Explosion of investments and increased complexity of residential projects
What is a non-competition clause in Quebec law?
The non-competition clause is a contractual stipulation by which an employee undertakes, after the end of his employment, not to carry out an activity competing with that of his former employer. Article 2089 of the Civil Code of Québec strictly regulates these clauses by requiring that they be limited in terms of time, place and type of work. A clause that does not meet these three criteria is deemed null and void.
This requirement of proportionality distinguishes Quebec from many other jurisdictions. Quebec courts do not modify a clause deemed excessive — they simply annul it, leaving the employer without protection.
Conditions of validity according to Quebec courts
For a non-competition clause to be found valid, it must meet a three-step reasonableness test. The duration must be proportional to the nature of the position held: for a senior executive, a period of 12 to 24 months may be accepted, while for a mid-level employee, the courts tend to limit this duration to six months or less.
The territory must correspond to the employer’s real area of influence. A clause covering all of Canada will almost certainly be considered excessive if the company operates primarily in Quebec. Finally, the nature of the prohibited activities must be defined with sufficient precision so as not to prevent the employee from earning a living in his or her field of expertise.
Risk factors specific to the Montréal context
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Non-competition clause and non-solicitation clause: what is the difference?
It is essential to distinguish between a non-competition clause and a non-solicitation clause. The latter only prohibits the employee from soliciting the customers or employees of his former employer, without prohibiting him from working in the same sector of activity. Quebec courts generally treat the non-solicitation clause more flexibly, as it infringes less on the freedom to work.
For an employer who wants to protect its business interests, combining a non-solicitation clause with a well-drafted contractual protection mechanism is often more effective than a poorly calibrated non-competition clause.
The consequences of a term deemed unfair
When a court finds that a non-competition clause is unreasonable, it does not reduce it to what would be acceptable — it declares it void in its entirety. The employer then loses any recourse based on this clause. This all-or-nothing approach, which is specific to Quebec law, requires employers to be more vigilant when drafting their contracts.
Disputes relating to non-competition clauses regularly end up before the higher courts, particularly in appellate matters. Case law is constantly evolving, and a rigorous follow-up of recent decisions is essential for any company that relies on these clauses to protect its competitive advantages.
