The advantages of restrictive covenants in a labour shortage context
In the current economic context, businesses must often strive to outdo each other to attract and keep the best talents within their ranks. But seeing as the provincial labour shortage has lasted several months – even several years – some employers are now offering working conditions that are so advantageous that employees agree to make the leap. How can Quebec businesses protect themselves in such situations?
Obviously, the sound management of talented or key employees remains the best solution. Making sure they’re happy, stimulated, valued and aware that their professional development is important to the organization does not necessarily guarantee their fidelity or loyalty, but it could help prevent mutinies or, at the very least, give employers a heads up. It also allows businesses to prepare interventions and better manage the risks. Briefly put, this is the first line of defense (or attack, as the case may be!) that is absolutely vital and, in a vast majority of cases, has proven to be efficient and relatively affordable.
However, every business could be confronted with a situation where one or several key employees leave to join a direct competitor. This brings its own lot of difficulties, notably as regards the know-how those employees developed within the organization or their knowledge of strategic and confidential information. This is where the use of restrictive covenants such non-compete and non-solicitation clauses is particularly appropriate.
When they comply with the law and jurisprudence, non‑compete clauses are efficient at preventing former employees from leaving to join a competitor to perform, in a specified territory and for a defined period of time, tasks similar to those performed for the employer they left.
Non-solicitation clauses, for their part, prevent employees from soliciting the clients of the business they left or from inciting their former colleagues to join them with their new employer. Generally speaking, this type of clause can apply for a longer time than a non‑compete clause.
It is important to bear in mind that the courts are relatively strict when it comes to the validity of these clauses; they must be limited to what is necessary to protect the legitimate interests of the business. Any excess enthusiasm in their drafting could have serious consequences, and could even render them void!
But what if your key employees’ current employment agreements do not contain such restrictive covenants? There is always the possibility of mutually revising the terms and conditions of their employment within your organization at some point in time, but this is easier said than done. It is best to impose restrictive covenants at the time of hiring, and that the employees agree to them willingly and knowingly before starting their new jobs.
Finally, should the restrictive covenants of your key employees be deemed void, or a key employee simply not be bound by any such restrictive covenant, there still remains the duty to act faithfully prescribed by the Civil Code of Québec as a last line of defense. That being said, savvy employers would be well-advised to make sure they don’t need to fall back on that provision…