Recent Employee Competition Cases of Note and Key Takeaways

We regularly publish summaries of interesting court decisions involving competition by employees against their former employees. For more detailed summaries of any of these decisions, see the Employee Competition Articles Page of the Canadian Employee Competition Blog.

Mandeville Holdings Inc. v. Santucci2021 ONSC 4321

The Ontario Superior Court of Justice upheld a non-solicitation clause and issued an injunction preventing an investment advisor from soliciting clients of his old firm for two years.

Key Takeaways

  • Courts generally apply greater scrutiny to non-competes and non-solicits that arise in normal employment contracts than those that are negotiated as part of a sale of a business. This often results in the courts refusing to enforce such clauses.
  • Here, the Court found that the negotiations between the investment advisor and his old firm, which included discussions about the non-solicitation clause, were more akin to a business transaction, not an employment agreement. As such, it was prepared to enforce the clause.

(A full summary of the decision can be found here at the Canadian Employee Competition Blog)

WJ Packaging Solutions Corp. v Park2021 BCSC 316

The BC Supreme Court upheld a five-year non-competition clause an employer had negotiated with an employee after she announced her intention to resign.

Key Takeaways

  • While most non-competes and non-solicits are agreed to at the commencement of employment, this case demonstrates that an employer who does not have such a clause can still negotiate one as the employee leaves.
  • Obtaining such protection at the end of employment may be costly, but may be worthwhile depending on the competitive threat posed by the employee.

(A full summary of the decision can be found here at the Canadian Employee Competition Blog)

City Wide Towing and Recovery Service Ltd v Poole, 2020 ABCA 305

The Alberta Court of Appeal altered a non-compete that it deemed to be too broad, by striking out the references to the provinces of BC and Saskatchewan, leaving in place, in the result, a non-compete applicable only in Alberta.

Key Takeaways

·       Typically, the courts will not alter a non-compete or non-solicit if it is too broad or has other defects. Rather, the courts simply will rule the clause to be unenforceable.

·       However, in the case of a non-compete that was agreed to by a vendor of a business, the Court of Appeal was prepared to “fix” the problem with an overly-broad clause. It applied the “blue pencil” rule to strike out references to competition in two provinces, given the employer did not do business there.

(A full summary of the decision can be found here at the Canadian Employee Competition Blog)