Non Solicitation Agreement Between Two Companies Template for Canada

A Non Solicitation Agreement Between Two Companies is a crucial legal document that protects your business relationships when entering partnerships, joint ventures, or collaborative arrangements. Under Canadian law, this agreement prevents each party from actively recruiting the other company's employees, customers, or business contacts for a specified period and within defined parameters.

When do you need this document?

You need this agreement when your companies will share workspace, collaborate on projects, or have access to each other's confidential business information. Technology companies often require these agreements when partnering with consulting firms on software development projects. Manufacturing companies use them when working with professional services firms on operational improvements. Healthcare providers and research organizations frequently need these protections when sharing facilities or conducting joint studies. Financial institutions require them when outsourcing services to business service providers who will interact with their client base.

Key legal considerations

The agreement must clearly define what constitutes "solicitation" and specify whether it covers direct recruitment, indirect encouragement, or mere acceptance of unsolicited approaches. Duration clauses should be reasonable—typically 12 to 24 months—to ensure enforceability under Canadian courts' restraint of trade analysis. Geographic scope must align with your actual business territories and the nature of your collaboration. Consider including specific exceptions for general advertising, public job postings, or situations where employees initiate contact independently. The agreement should address remedies including injunctive relief and monetary damages, as prevention is often more valuable than compensation for these types of breaches.

Legal requirements in Canada

Your agreement must comply with the Competition Act, which prohibits anti-competitive arrangements that substantially reduce competition in relevant markets. Each province has specific contract law requirements for formation, including proper consideration, legal capacity of signing parties, and genuine consent. Courts apply the common law doctrine of restraint of trade, evaluating whether restrictions are reasonable in terms of protecting legitimate business interests, duration, geographic scope, and activities covered. The Canadian Charter of Rights and Freedoms principles regarding mobility rights may influence enforcement, particularly for agreements that significantly restrict business operations. Include clear definitions of restricted entities, specify the exact nature of protected relationships, and ensure the agreement serves legitimate business purposes rather than simply eliminating competition.