A non-compete clause prevents an employee from competing directly or indirectly with their employer by virtue of the knowledge gained during their employment.
Non-Compete Clauses in the Civil Code of Quebec
The purpose of a non-compete clause is to protect the legitimate interests of the employer; not to prevent the employee from earning a livelihood. To be valid, this clause must be limited in three ways: in the length of time, in the territory, and the list of restricted activities.
Section 2089 of the Civil Code of Quebec ("C.C.Q.") formalizes this clause by stating that the employer and employee can stipulate in writing that the employee will not compete with or participate in any capacity whatsoever in an enterprise that competes with the employer during employment and even after termination.
Examples of Non-Compete Clauses
The way the three limitations of the non-compete clause apply varies from one employee to another. In one case, the court concluded the non-compete clause which prevented the employee for 12 months following the end of his employment from working in the field of data centers and colocation in North America and Europe was valid [1].
Given the highly competitive nature of the industry and the employee’s position in the company, the court held that the non-compete clause was reasonable to protect the legitimate interests of the company. Furthermore, it did not prevent the employee from working in sales or telecommunications, both areas in which he could transfer the skills he gained during his employment. As such, the court decided the ex-employee had to abide by the non-compete clause he signed when he accepted his job offer.
In another case, the court held the non-compete clause was unreasonable and went beyond what was necessary to protect the interests of the employer. In this case, the employee worked for a company that provided extermination services specifically to a clientele in the agriculture sector. [2]. According to the non-compete clause, the employee could not engage in the business of extermination and pest control in the territory within 150 km of the cities of Trois-Rivières and Granby for 18 months following the end of his employment. In this case, since the employer almost exclusively provided services to agricultural clients, the non-compete clause was considered excessively broad. A ban on the ex-employee's involvement in extermination and pest control services completely and within a radius of 150 km from Trois-Rivières and Granby was a violation of the law and went beyond what was required to protect the company's interests.
Written Non-Compete Clauses
A valid non-compete clause in an employment contract must be in writing (section 2089 C.C.Q.). If it’s not written, it’s as if it doesn’t exist. In case of litigation, a written clause further allows the court to analyze the wording to decide whether it’s valid and applicable. An ambiguously drafted clause is interpreted in favour of the employee (section 1432 C.C.Q.). As a result, an ambiguous clause can be declared unreasonable (and unenforceable). For example, an ambiguous clause would state that the geographical region covered by the non-compete is the “territory in which the employer operates”.
Does a Non-Compete Clause Always Apply?
In certain circumstances, the non-compete clause will not apply even if it’s drafted according to the rules. In particular, in case of constructive dismissal, firing an employee without a serious reason, or if the employer gives the employee a reason to leave (section 2095 C.C.Q.). For an employee that has a contract for an indeterminate period it is not enough to give them the required notice period to apply the non-compete clause; there must be a serious reason to end the employment.
Remedies Available to the Employer
Having the clause is one thing, but how can an employer enforce it? If an employer believes an ex-employee is competing with the business, they can apply for an injunction or a safeguard order, in addition to damages to compensate for the harm caused to the business.
This blog post is not legal advice and is for general informational purposes only. Always speak with a lawyer before acting on any of the information contained herein.