Acceptable Scope of a Non-Solicitation Clause: A Real-Life Example

| April 17th, 2017 | No Comments »

For most employees, a non-solicitation clause should be all that is necessary if an employer is seeking to protect his/her business interests (clients) from employees who leave to a competitor. However, employers must be careful with the wording of such clauses because the clause must only go as far as necessary to protect the employer’s business interests. This is the ‘reasonableness’ standard with which the courts will review a non-solicitation clause. Any restrictions on the employee’s freedom to work must be necessary to protect the employer’s business or the clause will be unenforceable.

Non- Solicitation Clauses

There are a few things that a non-solicitation clause must contain to be enforceable. The clause must have a limited geographic scope and time in place that is reasonable. Further, a non-solicitation clause must be limited to the act of solicitation. If the wording of the solicitation clause goes beyond the solicitation of the employer’s client base, then it is likely to place unreasonable limits on the employee’s ability to freely compete and earn a living. Lastly, it is wise to limit the act of solicitation so that it is not too burdensome. This may entail only restricting the solicitation of the clients that the employee dealt with or the types of clients that the employee works with. To better understand the limits of a non-solicitation clause, the case of Donaldson Travel Inc. v. Murphy et al. 2016 is useful to review.

Donaldson v. Murphy, 2016 (Superior Court of Justice – Ontario)

In the case, Murphy was a former employee of Donaldson Travel that left to work for a competitor company named Goliger. One of Donaldson Travel’s claims was that Murphy solicited clients and therefore violated the non-solicitation clause that Murphy had signed. The clause reads:

Mary agrees that in the event of termination or resignation that she will not solicit or accept business from any corporate accounts or customers that are serviced by … Donaldson Travel, directly, or indirectly. (emphasis added)

The court deemed this clause unenforceable for several reasons. Firstly, there was no limit in time and geography. As it is worded, this clause would never expire and would apply anywhere in the country. This is unnecessary to protect Donaldson Travel’s business interests. Secondly, the phrase “or accept business from” goes beyond the act of solicitation. This places an unreasonable restriction on Murphy’s ability to earn a living because it is not necessary to protect Donaldson’s business interests. Lastly, the term “any corporate account” is also too broad. It would be reasonable to limit the solicitation of clients that Murphy dealt with; however, the wording here would prevent Murphy from conducting business with any clients of Donaldson, even the ones that Donaldson establishes after Murphy had left. This is not needed to protect Donaldson’s business interests by the departure of Murphy.

Closing Remarks

The burden is placed on the employer to carefully draft such clauses and to show that the clause is reasonable. The wording of the clause is important as the courts will not look beyond the wording of the clause, nor will they change the clause so that it is legally enforceable. For employees that are not in a managerial role, a non-solicitation will almost always suffice in protecting an employer’s business interests. It is important to seek the assistance of an employment lawyer when seeking to protect business interests through non-solicitation clauses.

Q&A: Employment contracts and fundamental changes

| April 20th, 2015 | No Comments »

I have an employment contract stating my work location to be downtown. I have been told however that I will now be working for a satellite office which is 20KM away.  This may not seem like a huge distance but with the traffic in Toronto during the morning and evening commute times, I would be in my car for 45 minutes longer in each direction.  This seems unfair.  Do I have any right to reject the change?

You can reject changes to your job that fundamentally alter your working conditions.  This is known as a constructive dismissal.  A new work location is sometimes considered a fundamental change but it will depend on the circumstances.  If your contract guaranteed you a downtown Toronto location and that was important to you, the employer’s decision to change that term should be considered a fundamental alteration.

In a situation like this, you should make it known to your employer that you reject the change.  If the employer will not resume your employment at the downtown location, and insists that you work from the satellite office, you may be able to consider yourself as constructively dismissed, leave the workplace and sue for lost wages while you look for other work.

Employment contracts and their validity

| March 6th, 2015 | No Comments »

There is the possibility that an employment contract may or may not hold up in Court.  This is why it is recommended that a legal professional review documents of this nature.

Daniel Lublin, Toronto employment lawyer discusses the importance of employment contracts as they relate to their validity and legal standing in Court, non-solicit/non-compete clauses, and the legal protection of contractors and disclosing of their income. Mr. Lublin has this to say:

  • When an employee signs a non-compete/ non-solicit clause, the Court will rely on the contractual language and will determine its validity. However, there are special circumstances where an employee has a key role and is considered as a “fiduciary”.
  •  As it relates to contractors, an employer must make it absolutely clear that an employee’s compensation is kept strictly confidential.
  • A signed contract is an important document that a Judge will rely on. When an employer attempts to retract the offer, even though it is signed, consult with a legal expert.

