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Difference between revisions of "Employment Law Issues (9:V)"
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Employment Law Issues (9:V) (view source)
Revision as of 21:41, 27 September 2022
, 21:41, 27 September 2022→1. Restrictive Covenants
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Whether a particular provision is a restraint of trade is determined not only by the form of the clause, but by the effect of the clause in practice (''Levinsky v The Toronto-Dominion Bank'', 2013 ONSC 5657). Restrictive covenants may also influence the assessment of reasonable notice (see “Two Topics Relating to Restraint of Trade in Employment: Practical Alternatives to Restrictive Covenants and the Impact of Restrictive Covenants on Reasonable Notice”, Richard Truman and Valerie S. Dixon, Employment Law Conference 2014, Paper 3.2, CLE BC). As a general common law rule, restrictive covenants are presumed to be invalid. It is up to the party trying to enforce the covenant (usually the employer) to prove that it should be enforced, and it can be quite difficult to write a covenant narrow enough to be upheld in court. In deciding whether or not to enforce a restrictive covenant, the court must balance the interests of society in maintaining free and open competition with the interests of individuals to contract freely. The “public policy test” that emerges from the common law consists of the following considerations (per ''Shafron v KRG Insurance Brokers (Western) Inc'', 2009 SCC 6): | Whether a particular provision is a restraint of trade is determined not only by the form of the clause, but by the effect of the clause in practice (''Levinsky v The Toronto-Dominion Bank'', 2013 ONSC 5657). Restrictive covenants may also influence the assessment of reasonable notice (see “Two Topics Relating to Restraint of Trade in Employment: Practical Alternatives to Restrictive Covenants and the Impact of Restrictive Covenants on Reasonable Notice”, Richard Truman and Valerie S. Dixon, Employment Law Conference 2014, Paper 3.2, CLE BC). As a general common law rule, restrictive covenants are presumed to be invalid. It is up to the party trying to enforce the covenant (usually the employer) to prove that it should be enforced, and it can be quite difficult to write a covenant narrow enough to be upheld in court. In deciding whether or not to enforce a restrictive covenant, the court must balance the interests of society in maintaining free and open competition with the interests of individuals to contract freely. The “public policy test” that emerges from the common law consists of the following considerations (per ''Shafron v KRG Insurance Brokers (Western) Inc'', 2009 SCC 6): | ||
:i) the employer must show a legitimate business interest for imposing the covenant on the employee - there must be a connection between the covenant and the business interest that is sought to be protected; | |||
:ii) the covenant must minimally impair the employee’s ability to freely contract in the future; | |||
:iii) the restraint must be fair and reasonable between the parties, and must be in the public interest, having regard to the nature of the prohibited activities and the length of time and geographic area in which it will operate; and | |||
:iv) the terms of the covenant must be clear and unambiguous – it will not be possible to demonstrate the reasonableness of an ambiguous covenant. | |||
The courts are unwilling to re-write restrictive covenants if they contain uncertain and ambiguous terms; these covenants are deemed prima facie unreasonable and unenforceable (''Shafron v KRG Insurance Brokers (Western) Inc''). It can often be a simple matter to find an ambiguity: the length of time or geographic area might not be specified, or there may be a prohibition against soliciting clients that the employee did not work with, or the employer may have used a non-compete clause when a non-solicitation clause would have adequately protected their legitimate business interests. See ''Powell River Industrial Sheet Metal Contracting Inc. (P.R.I.S.M.) v Kramchynski'', 2016 BCSC 883. | The courts are unwilling to re-write restrictive covenants if they contain uncertain and ambiguous terms; these covenants are deemed prima facie unreasonable and unenforceable (''Shafron v KRG Insurance Brokers (Western) Inc''). It can often be a simple matter to find an ambiguity: the length of time or geographic area might not be specified, or there may be a prohibition against soliciting clients that the employee did not work with, or the employer may have used a non-compete clause when a non-solicitation clause would have adequately protected their legitimate business interests. See ''Powell River Industrial Sheet Metal Contracting Inc. (P.R.I.S.M.) v Kramchynski'', 2016 BCSC 883. | ||
