In Prince Edward Island, courts are very reluctant to enforce non-compete clauses against former employees. To succeed, an employer must prove the restriction is absolutely necessary, reasonable in its time limit (usually 6 months), and limited to a very specific geographic area.
When a key employee leaves your company to join a rival or start their own business, it can feel like a direct threat to your livelihood. Many PEI employers try to protect their client base and trade secrets by relying on restrictive covenants in employment contracts. 💼
However, enforcing a non-compete clause is notoriously difficult in Canada. The law heavily favours an individual’s right to earn a living. This guide explains how you can successfully enforce your rights and protect your business from unfair competition.
Step-by-Step Process in Prince Edward Island
Whether you operate a tech firm in Charlottetown or a retail business in Stratford, the legal steps to stop a former employee from poaching your clients require urgent action. 📝
Step 1: Assess the Enforceability of the Clause
Before taking any action, a lawyer must review the contract. PEI courts prefer “non-solicitation” clauses (which stop the employee from stealing your specific clients) over “non-compete” clauses (which stop them from working in the industry altogether). If your clause is drafted too broadly-such as banning them from working anywhere in Canada-it will likely be thrown out.
Step 2: Gather Evidence of the Breach
You cannot sue based on a simple suspicion. You must gather hard evidence that the former employee is actively breaching the agreement. This might include forwarded emails, testimony from confused clients who were approached, or announcements on social media. 📊
Step 3: Issue a Cease and Desist Letter
Your law firm will immediately send a Cease and Desist letter to both the former employee and their new employer. This letter warns them that they are violating a legal contract and demands they stop immediately to avoid a costly lawsuit.
Step 4: Apply for an Interlocutory Injunction
If they ignore the warning, you must file for an emergency court order called an interlocutory injunction at the Supreme Court of Prince Edward Island. This asks a judge to temporarily ban the employee from competing until a full trial can be held, arguing that your business will suffer “irreparable harm” otherwise. 👤
How Much Does it Cost in Prince Edward Island?
Litigating restrictive covenants is highly specialized and requires rapid action, which increases the cost. As of May 2026, typical legal fees in PEI include: 💰
| Legal Action | Estimated Cost (CAD) |
|---|---|
| Contract Review & Cease and Desist Letter | $500 – $1,200 |
| Private Investigator (Gathering Evidence) | $1,000 – $3,000 |
| Application for an Injunction | $7,500 – $15,000+ |
| Full Trial for Damages | $25,000 – $50,000+ |
How Long Does the Process Take?
Time is of the essence. A Cease and Desist letter can be drafted and delivered within 48 hours. If you need to seek an emergency injunction, a hearing can usually be scheduled within 2 to 4 weeks. 🕑
However, if the employee fights back and the matter goes to a full trial to claim financial damages for lost business, the entire litigation process can easily stretch across 1 to 2 years.
Frequently Asked Questions (FAQ)
What makes a non-compete clause “unreasonable”?
A clause is usually deemed unreasonable if it lasts too long (e.g., more than 6 to 12 months for a standard employee), covers too large of a geographic area (e.g., all of Atlantic Canada instead of just PEI), or is too broad in the type of work restricted.
What is the difference between non-compete and non-solicit?
A non-compete prevents a person from working for a competitor entirely. A non-solicit allows them to work for a competitor, but strictly forbids them from contacting your existing clients or trying to poach your current staff.
Can I withhold their final paycheque if they breach the contract?
No. Under the PEI Employment Standards Act, you cannot illegally withhold an employee’s earned wages, vacation pay, or severance, even if you believe they are breaching a non-compete clause.
Does it matter if I fired them instead of them quitting?
Yes. If you dismiss an employee without cause (wrongful dismissal), PEI courts will generally refuse to enforce any restrictive covenants against them, as the employer fundamentally broke the employment contract first.
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