In order to best protect the employer’s commercial interests and competitiveness, it is often crucial to include restrictive covenants in employment contracts. It is of equal importance to ensure that these covenants respect the limits established in the case law for them to be enforceable by the courts. Indeed, they may be deemed null and void if they are proven to be ambiguous or too broad.
The question then becomes: what happens if an employer omits to include a restrictive covenant in an employment contract? Is it possible to insert such a provision during the employment relationship? It appears that case law has not expressly forbidden such additions, but has determined the conditions under which the insertion of a restrictive covenant can take place in a current employment contract.
Since the addition of a non-competition provision appears to constitute a substantial modification to the employment contract, such a modification cannot be unilaterally imposed on an employee (see Jean v. Omegachem inc.). In this specific case, the Québec Court of Appeal decided that an employee’s refusal to adhere to a non-competition agreement during his employment cannot be considered a good and sufficient cause for dismissal. This principle has been reiterated more recently, again by the Québec Court of Appeal (see Parquets Dubeau ltée v. Lambert).
It will be necessary to obtain the employee’s consent before an employer can legitimately incorporate a non-competition clause in an existing employment contract. Such a provision will have to be reasonable with respect to both its duration and territorial application. An important factor in analyzing the reasonability of a restrictive covenant implemented during employment is the compensation offered by the employer in exchange. Case law has not yet illustrated what exactly constitutes appropriate compensation, but acknowledges that renouncing to the freedom to work does not come for free. Imposing a non-competition covenant without providing sufficient compensation is considered contrary to public order. For example, an employer could be tempted to subject a promotion to a restrictive covenant. However, if he does so, the employer must ensure that the new position held by the employee justifies the imposition of a non-competition clause. Otherwise, it can be considered null and void (see TQS inc. v Pelletier).
Finally, it is important to note that at the employment offer stage, including a commitment to agree to a future non-competition clause cannot bind an employee as one cannot legally commit himself to a restrictive covenant while ignoring the content of its obligation.
Written with the assistance of Maude Larochelle-Samson, articling student.