IP ownership with Canadian hires, from copyright to confidentiality clauses

Under section 13(3) of the Copyright Act, where an employee makes a work in the course of employment, the employer is the first owner of the copyright in it unless the parties have agreed otherwise. The text of section 13 is short and worth reading in full before you draft anything.

Software, written documents, designs and training material are typical of what an employee in a knowledge role might produce. Whether a particular item was made in the course of employment is the question the rule turns on, and something built on a personal project in the evening is exactly the kind of item where the answer gets disputed. A contract that names the categories of work product and the circumstances in which they belong to the employer leaves far less to argue about.

Section 13(3) is a copyright rule, and its reach stops there. For inventions, and for the moral rights an author may hold in a work, do not assume the same default applies. Get advice from Canadian counsel on how each is treated, and deal with both expressly in the employment contract. The second limit is more specific to foreign companies: the section gives first ownership to the employer, and in an EOR arrangement the employer is a separate business from yours.

An employer of record adds a link because the EOR, as legal employer, is the party section 13(3) points to. On a plain reading of the section, copyright in work your hire produces would belong first to the employer of record, and you would hold it only once the EOR passes it on. The chain of ownership therefore runs in two steps: from the employee to the employer of record, and from the employer of record to you.

Both steps need to be in writing. The employment contract between the employer of record and your hire should assign to the employer of record all rights in work product, with inventions and other rights beyond copyright named expressly, and should contain a waiver of moral rights. The services agreement between you and the provider should then pass everything the employer of record receives on to you, automatically, as the work is created and without a further payment. The explainer on what an employer of record does for Canadian hires sets out who holds each role.

Check the documents before the first hire starts. If the provider’s standard services agreement is silent on IP, or assigns only named deliverables, ask for wording that covers all work product. Fixing the chain after a year of work means asking the employee and the employer of record for fresh signatures on work that already exists, at a point when neither has any particular reason to hurry, and an investor’s due diligence may reach that gap first.

The employment contract should say what the employee creates, who owns it and what the employee must do to help register or defend it. The clauses below make up the usual set; Canadian counsel should confirm each one for the province concerned.

• An assignment to the legal employer of all rights in work product created in the course of employment, inventions included.
• A waiver of moral rights, worded with counsel.
• A duty to disclose inventions promptly and to sign any further documents needed for registration.
• A schedule of the employee’s pre-existing IP, so that what they bring with them is identified and stays theirs.
• A confidentiality obligation that continues after employment ends and names the client’s information.
• A duty to return devices, documents and data at exit.

Moral rights are the item most often handled carelessly. Section 13(3) does not deal with them, contracts commonly include a waiver, and the wording is best taken from Canadian counsel instead of copied from a template written for another country. The same goes for invention assignment: a clause drafted for a different legal system may not do what you expect in a Canadian province.

For a hire in Quebec, the employment contract is a document about working conditions. Under the Charter of the French Language, an employer’s communications with its staff must be in French, and that covers such documents, so plan for a French version of the IP and confidentiality clauses and review it with the same care as the English. For probation, termination clauses and the other terms, see our piece on employment contracts in Canada.

For most employees, no. Ontario bars employers from entering into non-compete agreements with employees for contracts made on or after 25 October 2021. The ban has two carve-outs. One covers a business sale after which the seller joins the buyer as an employee; the other covers executives, meaning a chief executive, president, chief financial officer or another C-suite role. A non-compete in the Ontario contract of a developer, analyst or account manager falls inside the ban.

Read the executive exception narrowly. It names the chief executive, president, chief financial officer and other C-suite positions, and a senior-sounding title such as country lead or head of sales for Canada may not bring a role within it. If your first Canadian hire is a genuine C-suite appointment, have counsel confirm the position before a restraint goes into the contract.

The ban is set out in Ontario’s Employment Standards Act, and it binds the employer that signs the contract. In an EOR set-up the signatory is the employer of record, which means its Ontario templates should not contain a non-compete for a non-executive role even where your own company’s contracts elsewhere always include one. If a draft contract from the provider does contain one, ask why before the offer goes out.

Non-solicitation and confidentiality clauses remain permitted in Ontario, and for a typical hire they are the tools that remain. A non-solicitation clause addresses approaches to your clients or colleagues after the person leaves; a confidentiality clause addresses the information they carry away. For staff in BC, Alberta or Quebec, Ontario’s statute does not decide the point, and how a restraint would be treated depends on the law of that province and the facts of the role. Take local advice before relying on a non-compete anywhere in Canada.

Confidentiality protects you only if the obligation reaches your information. In an EOR arrangement the employee owes contractual duties to the employer of record, so the employment contract should define confidential information to include the client’s business information, and the services agreement should require the employer of record to enforce those duties when you ask, or let you rely on them directly.

A different rule applies between businesses. The Competition Act makes it a criminal offence for unaffiliated employers to agree on wages, or to agree to leave each other’s staff alone, and the Competition Bureau has issued guidelines on how it enforces those provisions. If a supplier, a customer or a competitor proposes that neither side hires the other’s people, read the Bureau’s guidelines and take advice before agreeing to anything, formally or informally.

In Ontario a further rule runs in the employee’s favour. Where an employer of record operates as a temporary help agency under Part XVIII.1 of the ESA, the ESA bars it from preventing a client from taking the assignment employee on directly, and from preventing the employee from accepting such an offer. Whether a given employer of record falls inside that Part is for that employer to determine. It becomes relevant if you later move the hire onto your own Canadian corporation, and it is one more reason to read the conversion terms of a services agreement closely.

Remote work moves the risk from the office door to the laptop, so protection depends on devices, accounts and the exit process. Keep company data on systems you control, supply company-owned equipment where you can, and state in writing that devices and data come back when employment ends.

Personal devices are the weak point. If a new hire uses their own laptop or phone for work, company files end up on hardware you cannot recover at exit, so either supply the equipment or set a written rule on which company systems may be reached from a personal device and how data is removed from it when the job ends.

Monitoring is part of the same picture. Ontario requires a written electronic monitoring policy by 1 March from any employer whose 1 January headcount was 25 or more. With an EOR the policy belongs to the employer of record, so tell the provider what your security tools record. The guide to managing remote workers in Canada covers that policy along with the province-of-employment rule for home-based staff.

Plan the exit before the start date. On the last day, access to code repositories, shared drives and customer systems has to end, and the equipment return needs a named owner on your side and a written process on the employer of record’s. Agree those steps when the hire begins, so that offboarding never depends on goodwill at an awkward moment.

Confirm the ownership chain, the restraint clauses and the exit steps in writing before the first offer goes out. Each is simple to settle at the start and slow to repair later.

• The employer of record’s employment contract assigns all work-product rights, inventions included, and contains a moral-rights waiver.
• The services agreement passes every right the employer of record receives through to you as the work is created.
• Confidential information is defined to include your business information.
• Ontario contracts contain no non-compete for a non-executive role.
• Quebec contracts include a French version of the IP and confidentiality clauses.
• The steps for returning equipment and removing access at exit are written down.

At Employer of Record Canada, the person you hire is employed by us as employer of record, and we can go through the contract terms above with you before the offer is made. Our monthly fee is from USD 560 per person on payroll. None of this replaces advice from Canadian IP counsel on the rights that matter most to your business, and a provider’s templates should stand up to that review.