Restrictive covenants are a tool sometimes used in employment
contracts by innovative R&D companies. This type of
clause typically prohibits a former employee from working for a
competitor for a certain limited time and/or geography. The
goal of the clause is to temporarily limit competition, and also
reduce the risk that intellectual property (IP), such as trade
secrets, will leave the company with the employee. Although
this type of clause is also often used between sophisticated
companies that are business or R&D partners, this article will
focus on the employment context.
The pendulum may have swung too far against restrictive
covenants.
In an earlier article, I discussed how the Ontario Court of
Appeal, had recently reinforced that restrictive covenants
were valid and enforceable only in "exceptional"
circumstances1. That is not an easy test to
meet. The Supreme Court of Canada previously stated that an
exceptional case may exist, for example, where it
