Recent years have seen the integration of remote work into many organizations, blurring the physical boundaries of the workplace. This development has significant implications for how employers manage their contractual relationships, particularly with regard to non-compete clauses. To be enforceable, non-compete clauses must be reasonably limited in terms of duration, geographical scope, and activities covered. However, the notion of “territory” is harder to define in the context of remote work. An employee can now work in Montréal for a company based in Toronto, while serving U.S.-based clients. In a situation like this, what is a legitimate geographic restriction that would ensure the enforceability of a non-compete clause?
Recent approaches in case law
Courts often emphasize the specific duties performed by the employee, reasoning that the territory covered should correspond precisely to the employee’s actual area of activity, and not to the entire territory covered by the employer. In Solutions Victrix inc. v. Beaudry, the Superior Court of Québec (the “Court”) endorsed this reasoning, noting that the legitimate interests to be protected must be assessed based on the territory actually covered by the employee; otherwise, a multinational corporation could prevent its former employees from working in several countries. Thus, even if remote work theoretically allows the employee to carry out their duties remotely, the court requires tangible proof of actual activities in the territory covered by the clause for it to be enforceable.
Similarly, in Équipement d’essai aérospatial CEL ltée v. Errai, the Court examined whether an employee violated his non-compete clause by working remotely from his home, which was located within the 60-kilometre prohibition radius set out in the non-compete clause. However, his new employer’s head office was located outside this boundary, in Ontario. The Court rejected the idea that the defendant’s physical location should be the sole point of reference, taking the view that an interpretation based strictly on the employee’s physical presence would pose challenges, especially in the context of remote work. Indeed, if the employee physically performed his duties at his new employer’s head office in Ontario, outside the geographic area covered by the clause, it would not be considered a violation, even though he would be performing exactly the same tasks as he performed remotely. The Court emphasized that adopting an approach based solely on the employee’s physical location would risk undermining the fundamental purpose of a non-compete clause, which is to protect the employer’s legitimate interests. Ultimately, this case supports an approach that focuses on the actual duties and real scope of the activities performed by the employee rather than solely on their geographic location.
Conclusion
Although the courts have not yet adopted a unanimous position on how to determine the legitimacy of the territory covered by a non-compete clause, recent case law suggests that judges tend to favour analysis based on the actual scope of an employee’s activities, as opposed to an approach centred on the company’s structure. Several factors now influence the courts’ analysis of the issue, including the location of the company’s servers, the place from which the employee accesses the computer systems, and the location of the customers they continue to serve remotely. It is therefore crucial to anticipate these factors when drafting clauses to ensure their enforceability.
In this evolving context, a standardized non-compete clause of general application can quickly become ineffective or open to challenge due to the variety of professional working arrangements in place: remote, in-person, or hybrid. Employers are therefore advised to review and adapt their existing clauses on an individual basis, or to draft new ones tailored to their specific situation. All specific terms and conditions that justify the restrictions provided for in these clauses must be clearly stated in order to ensure their enforceability.
The author would like to thank law students Romie Nardone and Zoé Bourcy for their valuable contributions to this article.