicitation agreement and non-compete agreement are restrictive covenants. However, while a non-solicitation agreement stops an employee from actively engaging in or pursing the employer’s clients or customers, a non-compete clause or non-compete agreement exists to attempt to stop an employee from participating in other activities (such as employment or business activities) that would compete with the employer’s business after the employment relationship ends.

A key difference between a non-solicitation agreement and non-compete agreement relates to their enforceability. In October 2021 the government of Ontario prohibited employers from using non-complete agreements either as a clause within an employment agreement or employment contract or as another agreement. This ban is set out in Ontario’s Working for Workers Act and the Employment Standards Act, 2000. As such, in most cases, a non-complete clause (or agreement) is illegal in Ontario and will not be enforceable in Ontario courts. However, there are some limited exceptions.

If our readers would like more information about this topic, please review our blog entitled, “Are Non-Compete Clauses Enforceable in Ontario?“.

How are Non-Solicitation Agreements Enforced?

Non-solicitation clauses or agreements are enforced by Ontario courts. However, to be enforced, the non-solicitation clause or non-solicitation agreement must be reasonable. An employer will need sue the employee for any breach of the non-solicitation clause or agreement and plead that they are owed damages because of that breach. Damages would be the amount of money the employer has lost because of the employee’s actions in breaching the non-solicitation clause or agreement. The onus is on the employer to prove that there was a breach and that the non-solicitation clause or agreement was reasonable.

Ontario courts will use a context and fact driven analysis to determine if a non-solicitation clause or agreement is enforceable. Ontario courts will look at certain factors to determine reasonability of the cause or agreement. For example, the courts will look at the time period the non-solicitation clause or agreement lasts for, what geographic limits the non-solicitation clause or agreement has, whether the non-solicitation clause or agreement is limited in terms of what it is actually is protecting (such as legitimate business reasons like key customers or specific information) and whether the non-solicitation clause or agreement is vague or unclear in terms of its contents.

How Can Zeilikman Law Help?

It is important to speak to an employment lawyer before making any decisions regarding how to interpret an employment agreement with a non-solicitation clause or non-solicitation agreement, particularly if the employee has been wrongfully dismissed. If an employer or employee has any questions regarding non-solicitation clauses or non-solicitation agreements, they are invited to contact one of our experienced employment lawyers to set up a consultation to discuss their legal options.

For more information about other post-employment obligations that exist please look at our blogs:

• What obligations do departing employees have to their employers?
• The Right to Disconnect from Work and the Downfall of Non-Compete Clauses

Employers and employees can contact our office at (905) 417-2227 or online here to schedule their own confidential consultation with Zeilikman Law.