Tips For Enhancing The Enforceability Of Restrictive Covenants

Covenants in restraint of trade, such as confidentiality, non-solicitation and non-competition covenants, are presumed to be unenforceable as against public policy. However, it is possible to rebut this presumption by showing that the particular covenant in question is reasonable. The Supreme Court of Canada’s decision in J.G. Collins Insurance Agencies Ltd. v. Elsley Estate¹, established a three part test for assessing the reasonableness of a restrictive covenant as follows:

1. Does the party relying upon the provision have a legitimate proprietary interest entitled to protection, having regard to the nature of the business and the character of the employment?;
2. Are the temporal or spatial features of the covenant too broad, having regard to the nature of the proprietary interest, and its overall fairness to both parties?; and