Currie Law – Employment Law, Criminal Law, Civil Litigation in Mississauga, Oakville, Milton, Campbellville, Georgetown, Hamilton, Burlington and the Niagara Region

Are you thinking of leaving your employer and hope to take your clients with you? Sometimes such behaviour can result in a legal action. Nothing infuriates a company more than a former employee taking away its most important asset.

In some proposed employment contracts and in many termination proposals, there is a clause prohibiting an employee from working for certain alternate Companies in the industry for a certain period of time in a certain geographical location. These are called non-competition clauses.

Many lawyers and some judges for the Courts look at these kinds of covenants as generally void, except in exceptional circumstances. Many lawyers will counsel an employee to sign such a clause at the time of employment or termination stating that “they’re not worth the paper they’re written on”.

BEWARE!

While Courts were predisposed to throw out many of these cases stating it was unfair to preclude an employee from making a living and citing public policy against such a restraint of trade, it may be that the tide is turning on whether or not a Court will enforce these clauses. This is particularly so when the employee has sophisticated business acumen and has negotiated the contract prior to his employment or in the context of the termination.

Therefore when such a contract is presented at the termination of an employment relationship and has not previously been part of the employment contract, I would strongly counsel the employee to seriously consider the ramifications of signing such a clause and its impact on future job prospects.

A recent Nova Scotia Court of Appeal case found a 12 month restrictive covenant not to compete with the company or solicit their customers in mainland Nova Scotia, to be unenforceable for being a restraint of trade. While the Court found the geographical and temporal restrictions of the covenant to be reasonable, it struck down the clause because the facts did not justify “the most drastic weapon of a non-competition clause reasonably necessary to protect the interests” of the company in its trade connections.

In a more recently released Ontario case involving two insurance brokers working for an insurance company, the Court upheld the non-competition clause the employees had signed when starting with the Company that provided that for a period of two years following their termination, they wouldn’t conduct business with any clients of the agency they had serviced. Upon a change of management, the brokers became unhappy and resigned, moving to a new agency. Many of the insured clients transferred their business to this new agency. Their former employer was successful in its action to prevent them from approaching any customer and was also successful in an action against the new Company for inducing the breach of contract. The Court found that the restrictive covenants were reasonable in the circumstances and that because of the nature of the relationship between an insured client and his insurance agent, a simple non-solicitation clause would not have been sufficient to protect the company because the clients would be likely to follow their insurance agent without any solicitation. The Court further found that the restrictive clause was not contrary to public interest as it did not prevent them from earning a living in their chosen field and that the two year duration of the clause was reasonable.

ADVICE FOR EMPLOYERS

An employer, who has been damaged by an employee who has thwarted such an agreement, should consider taking action to prevent any further loss of business and to obtain damages for the loss as a result of the employee’s breach of contract.
An Employer should also seriously consider the ramifications of offering employment to a competitor’s former employee who is under a non compete agreement. It may be wise and save you legal costs in the future to ask applicants about the existence of any such agreement at the first interview and document the answers accordingly.

ADVICE FOR EMPLOYEES

Therefore, an employee should give serious consideration to the implications of signing an agreement that limits the options for re-employment following termination.

It is crucial to analyze any employment contract that you signed during the course of your employment or to consider the particulars of your position and situation to determine your rights. It is common to find any combination of non-solicitation, non-competition and confidentiality clauses restricting your ability to work for the competition or to solicit your previous clients in your new position.

Some of the considerations we’ll explore in an analysis of any restrictions which may govern when you leave employment include:

an analysis of any employment contract (written or implied) that governs your employment
whether any employment contract restrictions were drafted unreasonably or imposed on you improperly according to the law
Even if there is no formal contract in place, an employee may be prevented from soliciting prior clients to his new place of business. All employees have an unwritten duty of good faith and fidelity. This duty prohibits taking confidential information to use in competition against an employer and could continue to exist as long as that information remains confidential. Employees who have considerable control and responsibility in the Company and were likely in a management position may be viewed as fiduciaries. Such fiduciaries are under a very strict obligation to act only in the best interests of the company and not to compete unfairly after leaving.

We are available in the greater Toronto area including areas such as  Mississauga, Oakville, Milton, Georgetown,  Burlington, Hamilton, Grimsby, Saint Catherines, Niagara Region, Welland and others.

If you are in an area outside those listed, please contact us for more information.

