We often get calls from employers concerning departed employee who have started working for a competitor.
The client is concerned that the departing employee is taking clients or employees to the competitor. In some cases, the departing employee has signed an employment contract which contains a non-solicitation clause and the employer wants to know if it is enforceable.
Here are five issues that we normally canvas with the employer.
1. Has the departing employee agreed not to compete or solicit customers/employees for a period of time? In Ontario, non-compete agreements are not generally enforceable. Reasonable non-solicitation agreements however are generally enforceable.
2. If no non-solicit agreement exists (or it is likely not enforceable) is the departing employee a “fiduciary”? A fiduciary can be a senior executive or a salesperson who is the face of the company to the customer. If the person is a fiduciary, then the departing employee may have a common law duty not to solicit customers for a reasonable period of time.
3. If the departing employee is improperly soliciting customers what are the employer’s legal rights? In this regard, we discuss whether to bring an injunction to stop the former employee from soliciting, and the pros and cons of bringing an action and claiming damages. We also discuss whether or not the client wishes to commence an action against the departing employee for wrongful resignation.
4. Has the employer lost any customers since the departing employee has resigned? This is a critical question since the employer must prove that the departing employee has caused damages or benefited from any illegal solicitation.
5. Does the employer want to send a strong message to its employees that taking customers to a competitor will not be tolerated? In other words, is there a significant ripple effect to this one situation? If so, a more aggressive litigation strategy may be required.
If you are concerned that a recently departed employee is soliciting your employees or your clients, and you want to speak with a lawyer with experience with this kind of situation, contact us at [email protected] or 416 317-9894.
In the recent decision of Andros v Colliers Macaulay Nicolls Inc., the Ontario Court of Appeal (“OCA”) found yet another termination clause to be unenforceable. In this decision, the OCA reaffirmed and clarified various principles surrounding the enforceability of such clauses.
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