What does a non-solicitation clause mean?
In Ontario, a non-solicitation clause is a provision in an employment contract that specifically prohibits an employee from soliciting or “poaching“ clients, customers, vendors, business partners or employees from their former employer. These restrictions must be limited in geographic scope and duration.
In employment law, a non-solicitation clause is also called a “restrictive covenant”. It is “restrictive” because it attempts to limit what an employee can do upon leaving their employer.
Non-solicitation clauses most often are explicitly written in an employment contract, but can also be implied for senior executives or those in a fiduciary duty with their former employer.
Non-Solicitation Clause Example
Here is an example of a non-solicitation clause in the case of Donaldson Travel Inc. v. Murphy et al, 2016 ONSC 740:
Employee agrees that in the event of termination or resignation that she will not solicit or accept business from any corporate accounts or customers that are serviced by Uniglobe Donaldson Travel, directly, or indirectly. (para 18 of ONSC decision)
In this case, the non-solicitation clause is unenforceable because there was no limit in time or geography, the phrase “or accept business from” goes beyond solicitation to competition and “any corporate accounts” was found to be too broad.
On the other hand, in the case of Stress-Crete Limited v. Harriman, 2019 ONSC 2773, the following non-solicitation clause was found to be enforceable:
I shall not, for a period of two (2) years after the termination of my employment for any reason whatsoever:
a) Solicit or entice, or attempt to solicit or entice, either directly or indirectly, any of the employees of StressCrete to enter into employment or service with any business described in Clause 2 above; or
b) Contact any person, firm, corporation, or governmental agency who was a customer of StressCrete at any time during my employment with StressCrete.
In this non-solicitation clause example, the clause was found to be reasonable, clear, and in line with industry norms. For this reason, it is important to get help from an employment lawyer to help determine if a non-competition clause is reasonable or unreasonable before you sign an employment contract.
How do you get around a non-solicitation clause?
It is not so much about “getting around” these provisions for employees, as it is about how difficult it is for employers to enforce them. The power imbalance inherent in the relationship between employer and employee means that the law heavily favours employees in matters of contract interpretation.
Courts will begin an analysis of a non-solicitation clause from the position that it is unenforceable, and the onus will be on the employer to demonstrate that the clause is reasonable in the circumstances. The clause must be reasonable in terms of how long it lasts for, the geographic scope it covers, whether it is vague or clear and whether it is generally reasonable with regard to the public interest.
If the time period in a non-solicitation clause is too long, or the geographical scope is too broad, it is likely the employer will be unsuccessful in enforcing these clauses. If the clause is not truly needed to protect the employer’s business interests, a court will also likely refuse to enforce it.
What happens if you break a non-solicitation clause?
If an employee breaches a valid and enforceable non-solicitation clause that is “reasonable”, the employee may be sued for damages by their former employer. The amount of these damages would be equivalent to the worth of lost business or clients that resulted from the former employee’s actions. The amount the employee may be liable for may be entirely dependent upon the employer’s losses.
Is a non-solicitation agreement the same as a non-competition agreement?
A non-solicitation agreement is similar to a non-competition agreement, as they both attempt to limit what a former employee can do when their employment ends, but they are not the same. Non-solicitation clauses seek to prevent an employee from “poaching” clients, customers or other employees from their former employer, while non-competition clauses attempt to prohibit a former employee from going to work for a competitor or setting up a competing business. In order for non-solicitation clauses and non-competition clauses to be seen as “reasonable” and therefore enforceable by the courts, they must be limited in time and geographical scope.
Non-competition clauses can be even more difficult for an employer to enforce because they can severely limit a former employee’s ability to earn a living, particularly if they work in a niche or specialized field, or in a geographical area where employment opportunities are limited.
If your employer has asked you to sign an employment contract with a non-solicitation clause or if you have been accused of violating a non-solicitation clause, contact us today. We are experienced employment lawyers and non-solicitation lawyers at Monkhouse Law in Toronto. We will help you understand your rights and the implications of the clause.