What Is A Non-Compete Clause in Ontario? Is It Enforceable?
A non-compete clause, or a non-compete agreement, is a legally binding contract between an employee and a company that the employee will not compete with said company after their employment is over. These contracts also often come with a clause that the employee won’t disclose company secrets to another party, also known as an NDA (Non-Disclosure Agreement).
Penalties For Breaking A Non-Compete Clause
If you break a non-compete clause, the chances are you won’t face any prison time unless it relates to insider trading. However, there are still several penalties you may suffer if you’ve been found to have broken a legally upholding non-compete clause.
If it can be proven that your new company, or role within a competing company, has directly impacted the profits of your previous company, damages can be sought in court. Typically, this would be if you’d taken a client from the company or implemented company secrets that have in turn bolstered yourself at the expense of their profits.
If you are found guilty of this by a court of law, the original company may seek monetary compensation for the profits you caused them to lose.
If you are found guilty of taking important documents from your company after leaving, a court order can be carried out to force you to return the documents. This may, in turn, also be found to have led to monetary damages.
Being found violating a non-compete agreement may lead to an injunction. This would legally prevent you from continuing to operate in the same field for a set period of time, which may be longer than the initial non-compete agreement stipulated. Additionally, you will have to pay any of the company’s legal fees that were spent getting this injunction.
Is A Non-Compete Clause Enforceable In Ontario?
As non-compete agreements typically extend only to the province of the violation, legally enforcing them can damage the economy. Because of this, in an attempt to retain talented professionals as well as monetary investments within Ontario, the province introduced new legislation to prohibit these agreements.
In December of 2021, Ontario became the first of Canada’s provinces to enact this legislation, following in the footsteps of several U.S. states which had already prohibited non-compete clauses. This amendment excludes any executives, as well as anyone selling a part of the business and immediately becoming employed by the buyer.
How An Employment Lawyer Can Help
If you believe that you’re being held accountable for violating a non-compete agreement without due cause, or you believe a proposed non-compete agreement to be unlawful, an employment lawyer may be what you need. Employment lawyers can act as your legal representation, helping to uphold your side of the argument and protect your legal rights.
In the event that you have broken a non-compete clause, and are in a province where it’s enforceable, an employment lawyer could additionally aid you in reducing the compensation you’re charged with for damages. Finally, in Ontario where non-compete agreements are illegal, an employment lawyer could help nullify any charge brought against you for breaking one.
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