As an employer, there is always a great concern about confidentiality – most specifically, the concern that an employee or worker, once they've left the company, could potentially share sensitive information about your business with a competitor, which could mean you lose your edge. Depending on the severity of the agreement, this can be a great deal of stress on an employee, but in the end a reasonable level of protection is a good idea for a company to have to avoid any mishaps.
As with most things that fall into a legal category however, there can be great deal of confusion on behalf of both the business and the employee. Many struggle to understand the difference between a non-solicitation agreement and a non-compete agreement, whether or not they are legally enforceable and what they can contain. Fortunately, there are answers and once you get clear and concise definitions, it can make differentiation a great deal easier.
Non-compete agreements are a very complicated legal clause, and can be difficult to enforce depending on the area you're in. These laws not only vary between Canada and the US, but the rules are different depending on province or state as well. Effectively, a non-compete agreement prohibits signing employees from working at a business that is similar to your company, or starting a business that's like it either. In most cases, you need to establish a time period on this clause (for example, forbidding an employee from working with a competitor for a full year) in order for it to be considered legal, but it's important to keep in mind that the laws vary state-to-state. In the case of California, all non-compete agreements are automatically void outside of very specific legal situations, whereas in Florida, they are rather common as long as they aren't too vague.
In Canada, on the other hand, non-compete agreements can be rather difficult to enforce, as general courts have decided that it can be overly restrictive and doesn't serve the best interest of the employees. It's important to do your research and see what kind of agreement might better serve your purpose – for example, a non-solicitation agreement.
A non-solicitation agreement is a generally more popular option for many companies, since it's broadly more agreeable to their employees as well which makes it easier for everyone. A non-solicitation clause means the employee agrees not to try and lure other employees away from your business, or engage your clients once they leave. Unlike a non-compete agreement, your non-solicitation clause is much easier to enforce as long as you make absolutely sure that it is clear, reasonable and completely unequivocal in the eyes of the law.
This is often paired with a non-compete agreement in the United States to ensure that not only is your worker not allowed to open up a business in direct competition with you, but that they are also unable to try to steal business or assets. However, in Canada, it's a more common option due to the difficulty many businesses can have when it comes to enforcing a non-compete agreement. Most of the time, courts will enforce a non-solicitation agreement to prevent any poaching on your ex-employees’ part.
In Canada, it's generally a bad idea to include a non-competition clause if only for the sheer reason that it's next to impossible to enforce. Both parties involved might find it easier to forgo it completely in favour of the non-solicitation cause, which is generally considered to be fairer and much easier to enforce in the eyes of the law. In either case, it's best to employ legal minds before you decide to offer any sort of clause, to ensure you're not only compliant with the law, but that both parties are covered in a fair manner.