What must be true for a non-compete agreement to be enforceable?

For a non-compete agreement to be enforceable, it is essential that it be reasonable in both duration and geographic scope. This requirement ensures that the restrictions placed on the employee are not overly broad or oppressive, which could unfairly limit their ability to find future employment. Courts generally assess the reasonableness of the terms in these agreements by considering factors such as the length of time the non-compete clause is in effect and the geographical area it covers. If either aspect is too restrictive, it can lead to the agreement being deemed unenforceable.

In contrast, requiring only the employer’s signature, having unlimited time, or including financial penalties do not meet the legal thresholds necessary to validate a non-compete agreement under Canadian law. Such factors do not address the fundamental necessity of reasonableness that courts employ to evaluate the enforceability of these contracts.