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Explaining Non-Compete and Non-Solicitation Clauses

An employment agreement is central to defining the relationship between an employer and its employees, as well as their expectations. Employment agreements typically cover job duties and various elements of an individualu2019s employment with a company. However, these agreements may also contain clauses that can place limitations on what an employee can do once the working relationship ceases. In particular, employees and employers alike often have questions and concerns about non-compete or non-solicitation clauses.

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Explaining Non-Compete and Non-Solicitation Clauses

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  1. Explaining Non-Compete and Non-Solicitation Clauses

  2. An employment agreement is central to defining the relationship between an employer and its employees, as well as their expectations. Employment agreements typically cover job duties and various elements of an individual’s employment with a company. However, these agreements may also contain clauses that can place limitations on what an employee can do once the working relationship ceases. In particular, employees and employers alike often have questions and concerns about non-compete or non-solicitation clauses. The wording and construction of such clauses are important. Let’s review what these two provisions entail and what employers may need to know about including them in agreements and enforcing them.

  3. A Quick Overview of Non-Compete Clauses The non-compete clause is a tool employers may use to protect their business interests. Their purpose is to limit an individual’s ability to provide an advantage to other competitors or to challenge the original business itself. The most common types of non-competes restrict an individual from: • Joining a competitor’s business as an employee, or • Beginning a new business that will act in direct competition with the original employer.

  4. Non-competes aim to keep trade secrets and other business knowledge secure. A business may not want its employees to leave with proprietary information or knowledge that could provide another business with a chance to out-compete the company. However, non-compete clauses require cautious wording and must only aim to protect legitimate business interests. As such, these provisions often remain in force for only a limited period of time and apply only to a specific geographic region. When drafting or reviewing such clauses, many businesses turn to employment lawyers in Edmonton for guidance to ensure the restrictions are legally sound and practical for Alberta workplaces. What is a Non-Solicitation Clause?

  5. A similar provision, called a non-solicitation clause, may also appear in employment agreements. Such clauses aim to protect a company’s reputation and operating conditions. When correctly written, a non-solicitation provision may prevent individuals from contacting their former employer’s current staff, clients, or other companies with which the employer has a business relationship with the intention of soliciting them away from the employer. Such a clause can help prevent the spreading of rumors or attempts to sabotage working relationships. Can Companies Enforce These Clauses?

  6. The courts scrutinize non-compete and non-solicitation clauses due to the restrictions they can place on an individual after an employment agreement ends. This scrutiny makes it difficult to enforce beyond the correct circumstances, especially for non-compete clauses. These clauses require specific language that does not unfairly burden former employees. Some of the factors that can make clauses more enforceable include: • The restrictions last only for a set period of a reasonable duration. • The restrictions remain limited to a specific geographic area, such as the company’s operational region. • The scope of the restrictions is narrow and limited only to reasonable business purposes.

  7. Despite a clause having all the above, however, there are still a number of reasons a court may find an employer’s non-compete or non-solicitation clause to be invalid. Because the requirements are so strict and enforcing these clauses can be challenging, it is essential to seek experienced legal advice to craft language that can withstand a court review if an employee contests the restriction. In many cases, Alberta labour lawyers can help both employers and employees understand their rights and obligations under these provisions. Learn About Building Appropriate Employment Agreements

  8. Non-compete and non-solicitation clauses can be valuable tools for protecting genuine interests. However, courts often find them to be too restrictive, which can leave a business without the protections it expected. There are good reasons to include this language in employment agreements, but support from employment lawyers can help ensure they are both fair and enforceable. To learn more about how to use these clauses and how to balance business interests and employee rights, connect with us today.

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