Non-solicitation agreement

How BC law treats it

A non-solicitation covenant is a restraint of trade under the common law. The party relying on it must show it is reasonable and protects a legitimate proprietary interest, such as customer relationships or a trained workforce (Elsley v JG Collins Insurance Agencies Ltd, [1978] 2 SCR 916). Because it restricts only active approaches to identified people, rather than all competition, courts are more willing to enforce it than a non-compete. The same strict rules from Shafron v KRG Insurance Brokers (Western) Inc, 2009 SCC 6 apply in employment. The clause must be clear and reasonable in duration and in whom it covers. Courts will not rewrite an ambiguous or overbroad clause. A covenant limited to clients the employee actually dealt with in the last year or two is far more likely to survive than one covering every customer the business has ever had. Drafting matters. "Non-solicitation" usually means the departing person cannot initiate contact. A "non-dealing" clause goes further and bars accepting business even if the customer calls first, and courts scrutinize it more closely. On the sale of a business, the vendor's non-solicitation covenant protects purchased goodwill and gets more deference (Payette v Guay inc, 2013 SCC 45). A non-solicitation clause between an employer and its own employee is lawful. An agreement between two unaffiliated employers not to solicit or hire each other's staff is different: since June 23, 2023, it can be a criminal offence under Competition Act, RSC 1985, c C-34, s. 45(1.1).

What it means for your business

For many BC businesses, especially professional services, agencies and sales-driven companies, client relationships are the core asset. A properly limited non-solicitation clause is often the most enforceable way to protect them after an employee, contractor or partner leaves. Buyers of a business should insist on vendor non-solicitation covenants. Companies that sign service, staffing or joint venture agreements with other employers should review any mutual no-hire terms for Competition Act risk. Example: A Vancouver marketing agency's account manager agrees not to solicit clients she served in her last 12 months for one year after leaving. When she emails those clients from her new firm, the agency seeks an injunction based on the clause.

Risks and common mistakes

Covering every customer of the business instead of those the person actually dealt with. Writing a non-dealing clause when only a non-solicitation clause was needed. Setting a duration far longer than the customer relationship would realistically last. Signing a mutual no-hire clause with another employer without checking the Competition Act. Assuming a non-solicitation clause stops a former employee from working for a competitor.