Restraint of Trade
Non-competition clauses and Non-solicitation clauses
Employers and employees frequently enter into written employment contracts that contain specific post-employment restrictions, usually preventing the employee from competing with the employer in the event the employment relationship ends. In addition, employment contracts often contain terms that restrict an employee from soliciting other employees or inducing them to leave the employment to work for a competing business. This is usually within the context where an employee has had access to trade secrets, confidential business practices and access to customer or client lists (commonly called intellectual property).
The courts have historically treated these types of clauses as unenforceable as they prevent employees from earning a living. However, the courts do balance the rights of employers to protect their trade secrets and customer lists by placing the onus on the employer to show whether the contract is reasonable, in all the circumstances, to protect the employer’s interests.
Until 2005 the courts in British Columbia typically would strike out the entire restrictive covenant. However, recent decisions in British Columbia have altered this notion of “all or nothing” and have imported the concept of “notional severance”, which allows the court to effectively “re-wright” an employment contract and introduce concepts of fairness to both the employer and employee. This marked shift in how the courts have traditionally viewed restrictive covenants is of particular concern to employees, in particular when restrictive covenants exceed a two year period.
Factors that the courts will consider when determining whether these types of clauses are enforceable are:
- That it goes no further than necessary to protect the employers right to protect their intellectual property;
- Whether it unduly restrains the employee from making use of his or her employment skills;
- Whether the covenant offends public policy; and
- The duration of the restrictive covenant;
Termination of Employment
An employer can terminate an employment contract, without cause, provided the employer gives sufficient notice, or payment in lieu of notice. The amount of notice (or payment in lieu of notice) generally depends on several factors:
- Length of service
- Age of employee
- Education level
- Level of responsibility
- The availability of similar employment
Employers typically provide employees with severance pay, in lieu of notice. The Employment Standards Act sets out the minimum amount of notice that employers cannot fall below. Under the Employment standards Act employees must be given at least 1 week notice (or payment in lieu of notice) for each year of service.
If your employment has been terminated, the Employment Standards Branch provides a quick and simple remedy, but is limited to the minimum standards that employers cannot fall below.
The courts however are much more generous and, depending on the factors listed above, an employee may be entitled to 1 month payment in lieu of notice for every year of service. A long serving employee therefore can be entitled to significantly more severance pay than set out in the Employment Standards Act.
If your employment has been terminated and you have been offered a severance package, you should review it with a lawyer to ensure you receive the most you are legally entitled to.