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NEWS ABOUT RESTRICTIVE COVENANTS (NON COMPETE CLAUSES)

Ontario Appellate Court Finds Non-Competition Clause in Employment Agreement to be Unenforceable.

Ontario Employers may no longer enter into non-competition agreements with non-C-Suite employees

 

M & P Drug Mart Inc. v. Norton: The Ontario Court of Appeal upheld the decision of an application judge which found that a non-competition clause in an employment agreement was ambiguous and overly broad, and therefore unenforceable. It was of no consequence that the employee, a pharmacist, agreed to it. The application judge did not err when he held the restrictive covenant did not only restrict the employee working as a pharmacist for a specific time after leaving the employer’s business, it went further. The Court stated that “the question is one of legal consequences rather than business ethics.” (See our Case in Point of May 19, 2022.)

Ontario employers can no longer enter into non-competition agreements with non-C suite employees. Existing employment agreements should be reviewed for provisions that may be construed as directly or indirectly preventing post-employment competition. Properly worded confidentiality, non-disclosure, non-solicitation, and intellectual property provisions are still permissible to protect the employer's interests.

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