• Representation of both companies and employees in employment issues involving employment agreements, termination, harassment, wrongful and constructive dismissal
• Ongoing advice and assistance to Boards of Directors in matters concerning business decisions and liability
• Experience in analyzing and reviewing contracts of a commercial nature with clients to assess their protection prior to signing
• Representation of a major tobacco company on product liability claims and complex litigation arising from the use of tobacco
• One of the team of lawyers on behalf of Canadian tobacco companies who launched a successful constitutional challenge in Quebec involving advertising of the product and constitutional issues
• Retained by the manufacturer of an airplane on product liability and litigation matters and concerns
• Retained by an American heart valve manufacturer with respect to Canadian product liability claims

My employer has told me he has to change my working conditions or reduce my salary. Is that a type of wrongful dismissal?

In most circumstances, a unilateral change in the working conditions or salary amounts to a form of wrongful dismissal known as constructive dismissal. Such conduct could be grounds for you to quit your job and sue for damages.

My employer has terminated my employment and offered me a severance package that is more than the amount required by the Employment Standards Act . Should I take that amount?

The amounts set out in the Employment Standards Act is a bare minimum. In most circumstances, you are entitled to more. There are many factors to consider in determining the appropriate amount in your wrongful dismissal situation. You must consult a lawyer knowledgeable in wrongful dismissal who can advise you whether the amount offered is fair and reasonable.

I get the feeling I’m about to be fired. What should I do if I think I’m about to be fired or laid off?

First, consult with a lawyer experienced in wrongful dismissal law. If you have been incorrectly accused of misconduct, it may be advisable to dispute this accusation before you are asked to leave. If you are laid off for reasons not relating to your performance, we can advise you of your rights and help you determine the best way to manage the situation.

I was required to enter into a written contract limiting the amount my employer has to pay me if I am let go for no reason. Is this enforceable?

It may not be, especially if it was entered into after you accepted the position or after you started to work. A lawyer knowledgeable about wrongful dismissal law can help determine this after fully reviewing all of the facts of the case.

My employer terminated my employment in a humiliating and embarrassing manner. Do I have any recourse?

Such a dismissal may be wrongful and entitle you to increased damages and even a claim for aggravated or punitive damages.

Can I be fired or laid off while I’m on sick or stress leave?

Terminating your employment in this situation may be a wrongful dismissal entitling you to damages.

If I am in a wrongful dismissal action, do I have to wait for it to resolve before looking for work?

You should look for work as soon as you are able. The Courts have held that if you are dismissed, you have an obligation to look for work and accept a job if it is comparable to your last employment. However, the pay from the new job may offset in some manner the amount you’re entitled to receive in a wrongful dismissal action.

What is just cause?

Just cause means a good reason to fire you. It usually means that you did not perform your job duties or you did something seriously wrong, like stealing from your employer or unreasonably refusing to follow your supervisor’s directions. Your employer may have just cause to fire you if you:

• use drugs or alcohol that interfere with your job performance
• ignore a strict workplace rule
• intentionally and unreasonably disobey your boss
• consistently refuse to follow a clearly defined chain of authority in a tightly knit business
• are disloyal to your employer or put yourself in a conflict of interest, for example, you set up a business to compete directly with your employer
• ignore a clear workplace policy, procedure or rule
• are dishonest about something important
• are incompetent; for example, if you got the job only because you could repair computers and it turns out you can’t

There may be other cases of just cause and things aren’t always as clear cut as these examples. An employer does not have just cause to fire you simply because he or she is dissatisfied with your job performance. An employer may have to warn you before firing you. An employer may even have to offer you reasonable job training.

Some employers may try to avoid giving you notice or severance pay by saying there is just cause to fire you, even if there isn’t. If you are fired and the employer says there is just cause, look very carefully at the employer’s reasons for firing you to see if there really is just cause. A personality conflict between you and your superior may not be just cause – it depends on the facts of the case.

What are the employee’s obligations after dismissal?

There is generally an obligation to mitigate the damages. In other words the employee must actively seek out another job and be prepared to demonstrate your reasonable efforts to obtain alternate employment. A terminated employee is entitled to search locally. He is not expected to uproot his family and move because a job may be available in that region. Further a terminated employee is entitled to search for employment in his or her own or in a related field. While some flexibility of expectation may be appropriate, the terminated employee in a skilled or highly qualified area is not required to accept a position at minimum wage preparing fast food merely to mitigate his damages.

An employee must keep a proper log and evidence with respect to his efforts including the date of any attendances at a company; his contact person at the company and any follow up done. An employee should further consider seeking out professional advice to assist with a job search.