HR Professional - August/September 2009 - (Page 17)

L E GA L BY MARY BE TH CURRIE AND CARL CUNNINGHAM COMPETING PRIORITIES: RESTRICTIVE COVENANTS wo recent decisions remind employers of the importance of creating carefully drafted employment agreements to protect them from employees seeking to compete after they leave the organization. In 2008, the Supreme Court of Canada in RBC Dominion Securities Inc. vs Merrill Lynch Canada Inc. confirmed that departing employees are generally free to compete against their former employer in the absence of an enforceable contractual restriction. While the RBC decision reminds employers to use written contracts, the decisions of Shafron vs KRG Insurance Brokers (Western) Inc. and H. L. Staebler Company Ltd. vs Allan also illustrate that contractual restrictive covenants must be precise and reasonable in order to be enforced. A restrictive covenant is a type of clause that may be included in an employment contract and restricts an employee’s post-employment activities. These include non-solicitation clauses, which limit T • Are the geographic limitations and time limits in the covenant reasonable? • Is a clause reasonable in its restricted activities? Unenforceable covenants Staebler provides a recent example of the type of restrictive covenant that a court will likely find unreasonable. The Ontario Court of Appeal held that the non-competition clause in question was overly broad and unenforceable because it contained no geographical limitation and did not restrict prohibited business activity to competitive activities; it prohibited all conduct with the clients or customers (so the employee who sold insurance for Staebler could not even sell coffee or other non-competitive products to former clients). Ambiguous clauses are not enforceable In addition to being reasonable, the restrictive covenant must be clear and unambiguous. In Shafron, the ambiguous portion of that restrictive covenant was the reference to activities in “metropolitan Vancouver.” There is no defined understanding of what areas are included in metropolitan Vancouver, so the British Columbia Court of Appeal applied the concept of notional severance and replaced that term with “the City of Vancouver, the University of British Columbia Endowment Lands, Richmond and Burnaby.” But the Supreme Court of Canada held it was inappropriate to extend the concepts of notional severance or blue penciling (i.e., strike or remove a portion of the unenforceable or ambiguous clause) to rewrite restrictive covenants, directing employers who impose post-employment restrictions to be precise, because there will be no second chance. Employers should ensure all restrictive covenant clauses in their employment contracts are specifically tailored to the individual they are designed to restrict. For a list of suggestions to increase the likelihood your restrictive covenants will be enforceable, visit www.hrthoughtleader.com/webextras. Mary Beth Currie and Carl Cunningham are partners in the Employment Services Practice with Bennett Jones LLP in Toronto. A u g u s t / S e p t e m b e r 2 0 0 9 17 In addition to being reasonable, the restrictive covenant must be clear and unambiguous. the employee’s ability to solicit the business of the company’s customers or persuade its company’s employees to cease employment with the company, as well as non-competition clauses, which limit the employee’s ability to work in a business activity that is competitive with the employer’s business. ‘‘ ’’ Reasonableness requirements The courts have said restrictive covenants will only be enforced if reasonable. The primary factors determining reasonableness are: • Does the employer have a proprietary interest entitled to protection? w w w. HRT houghtLeader. c om http://www.hrthoughtleader.com/webextras http://www.HRThoughtLeader.com

Table of Contents for the Digital Edition of HR Professional - August/September 2009

HR Professional - August/September 2009
Contents
Editor's Letter
Contributors
Leadership Matters
Upfront
Legal
Compensation
Wellness ROI
Focus
Human Capital
Strategy
Talent Management
HR 101
Interview with Dr. Kathryn Cramer
Off the Shelf
The Last Word

HR Professional - August/September 2009

https://www.nxtbook.com/nxtbooks/naylor/HRPH0313
https://www.nxtbook.com/nxtbooks/naylor/HRPH0213
https://www.nxtbook.com/nxtbooks/naylor/HRPH0113
https://www.nxtbook.com/nxtbooks/naylor/HRPH0812
https://www.nxtbook.com/nxtbooks/naylor/HRPH0712
https://www.nxtbook.com/nxtbooks/naylor/HRPH0612
https://www.nxtbook.com/nxtbooks/naylor/HRPH0512
https://www.nxtbook.com/nxtbooks/naylor/HRPH0412
https://www.nxtbook.com/nxtbooks/naylor/HRPH0312
https://www.nxtbook.com/nxtbooks/naylor/HRPH0212
https://www.nxtbook.com/nxtbooks/naylor/HRPH0112
https://www.nxtbook.com/nxtbooks/naylor/HRPH0811
https://www.nxtbook.com/nxtbooks/naylor/HRPH0711
https://www.nxtbook.com/nxtbooks/naylor/HRPH0611
https://www.nxtbook.com/nxtbooks/naylor/HRPH0511
https://www.nxtbook.com/nxtbooks/naylor/HRPH0411
https://www.nxtbook.com/nxtbooks/naylor/HRPH0311
https://www.nxtbook.com/nxtbooks/naylor/HRPH0111
https://www.nxtbook.com/nxtbooks/naylor/HRPH0211
https://www.nxtbook.com/nxtbooks/naylor/HRPH0810
https://www.nxtbook.com/nxtbooks/naylor/HRPH0710
https://www.nxtbook.com/nxtbooks/naylor/HRPH0610
https://www.nxtbook.com/nxtbooks/naylor/HRPH0510
https://www.nxtbook.com/nxtbooks/naylor/HRPH0410
https://www.nxtbook.com/nxtbooks/naylor/HRPH0310
https://www.nxtbook.com/nxtbooks/naylor/HRPH0210
https://www.nxtbook.com/nxtbooks/naylor/HRPS0110
https://www.nxtbook.com/nxtbooks/naylor/HRPS0609
https://www.nxtbook.com/nxtbooks/naylor/HRPS0509
https://www.nxtbook.com/nxtbooks/naylor/HRPS0409
https://www.nxtbook.com/nxtbooks/naylor/HRPS0309
https://www.nxtbook.com/nxtbooks/naylor/HRPS0209
https://www.nxtbook.com/nxtbooks/naylor/HRPS0109
https://www.nxtbook.com/nxtbooks/naylor/HRPS0608
https://www.nxtbook.com/nxtbooks/naylor/HRPS0508
https://www.nxtbook.com/nxtbooks/naylor/HRPS0408
https://www.nxtbook.com/nxtbooks/naylor/HRPS0308
https://www.nxtbook.com/nxtbooks/naylor/HRPS0208
https://www.nxtbook.com/nxtbooks/naylor/HRPS0108
https://www.nxtbook.com/nxtbooks/naylor/HRPS0607
https://www.nxtbookmedia.com