To thoroughly understand these topics, read Daniel Lublin’s Globe and Mail column and full article Can my employer stop me from working for a competitor?

 

Your legal questions answered

| November 17th, 2014 | No Comments »

Toronto Employment lawyer, Daniel Lublin hosted a live chat on the Globe and Mail’s Career section, where he answered reader’s legal questions regarding their employment law matters. These topics varied from terminations and severance packages, mass layoffs, non-compete/non-solicitation clauses, maternity leave legal rights and the legality with respect to employment contracts.

This month alone, the media has been soaring with news of mass terminations at SNC Lavalin Group Inc. (laying off 4,000 workers) and Wal Mart Canada (laying off 200 workers). Other big companies, such as CIBC and Bombardier have headed in the same path.  As a result, employees and employers alike are being affected and questioning what their legal rights are.

Mr. Lublin provided the following facts and suggestions to provide some sense of direction in regards to your employment matters:

  • An Employer can never absolve itself from the requirement to pay severance under the Legislation; if you are Employer- you can pre-define severance requirements to the minimum, if you are an Employee- you want to negotiate and challenge the severance clauses (amount of pay) or get rid of them altogether.
  • You should never be forced to sign anything on the spot!  Advise your Employer that you are not signing anything until you have a chance to review and consider the offer. Tell the Employer you will get back to them in a couple days.
  • Terminations for “cause” place an onus on the Employer to prove misconduct that was beyond reproach and intolerable. If it cannot be proven, you can be awarded wrongful dismissal damages. For “cause” terminations require no advanced warning and severance pay is not a requirement.
  • Always try negotiating with your Employer before resorting to a lawsuit. However, even in negotiating, you should consult with an Employment Law expert who can negotiate on your behalf and advise you on where and how you can negotiate.
  • Courts will uphold non-compete/non-solicitation clauses when drafted and implemented properly, and not overly restricted in terms of length or geography. That said, not too many clauses meet all of these requirements.

Teacher dismissed after 40 year-old risqué films discovered

| October 22nd, 2014 | No Comments »

Recently, 73 year-old Jacqueline Laurent Auger was dismissed from her place of employment at a Montreal prestigious private school, based on 40 year-old soft porn discovered by her students. This case is appealing in that it involves a former career in risqué films, but also in the context of the impermanent nature of short-term contracts. Toronto employment lawyer, David Whitten adds that this is a perfect example of how “past lives” can impact our employment in the digital age.

Mr. Whitten further explains that short term contracts impose no obligations on employers at the conclusion of the contract.  Indeed, severance is not payable if a short term contract expires and is not renewed.  Had Ms. Auger been an employee of indefinite duration, it is unclear whether or not her past “risqué film career” would have provided legal cause to terminate her without a severance.  However, her statement that the headmaster had “said something stupid” may very well have justified summary dismissal.

For employment law advice, based on your individual needs, consult with an expert who can guide you and provide legal advice.

Enforcing Written Employment Contracts

| September 18th, 2014 | No Comments »

The manner in which an employment contract is written and the language employer’s use to deal with employee terminations can help ease the uncertainty with respect to how much it will cost to terminate an employee. The Courts maintain a very strict standard when it comes to enforcing these clauses and when poorly drafted, the Courts will not hesitate to disregard it.  Primarily, an employment contract should reflect current legislation and the minimum statutory entitlements.

Most employment contracts fail at the onset when the minimum statutory entitlements are not respected. In addition, the termination language needs to be such that it provides the employee with the minimum entitlement according to provincial or federal legislation. When this is not met, the Court will strike it down. To ensure that the termination language in an employment contract is written and enforceable follow these steps:

  • Keep it simple: Set out the specific amount of notice and/or pay. A complex clause can run the risk of being invalid if there is more than one interpretation.
  • Know your jurisdiction: Know the statute that applies. Some employers are provincially regulated, and some are federally regulated.
  • Know the applicable minimum standards and how they apply: familiarity with this will help ensure that the clause is compliant at all times.
  • Close the door on more damages: write the clause so that it does not permit an interpretation for additional payments.
  • Recommend independent legal advice: include this in the contract, it will help defuse the argument that the person was forced to sign or that they didn’t understand what they were signing.

 

 

Will hiring contractors save your company money?

| September 25th, 2012 | No Comments »

Often times, companies will consider hiring external contractors to reduce various costs and liabilities instead of hiring regular employees.  Having no objections to that and while paying less tax, contractors are content with this arrangement.  Some employers make deal with their employees to fire them  and then hire them back as contractors, while the work being performed would stay the same as when they were employees.  However, the problem occurs when these arrangements are challenged and a court finds that these contractors were actually employees.  Even with a signed agreement between the employer and the contractor, the court will consider the nature of the employer’s control and the employee’s vulnerability in the relationship and find that contractor to be an employee.

