Many Canadian employment contracts or NDAs include non-compete clauses bundled together. A non-compete restricts you from working for competitors or starting a competing business for a specified period after employment ends. Canadian courts scrutinize these heavily, applying a 'reasonableness' test: the restriction must be reasonable in scope, duration, and geographic area. A clause that's too broad will be struck down. Before you sign, understand that an overbroad non-compete may be unenforceable.
What is a Non-Compete Bundled?
A non-compete bundled with an NDA restricts your ability to work for competing businesses or start competing ventures after employment ends. In Canada, enforceability depends on reasonableness: is the scope limited to legitimate business interests (trade secrets, confidential information, customer relationships)? Is the duration (typically 6 months–2 years) reasonable? Is the geographic area (e.g., Canada-wide) justified by the employer's business?
Red flags to watch for
Canadian courts rarely enforce non-competes over 2 years. Indefinite restrictions are almost always struck down as unreasonable.
A restriction must be limited to areas where the employer actually has business interests. World-wide non-compete is likely unreasonable.
Overly broad industry definitions (e.g., 'any tech company') are unreasonable. It should be limited to direct competitors.
Canadian courts are suspicious of non-competes if they apply to terminations without just cause. Courts may find this unreasonable.
Courts prefer non-competes to be supported by consideration (bonus, promotion, continued employment). Lack of consideration weakens enforceability.
The restriction should be justified by legitimate business interests, not just to block competition generally.
While enforcement of non-competes as a condition of employment is possible, courts scrutinize these carefully. The restriction must still be reasonable.
Your legal rights
Canadian courts apply a 'reasonableness' test to non-compete clauses: is the restriction necessary to protect legitimate business interests, reasonable in geographic scope, reasonable in duration, and reasonable in subject matter (types of work restricted)? The burden is on the employer to prove reasonableness. An unreasonable clause is void and unenforceable. In some provinces (e.g., Alberta, parts of BC), the threshold for enforceability is very high. If an employee is terminated without cause, courts are more skeptical of the non-compete applying. Provincial legislation varies: some provinces (Ontario, Quebec) require explicit statutory compliance for non-competes in employment.
Questions to ask before you sign
- 1How long does the non-compete last after employment ends?
- 2What geographic area does it cover? (Only where the company does business?)
- 3What activities or companies are restricted? (Define 'competitors' specifically.)
- 4Does the non-compete apply if you terminate me without cause?
- 5Is there any compensation or consideration for accepting the non-compete?
- 6Are there carve-outs or exceptions (e.g., starting a new company in a different market)?
- 7What happens if I breach the non-compete — can you sue, and what damages would apply?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.