Non Solicitation Clauses (“NSC(s)”) are a crucial tool for employers to protect their business from former employees. One topic of confusion, however, is how specific an employer must be in defining what customers or clients are off-limits to the former employee. Must they be specifically named? Or can they be defined just as “customers” more generally?
As the following explains, courts have given different answers to this question.
A Non Solicitation Clause (NSC) is a “restrictive covenant” in an employment contract and is often set to last several years after the employee departs. The typical NSC restricts the former employee from soliciting (i) the employer’s customers or clients, and from soliciting (ii) any employee or supplier of the employer to cease working for or doing business with the employer. They often have geographical boundaries. Non Solicitation Clauses are different from non-competition clauses because they are more narrowly worded to restrict solicitation of specifically customers, employees, and suppliers. A non-compete typically goes much further than this, to prohibit any competition by or association with any competing businesses by the former employee.
Both NSCs and non-competes are frequently challenged in court when the employer tries to enforce them. Courts place great value on the freedom of someone to pursue gainful employment or a trade or occupation, so they have frequently held non-competes and NSCs to be unenforceable.
A common reason NSCs are found to be unenforceable is vagueness about who is off limits to the departing employee. “A valid NSC clause must clearly advise the former employee which customers are off-limits to her or him.”: ThyssenKrupp Elevator (Canada) Limited v. Amos, 2014 ONSC 3910, para. 32, following Mason v. Chem-Trend Limited Partnership, 2011 ONCA 344, para. 30.
In each of these cases, a NSC using the general “any customers” scope, or some variation of it, was deemed unfair to the former employee because they could not know with certainty whether a particular person or company is or has been a customer of the employer. Where the court believes the NSC is too vague on what a “customer” means, the result will be a refusal to enforce the NSC.
However, a closer look at the case law shows that judges will still uphold a NSC even if it fails to name-identify off-limits customers, provided that the overarching goal – does the employee know with certainty who is permissible to contact – is achieved. For example, in MD Physician Services Inc. v. Wisniewski, 2018 ONCA 440, the NSC forbade the employee from soliciting “any client, or prospective client, of the Employer who was serviced or solicited by the Employee during his/her employment.” Neither the trial judge nor the Ontario Court of Appeal even referred to a rule requiring named customers, and both held that the clause was reasonable. Similarly, in 2158124 Ontario Inc. v Pitton, 2017 ONSC 41, the NSC covered “any of [the former employer]’s clients, including without limitation, any portion of the Book of Business (as defined above)”. Yet it too was upheld as reasonable (para. 41). See also Mandeville Holdings Inc. v. Santucci, 2021 ONSC 4321, para 52; and in Alberta Catch Engineering Partnership v Mai, 2023 ABKB 279, para. 35. This line of cases suggests that the practice of naming names in a NSC has not been elevated to a bright line rule of law.
While courts are certainly sometimes exacting in their review of NSCs, they also do not appear to hold employers to a perfection standard. They recognize that, practically speaking, it may be hard to know all the possible individuals and businesses that could be former customers. There is some expectation that the former employee will have some starting knowledge of this group, or at least exercise restraint and caution in deciding to promote any new business they may undertake after employment. While identifying a “book of business” or other named list of customers is certainly helpful, it is still permissible in my view to complement that with a residual category of “or other customers of the employer during the employee’s term of employment.”
Of course, every employer is different and so are their post-termination NSC protection needs. Some may need a very aggressive clause, others one more qualified and measured. In either case, the discernibility of the class of off-limit customers appears to be a very crucial factor. If in the context of the business and the industry that discernment can be provided by specific language, including named businesses or individuals, then that would seem the safer course. On the other hand, it may not cover all the customers an employer wants to protect. So there must be a balancing exercise in crafting good NSCs and other covenants as part of employment contracts. An employment lawyer can assist with achieving the right balance for their specific client’s needs and competitive profile.
About the Author
This article was written by Tom Archibald, one of the seasoned employment lawyers at HRC Law Professional Corporation. Tom comes with 15+ years of legal expertise in employment and labour law and a passion for helping Canadian employers navigate through complex legal landscapes. Tom’s extensive knowledge covers a wide range of employment issues, including precarious legal situations.