Comments (0)

By MacLeod Law Firm, March 4, 2013 4:15 pm

The Main Issue Regarding a Non-Solicitation Clause: Will Departing Employees Take Customers With Them?

To plan for this worst case scenario, we like to ask at the time of hiring, “Could this person take your customers to a competitor if he or she quits?”

The Solution: A Non-Solicitation Clause in the Employment Agreement

If the potential for poaching customers exists, the employer needs to protect its client relationships. The best way to do this is by requiring the employee to sign an employment contract with a non-solicitation clause.

In the non-solicitation clause, the employee agrees to neither: (i) solicit certain customers for a specified period of time; nor (ii) take advantage of any business opportunity that came to his or her attention while employed.

The Non-Solicitation Clause Must be Reasonable to be Legally Enforceable

For the courts to enforce this kind of agreement, it must be reasonable between the parties with reference to the public interest. The court will balance the public interest in maintaining open competition and discouraging restraints on trade on the one hand, and on the other hand, the right of an employer to the protection of its client relationships.

The non-solicitation clause will not be enforced if it is ambiguous. In this regard, the Supreme Court of Canada has stated:  “if (a non-solicitation agreement) is ambiguous, in the sense that what is prohibited is not clear as to activity, time, or geography, it is not possible to demonstrate that it is reasonable. Thus, an ambiguous restrictive covenant is, by definition, prima facie unreasonable and unenforceable”

In other words, when deciding whether to enforce a non-solicitation clause, the court will consider whether the prohibition is too broad. For example, is the employee forbidden from contacting clients with whom he or she has had no prior dealings? Does this prohibit the employee from working in a geographic location where he or she has not worked before? And, does this non-solicitation clause impose a period that exceeds the employer’s normal sales cycle?

It is important to draft a non-solicitation clause that fits the employer’s specific circumstances because the courts will not read down or blue pencil it. This means that the courts won’t amend it to make it enforceable and the employer needs to get it right the first time.

If you have any questions about non-solicitation clauses or employment agreements, you can reach us at 1-800- 640-1728 or at inquiry@macleodlawfirm.ca.

Comments (0)

By MacLeod Law Firm, January 8, 2013 8:46 am

Wrongful Dismissal Update: What is Reasonable Notice of Termination?

In Ontario, an employer generally may terminate an employee at any time by providing the employee with reasonable notice of termination. Or the employer may opt to pay the compensation the employee would have earned during this notice period and remove the employee from the workplace immediately.

There are important exceptions to this general rule which are beyond the scope of this blog. One exception is if an employee has signed an employment contract that contains a termination clause.

When determining the appropriate reasonable notice period in a particular case the courts do not adopt a formula; however the courts do consider a number of factors in every case.

The Four Bardal factors

In determining what constitutes “reasonable notice” of termination, the courts have followed the principles laid out by the Ontario Court of Appeal in a 1960 case called Bardal; namely:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the (i) character of the employment, (ii) the length of service of the servant, (iii) the age of the servant and the (iv) availability of similar employment, having regard to the experience, training and qualifications of the servant.

In the last 52 years, the courts have been asked to apply the Bardal factors in thousands of wrongful dismissal actions. As a result, there have been two significant developments in connection with two of these factors.

The Character of Employment factor

In 2011, the Court of Appeal stated that the “character of employment” factor is now largely irrelevant except for a small class of very senior employees.

The Length of Service factor

In 1999, the Ontario Court of Appeal concluded that an employee is NOT entitled to one-month notice of termination for each year of service.

In 2011, this court stated that an employee is NOT limited to 24 months notice of termination.

Lessons to be learned:

1. Although the factors a court will consider when determining reasonable notice have not changed for over 50 years, the courts have interpreted these factors differently over the years.

2. With the elimination of mandatory retirement in Ontario, employers will be forced to start terminating long-service employees as part of corporate down-sizing. Current wrongful dismissal law suggests that a reasonable notice period for these employees is increasing – particularly unskilled employees.

