Court Upholds Non-Solicitation Clause When Employee Commits Blatant Breach feature image

Court Upholds Non-Solicitation Clause When Employee Commits Blatant Breach

When an employee leaves a job, they may not take their former employer into consideration when making plans for the future. However, a recent case from the Ontario Superior Court of Justice serves as a reminder that contracts entered into when starting a job can have an affect after the employee leaves the job.

The employment contract

The employee began working with the former employer as Regional Sales Manager on August 15, 2011. They former employer is engaged in the manufacturing of commercial, municipal, utility, and industrial lighting solutions such as concrete poles and arms. Their largest market is in Ontario. When the employee first started working for the former employer, he was responsible for sales in the United States, but was eventually promoted to Sales Manager of US Northeast and Canada. This promotion took place on September 22, 2014. In 2015 he signed a contract that contain a non-competition clause, which was stated,

“I shall not, for a period of two (2) years after the termination of my employment for any reason whatsoever, be employed by a director, officer, shareholder, principal, agent or partner of, operate, act as consultant to, invest in, loan money to, or directly or indirectly engage or be involved in, any person, corporation, association, firm, partnership, or business which has all or part of its undertaking the manufacture, sale or lease of:

  1. a)      poles used to carry utility services; or

  2. b)      lighting fixtures; or

  3. c)      any other products manufactured or sold by (former employer) or any of the (former employer) association corporations, (King Luminaire Co. Inc.),at the time of my termination of my employment, or

  4. d)      any or products similar to, or competitive with the products described in (a) (b) or (c) within a 750-mile radius of any (former employer) production facilities.”

 

He also signed a non-solicitation clause, which stated

“I shall not, for a period of two (2) years after the termination of my employment for any reason whatsoever:

  1. a)      Solicit or entice, or attempt to solicit or entice, either directly or indirectly, any of the employees of (former employer) to enter into employment or service with any business described in Clause 2 above; or

  2. b)      Contact any person, firm, corporation, or governmental agency who was a customer of (former employer) at any time during my employment with (former employer).”

The employee’s resignation

The employee presented a resignation letter to the former employer on October 22, 2018. He had been looking at job offers, including some from non-competitors of the former employer. However, on October 26, 2018, he accepted a position as a sales representative with the new employer, which was a competitor.

Upon learning of the employees new work, the former employer sought an injunction to prevent the employee from breaking the non-competition and non-solicitation clauses.

The court’s analysis of the clauses

The court first looked at the non-competition clause and ruled it was not enforceable. The court mentioned that, “as a general rule, restrictive covenants in employment agreements are unenforceable, unless they are reasonable between the parties and not adverse to the public interest.”

In this case, court found that the 750 mile radius described in the non-competition clause is too vague in not specifying which facilities are included.

However, the court did find the non-solicitation clause to be enforceable, writing,

“(It) does not prohibit (the employee) from being employed. (The employee) is free to deploy his knowledge, skills and experience as a sales person in any industry in which he desires that does not breach the terms of the Agreement. By his own admission, he possesses skills, knowledge and expertise in sales, which translate to a wide range of gainful employment outside of the narrow industry of commercial light fixtures.”

The court added that the employee’s conduct did not leave him in favourable light with the court,

“In considering where the balance of convenience lies, it would be inequitable to permit a wrongdoer who had voluntarily signed and potentially benefitted from a breach of a non-solicitation or confidentiality covenant to claim that he would be more hurt by the granting of an interlocutory injunction.”

At HMC Lawyers, we have a team of skilled and proactive employment lawyers who can respond quickly to breaches of non-competition and confidentiality agreements by employees and independent contractors. We understand the enourmous business ramifications of a breach, and will act quickly to protect your rights, including seeking injunctive relief that prevents any use of confidential and proprietary company information.

We also represent individuals that are facing allegations of breaching a non-competition or confidentiality agreement. Where unjustified, these types of claims can wreak havoc on your ability to earn a living. We will vigorously defend your rights against unfounded claims.

If you have questions about a confidentiality or non-competition agreement, contact HMC Lawyers online or call 1-800-480-3534 to make an appointment. With offices in Calgary, we represent professionals in Calgary, throughout Alberta, and across Western Canada.

 

 

 

 

 

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