Working for a competitor is a topic that has become increasingly predominant. Many employees continually seek or may be presented with alternative employment opportunities, often with competitors. Ontario has recently banned non-competes for non-executive employees, however, it is useful to carefully consider the specifics of the employment agreement prior to deciding to work for a competitor.
Does this scenario sound familiar: you receive an exciting new offer of employment. It’s your dream job that you have been working towards. It comes with many additional perks and the organization offers more opportunities for growth. Sounds incredible, right? There’s one catch, this position is with a direct competitor to your current employer. Before you submit your resignation, turn your mind to your existing employment arrangement and its non-competes.
Working for a Competitor with a Written Agreement
First and foremost, do you have an employment agreement with your current employer? If the answer is yes, you must review it carefully before working for a competitor. Employment agreements are the framework that outline the logistics of the employment relationship. They not only set out specific details for when an employee is actively employed, such as hours of work, compensation, vacation etc., they also may have clauses in relation to the ending of the employment relationship.
Some of the most common clauses found in an employment agreement regarding the ending of an employee-employer relationship are non-solicitation and non-competition clauses. These clauses attempt to limit current or former employees’ ability to work for a competitor and/or solicit clients from the previous employer for a specific duration of time.
The Ontario Employment Standards Act (ESA) defines a non-compete agreement in section 67.1 as:
“non-compete agreement” means an agreement, or any part of an agreement, between an employer and an employee that prohibits the employee from engaging in any business, work, occupation, profession, project or other activity that is in competition with the employer’s business after the employment relationship between the employee and the employer ends.
If you see these clauses in your agreement, don’t panic! You may still be able to work for a competitor. Prior to October 25, 2021, non-competition clauses were more enforceable. They were still subject to the legal test of evaluating the time period and geographical area, determining whether the clause was too restricting on an employee; however, many were deemed enforceable. This caused severe difficulty for employees to seek alternative employment.
In 2021, the Government of Ontario introduced Bill 27, Working for Workers Act, 2021 which enacted a ban on non-competition clauses, except for employees working in an “executive” role (such as a Chief Executive Officer or Chief Financial Officer role, for example). This Bill became law on December 2, 2021; however, it retroactively took affect to October 25, 2021, the day in which the bill was introduced. This means that if you have signed an employment agreement with a non-competition clause after October 25, 2021, the non-competition clause is not enforceable. Further, this statute prohibits any employer from entering into an employment contract or other agreement with an employee that includes a non-compete agreement. Click here for more information on Bill 27.
In a recent Ontario case involving a dentistry practice, the Superior Court of Ontario provided its interpretation on the application of the new non-compete provisions included in contracts prior to October 25, 2021. In that case, the Court decided that the non-compete clause was enforceable since it was reasonable in the circumstances. However, a detailed analysis would be required to determine whether non-competes prior to October 25, 2021 would be upheld in other situations.
Working for a Competitor without an Employment Agreement
If you did not execute an employment agreement, you are free to leave and work for a competitor. An exception to this would be those in managerial or high signatory roles. Employees of such nature may have a fiduciary duty to the employer which may limit their ability to work for a competitor.
When deciding to work for a competitor, it is crucial not to keep and/or share confidential information and trade secrets from your previous employer.
Before making the decision to work for a competitor, it is always advisable to speak to a lawyer to receive legal advice. Please call Monkhouse Law at 416-907-9249 to speak to a lawyer about your specific circumstances.
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