3. It is in an employer’s self-interest to help terminated employees find alternative employment as soon as possible because the courts will deduct income earned during the reasonable notice period from wrongful dismissal damages otherwise payable. This may involve providing former employees with positive references, retraining, and/or outplacement counseling.

If you have any questions about wrongful dismissal law in Ontario please call us at 1–888-640-1728 or email us at inquiry@macleodlawfirm.ca. You can follow us on twitter or subscribe to our employment law blog

Comments (0)

By MacLeod Law Firm, September 21, 2012 6:02 pm

Employment Contract – Have You Updated Yours Lately?

Updating Your Employment Contract

We at MacLeod Law Firm believe a well-crafted written employment contract is the best return on your employment law investment.

A written offer of employment that is signed back by the employee is a form of employment contract.

To maximize your return on this investment, we suggest that an employer regularly review and update its employment contract.

Reasons to Update Your Employment Contract

Change in Employment Laws

Changes in employment laws may require changes to your standard contract.

For example, did you know that a contract which states an employee must use or lose his/her vacation pay is contrary to the Employment Standards Act?

Court cases

Recent court cases which interpret contract clauses may necessitate an amendment to your employment contract.

For example, did you know the Ontario Court of Appeal recently concluded that an employee could collect termination pay and salary from a new employer for the same period of time in a case where the termination clause in an employment contract did not provide otherwise?

New Employee Activities that Need to Be Managed

New types of employee activities, like the use of social media in the workplace, may result in the need to add or edit a clause in your standard employment contract.

For example, did you know that studies indicate that employees spend almost two hours of the workday using social media?

Our Employment Contract Seminar

Macleod Law Firm is hosting a complimentary one hour breakfast seminar to discuss employment contracts. We call it the Employment Contract Tune-up.

Our  Toronto seminar will be held at 9:00am on Thursday, October 18th in Suite 5700 of the 1st Canadian Place. Our Barrie seminar will be held at 9:00am on Tuesday, October 16th in the Muskoka Room of the SuiteWorks Business Centre, 92 Caplan Avenue.

To register for this seminar either  visit our website or email us your name, company and preferred date at inquiry@macleodlawfirm.ca 

If you have any employment law questions, please call us at 1–888-640-1728 or email us at inquiry@macleodlawfirm.ca. You can follow us on twitter  or subscribe to our employment law blog  

Comments (0)

By MacLeod Law Firm, June 28, 2012 7:08 pm

Employment Contracts

We recommend that every new hire sign an employment contract with a termination clause.

If the termination clause provides the employee with more than the minimum notice of termination provided under the Employment Standards Act, then can a terminated employee collect termination pay from your organization and salary from another employee at the same time?

Last week, the Ontario Court of Appeal decided that the answer to this question was yes, unless the termination clause explicitly permits the terminating employer to deduct the salary from the new employer.

The Facts: In this case, Mr. Bowes was entitled to six months notice of termination or pay in lieu of this notice under the terms of his written employment contract. He was terminated without any notice. He found another job during the six months following his termination earning the same income and his former employer stopped paying him termination pay.

The Decision: The Court of Appeal concluded that Mr. Bowes could collect termination from his former employer and income from his new employer until six months after his termination.

Lesson to be learned:  An employer should make sure that the termination clause in its employment contract explicitly addresses this issue of what happens to any income that a terminated employee earns during the agreed upon notice period.

The provincial government and judges are forever changing the employment law landscape. It is important to review your employment contracts, policies and practices to make sure they comply with all employment laws and are up to date.

We offer one-hour employment law check-ups where we will review your organization’s legal obligations and any employment law policies that are of particular interest to you. To give you some idea of the areas you can review, check out our Workplace Audit: 20 Areas to Consider.

If you want to amend your employment contract to enhance your management rights or have us conduct an employment law checkup at your workplace, please email us at inquiry@macleodlawfirm.ca or call us at 1-888-640-1728.