As an employee accepting a new position in a competitive industry, it’s important to read and understand the terms and conditions outlined in your employment contract. One significant aspect of your employment contract is the post-employment clause(s) which outline what you can and cannot do after leaving the company.
On the other hand, for businesses operating in a highly competitive landscape, protecting proprietary knowledge, and maintaining a competitive advantage is vital. Company information can range from trade secrets, client contacts, unique technology and anything that can be considered as sensitive or proprietary.
In this post, we’ll review some post-employment clauses and how they’re interpreted and enforced in Ontario.
The Government of Ontario introduced changes to the Employment Standards Act (“ESA”) in December 2021 to prohibit employers from including non-competition clauses in employment contracts with their employees. This prohibition took effect in October 2021, although there are a few exceptions to this rule.
Non-competition agreements that were established before October 25, 2021, remain unaffected by this prohibition. However, even before the ESA amendments, courts have generally been hesitant to enforce non-competition agreements. In fact, such agreements are typically considered unenforceable unless the employer can demonstrate their reasonableness in the given circumstances.
Other than narrow specific circumstances, employers cannot stop employees from working for a competitor. The law provides employees with the freedom to enter new employment relationships. That said, to protect the company’s interests, employers can enforce a non-disclosure agreement. A non-disclosure agreement (“NDA”) is a clause within a contract where the employee agrees not to share confidential information with anyone, including competitors.
NDAs are generally enforced in Ontario, but courts will only enforce them if the information is truly confidential and if the company has taken steps to keep it confidential.
Some NDAs may have time limitations, where employees are bound by confidentiality for a specified period after their employment concludes. Others may be permanent, where they’re prohibited from disclosing confidential information forever.
Another common provision found in Ontario contracts is a solicitation agreement. This agreement is put in place to prevent employees and former employees from enticing or taking away clients, customers, or other employees from their past employer. In these agreements individuals agree not to indirectly seek business or engage in activities that could harm the business relationships of their employer. Non-solicitation agreements are recognized and enforceable in Ontario, provided they are reasonable in scope, duration, and geographical restrictions.
It is important for employers and employees alike to understand the terms and implications of non-solicitation agreements and seeking a legal opinion and/or legal advice can help ensure compliance with the law and protect the interests of all parties involved.
Confidentiality clauses play a similar role to NDAs, but they are much broader in scope. These clauses aim to prevent former employees from disclosing any information they learned or obtained while working for the company that is not publicly available.
Furthermore, and within the scope of confidentiality, the duty of fidelity is an important aspect of employment contracts. It refers to the obligation of an employee to act in the best interests of their employer and to protect the employer’s confidential information.
The duty of fidelity includes obligations including;
- confidentiality, and
- the duty to avoid conflicts of interest.
Confidentiality is an important aspect of the employer-employee relationship and plays a role in protecting a company’s valuable information and trade secrets.
It is important to note that confidentiality clauses can extend beyond an employee’s tenure and remain applicable even after they have left the company. However, for these agreements to be enforceable they must be reasonable and not overly restrictive. In Ontario, courts consider the need to protect the company’s information balanced against the employee’s right to earn a living.
Overall, confidentiality clauses and the duty of fidelity in employment contracts serve as important protections to preserve the integrity of sensitive information and uphold the employer’s interests while maintaining a fair balance with the employee’s rights.
Post-employment clauses in Ontario employment contracts are an essential aspect of understanding your rights and obligations as an employee. Non-disclosure agreements, confidentiality and non-compete agreements can significantly impact your career choices even after leaving your current employer. Therefore, it’s important to review and understand your employment contract thoroughly to mitigate any legal complications.
If you’re unsure about the interpretation or enforceability of any post-employment clauses, it’s recommended to seek legal advice. Contact Toronto employment lawyers, Sultan Lawyers, at 416-214-5111 or here.
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