Labor & Employment Law

Enforcing restrictive covenants such as non-solicitation and non-competition provisions in employment contracts or other stand-alone agreements is becoming increasingly difficult.  That said, it is possible in the appropriate case.  The question is how one defines "the appropriate case"?

Greg Gowe has a post on the recent BC Supreme Court case of F & G Delivery Ltd. v. MacKenzie.

The Court considered the enforceability of all or part of the following covenant contained in an agreement:

F & G and the Employee agree that in consideration of F & G providing employment to the Employee, the Employee shall not,

(i)         for the period ending two (2) years from the date of termination of the Employee?s employment with F & G, regardless of how the termination should occur, directly or indirectly solicit business from any client or customer or potential client or customer of F & G within the geographic area set out in Appendix ?A? to this Agreement (the ?Restricted Area?). (the ?customer solicitation clause?) (

ii)        for the period ending one (1) year from date of termination of the Employer?s employment with F & G, regardless of how the termination should occur involve or engage himself or herself as an employee, partner, joint venture, principal, consultant, contractor, agent, or shareholder with any person, firm, association, organization, syndicate, company or corporation, engaged in any business activity (specifically including the transportation of equipment or goods) that is similar to the business of F & G and has offices or facilities located within the Restricted Area. (the ?non-competion clause?).

(iii)       during the Employee?s employment with F & G and for a period of three (3) years following the termination of the Employee?s employment with F & G regardless of how that termination should occur, the Employee will not hire or take away or cause to be hired or taken away, any employee of the Employer or any former Employee of the Employer who was employed by the Employer during the three (3) years preceding the date of the termination of the Employee?s employment with F & G. (the ?employee hiring clause?).

A restrictive covenant is prima facie unenforceable as a restraint of trade, however the Court will enforce the covenant where it is reasonable to do so in the circumstances.  In deciding on whether a covenant is "reasonable" the Court will consider many factors including, as noted in the MacKenzie case whether:

(a) it protects a legitimate proprietary interest of the employer;

(b) the restraint is reasonable between the parties in terms of:

(I) temporal length;

(ii) spatial area covered;

(iii) nature of activities prohibited; and

(iv) overall fairness;

(c) the terms of the restraint are clear, certain and not vague; and

(d) the restraint is reasonable in terms of the public interest with the onus on the party seeking to strike out the restraint.

In the circumstances of this case, the Court determined that "Prohibiting Mr. MacKenzie from soliciting potential customers or hiring former employees is an unreasonable restraint of trade."  Furthermore, the Court refused to "read down" the covenant to make it reasonable and dismissed the employer's application for an injunction.

I wrote a piece about an Ontario case some years ago for the Canadian Bar Association Addendum that can be found here.  The case is Trapeze Software Inc. v. Bryans.