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Executive Summaries Feb 18, 2021

How Telecommuting Transforms The Application Of Non-Competition Clauses

The advent and development of information technology have proven to be a catalyst in the growth of new forms of work. Among these, teleworking has become common practice and is overturning traditional methods. Telework leads to a rethinking of the integration of non-competition clauses, non-solicitation clauses and particularly to the notion of where employees work, in addition to raising its share of questions at the legal level.

  • What is the territory in which an employee who works remotely operates?
  • Is the place of performance of work the establishment of the employer's business or the teleworker’s home?

It is clear that in this situation, the classical geographical notion becomes more and more obsolete.

Telework, taming the limits of the territory

These questions are all the more topical given the consequences that the pandemic has had on the labor market. While teleworking was a rather marginal practice, this form of work delivery has become the norm for many companies since March 2020. As a result, the work that was traditionally performed at the employer's premises has now moved to the employee's home, with its share of legal grey areas. Although in some industries, teleworking remains a short-term solution, many employers see the significant benefits and wish to permanently integrate this new practice for their employees.

In the context of telework, the employee's home could therefore be located in the territory covered by the non-competition clause while the work is done for a company located outside this territory. The place where the employee is physically present is therefore less and less relevant. It is thus becoming difficult to give importance to the physical location where the employee virtually carries out his activities.

The need to adapt to a new reality

Thus, teleworking can be a means used by an employee to circumvent the territorial limits of a non-competition clause that binds him to his former employer. For example, an employee could very well offer a work service from his home in Toronto for a new employer located in Montreal, whereas the prohibition of the non-competition clause applies to the province of Quebec. Given the erosion of geographic boundaries in the digital age, it is quite possible that this new employer, although located in another province, is a direct competitor of the former employer who is subject to the non-competition obligation.

In this context, we note that certain trends are beginning to emerge with respect to the application of a non-competition clause with a defined geographical scope to a distance employment relationship:

  • Elements considered in determining the place of performance of the work;

It can be difficult to determine where the work is performed in a telework context, especially when the employment field is in the new technologies and digital industry. As such, the location of the head office, central servers, and facilities for processing data related to the work performed by employees may influence the determination of where the work is performed. For example, where employees use remote connections to enter or manipulate data contained on servers located in Montreal, the location of the work could be considered to be in Montreal, regardless of the physical location of the employees when entering or manipulating the data. The geographic limitation of a non-competition clause thus becomes futile in this type of situation.

  • Consideration of telework as a physical trip to the workplace;

Let us take a telework situation from the geographical area provided for by a non-competition clause, for example, Canada, in the context of a job performed for a company located in the United States. Some of the cases observed conclude that performing telework at a location outside the geographic restriction of the non-competition clause does not constitute a violation of the non-competition clause, indicating that this is no different than when the employee physically moves outside the geographic restriction.

It will therefore be interesting to see how the Quebec courts will adapt their restrictive covenant criteria to telework situations. One thing is certain: this type of situation will soon become commonplace, and case law will have to adapt to this new reality.

The increased use of telework may prove to be a headache and, consequently, it is crucial for employers to review their non-competition clauses and employment contracts to validate whether they deal with telework situations and, if not, to provide for wording that will cover these situations.

An attorney with a good knowledge of employment contracts will be able to help you draft a non-competition clause that will provide adequate protection of your legitimate interests. Do not hesitate to contact Maxime Savard to learn more.

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