So, what can be done if you’re considering hiring or becoming a contractor?

Toronto Employment Lawyer, Daniel Lublin offers his advice in his latest article, Think you’re cutting staff costs with a contractor? Think again published in the Globe and Mail.

Even though it is always best to consult with an expert, here are few things to consider if you decide to hire or become a contractor:

  • Have a clear separation between the employer’s business and the contractor.  Permit the contractor to perform services for others and to maintain genuine discretion over how and when he or she performs the job.
  • Use a third-party company to act as the notional employer.  These companies are becoming increasingly relevant, and most are adept at designing an arrangement that will hold up in court.
  • Ensure that contractors do not receive any of the benefits given to regular employees, including health benefits, statutory holidays and overtime pay.
  • Do not allow a contractor to continue in the job indefinitely.  Courts and government tribunals tend to focus mostly on permanency and dependency in declaring whether a contractor is truly independent.  The longer he or she stays, the more likely he or she will be viewed as an employee.

 

 

 

Be mindful of your social media presence

| May 10th, 2011 | No Comments »

The ever growing involvement of social media in our society has had a profound  impact on our lives. To some, the greatest impact occurs when their employment is terminated due to comments or images posted on websites such as Twitter or Facebook. As such, many employees share concerns about their online profile and the potential affects on their employment.

What should an employee do to ensure they do not find themselves as the recipient of a termination letter? In today’s Toronto Star, Mr. Lublin suggests checking workplace policy manuals is a good start.

FAQ’s in the Workplace

| January 13th, 2011 | No Comments »

Despite all of the hours I have given to this company, I still score average on my performance reviews.  What more could I possibly do?  How will I ever get that promotion?

I hate working during the holidays.  I’m forced to work through my breaks, and lucky if I get to take a lunch, is that even legal?

Much like in the classroom, people often have similar legal questions but suffer in silence, because no one wants to ask first.  But the truth is that when it comes to the workplace, there are a number of seemingly obvious questions with not so obvious answers.  For example:

You have just gotten a job after months of searching, and are sitting across from your new boss who hands you a contract.  You leaf through a few pages and your eye catches something concerning.  

Can you ask for time to review the contract?  Should all of the details be spelled out or is your boss’s word okay for the upcoming promotion? Do you have to accept minimum severance pay?  

Contacting a lawyer before you sign a contract could potentially save you a lot of headaches, particularly when complex pay structures and post-employment agreements are present.   Keep yourself well-informed of your rights so that you don’t find yourself settling for less than you deserve.  You can start by reading Daniel Lublin’s, “Advice to remember in 2011”.

Disney Foots the Bill for Playdom’s Talent Poaching

| December 14th, 2010 | No Comments »

Two computer gaming tycoons in California reached a settlement on a sensitive case, and they aren’t saying much about the details.

Zynga commenced a lawsuit against Playdom over a year ago, after losing several employees to them in a controversial manner.  According to techcrunch.com, Playdom’s list of offences includes, “misappropriation of trade secrets, breach of contract, breach of the duty of loyalty, tortious interference with contracts, tortious interference with existing and prospective economic advantage and unfair competition”.  These charges have resulted in a preliminary injunction, a temporary restraining order, and a jail sentence for a former Zynga employee, Raymond Holmes (though it was never served).  Holmes erased hard drives, signed false documents and amidst all of this, Playdom was acquired by Walt Disney Co.

With a hush on details regarding the settlement and the stolen data, gamers are wondering what kind of information was so important to Playdom and how large of a threat Disney might pose, with such a large pool of talent and ideas to draw from.

It’s easy to see why corporations protect against things like a portfolio manager absconding to a rival company with 200 million dollars in clientele.  What is not so clear is how companies can protect themselves against theft of intellectual property and technological trade secrets.

Silicon Valley is a hub for tech giants, and houses thousands of headquarters including Google, Yahoo, eBay, and Facebook.  Often, companies with highly valued, sensitive information will have employees sign non-competition agreements, hoping to stave off the inevitable “poaching” of talent by other companies. However, as mentioned in a prior entry, like Canadian courts, California is notoriously opposed to non-competition agreements.  With seemingly little control over it, Silicon Valley is ready and willing to engage in a technological survival of the fittest.  Zynga seems happy enough with the settlement from Disney, so perhaps it’s safe to presume that whatever secrets changed hands, it won’t thin them from the herd.