What is a non-compete clause?

You have an offer letter. The compensation looks good, the role is a step up. Then you reach page 8 and find a clause that says you cannot work for a competitor for 12 months — anywhere in North America — after leaving.

Non-compete agreements are increasingly common and often buried in employment contracts. Here is what they typically contain and what questions to raise before you sign.

What a non-compete clause typically covers

A non-compete (also called a restrictive covenant) may restrict:

• Industry or role: Working in the same industry or a similar role.
• Geography: A defined area — city, province, country, or broader.
• Duration: A set period after your employment ends.

Employment contracts often also include a non-solicitation clause, which may restrict contacting former clients or colleagues for a period after leaving. These are separate from non-compete clauses and have different legal considerations.

What Canadian courts have considered

Canadian courts have addressed non-compete clauses in a range of employment cases. Factors that courts have historically examined include the scope of the restriction, the geographic area, the duration, and whether the clause protects a legitimate business interest.

Whether a specific non-compete in your contract is enforceable depends on the particular wording, your role, your province, and the circumstances of your departure. An employment lawyer in your province is the appropriate person to assess that question.

Questions to raise before signing

Before accepting a role with a non-compete, it is worth understanding what you are agreeing to. Questions to consider — and to discuss with an employment lawyer:

• What activities does the clause specifically restrict?
• What geographic area does it cover?
• How long does the restriction last after your employment ends?
• Does it apply if you are terminated without cause?
• What counts as a “competitor” under the clause?

Getting the right advice

If a non-compete clause in an offer letter concerns you — particularly if it is broad in scope, geography, or duration — a review with an employment lawyer before signing is worth the time. Employment lawyers can assess the specific clause in the context of your province's law and your circumstances.

To understand the specific language in your employment contract, upload it to Legibly for a plain-English summary of what the contract says.