Non-Compete Agreements and Their Enforcement: An Independent Contractor’s Guide

by John Burke

1 min read

A non-compete agreement is a contract or clause within an employment contract in which an employee promises not to work in, or work for another company engaged in the same business. As an independent contractor, you may have to sign this type of agreement to get work. Because these agreements restrict your ability to earn a living, they fall into the category of restrictive covenants. Canadian courts apply the standard of “reasonableness” to restrictive covenants. They usually don’t enforce these agreements when another remedy, such as a non-solicitation agreement where you agree not to solicit the employer’s customers, accomplishes essentially the same purpose. To enforce a non-compete agreement, Canadian courts usually require the agreement to be limited in time, geography and scope, and only to the extent necessary to protect the employer’s proprietary information. In general, the agreement must limit you to only a reasonable time frame, apply to reasonable geographic area, and apply to reasonable activities. So, an agreement that prevents you from ever working anywhere in Canada in any related business wouldn’t be enforceable, especially if the employer only operates in one town or province. Yet a court may uphold an agreement that prevents you from performing the same type of work for competing businesses within a 25-mile radius for six months, especially if you were given confidential trade secrets or special training. If you plan on working in the United States, courts of various jurisdictions take different approaches to non-compete agreements. In California, these agreements are void, while Massachusetts courts tend to enforce them. Aside from voiding or enforcing them, a court may “blue pencil” or edit the contract to remove language it finds objectionable. Non-compete agreements prevent you from engaging in the same type of work after your contract ends. Canadian courts tend to enforce them to the extent that they are necessary to maintain confidentiality, protect trade secrets, and don’t unreasonably restrict your ability to work. United States courts take different approaches to these agreements, depending on the jurisdiction. Make sure you are aware of the terms of a non-compete agreement before signing.

References & Resources

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