Non-Competition Clauses (Lesson 4.2) Flashcards
What is a non-competition clause?
A clause in an employment contract that restricts the employee from competing with the employer after the employment ends.
Under what conditions is a non-competition clause valid (CCQ 2089)?
In writing
Expressly stated
Limited in time, place, and type of employment
Can non-competition clauses be implied?
No, they must be explicitly written in the contract.
Who bears the burden of proof to validate a non-competition clause?
The employer must prove it is reasonable and necessary to protect legitimate interests.
What three elements must a non-competition clause specify?
Time period
Geographic area (place)
Type of work restricted
Why are non-competition clauses rarely enforced against regular employees?
Because employment contracts are often contracts of adhesion, where the employer has all the bargaining power, and courts recognize this imbalance.
What does CCQ 2095 state about non-competition clauses?
If the employee was not fired for serious cause (per CCQ 2094), the employer cannot enforce the non-competition clause in court.
What does this indicate about judicial attitude toward non-competition clauses?
Courts are generally skeptical and reluctant to enforce them unless clearly justified.
How do courts treat non-competition clauses differently in the sale of a business?
In business sales, parties usually have equal bargaining power, and buyers often pay for intangibles like goodwill.
Courts are more willing to enforce non-competition clauses in these cases.
Why are non-competition clauses more acceptable in a business sale?
Because the buyer pays for reputation and customer base, and it is reasonable to protect those interests against competition from the seller.
What is the main distinction between a non-competition clause in an employment contract vs. a business sale?
Employment = power imbalance (likely unenforced).
Business sale = equal negotiation and financial exchange (more likely enforced if reasonable).
