THE LAWYERS WEEKLY
November 5, 2010 | 13
For years, discussions of
restrictive covenants have started
with a presumption that non-competition clauses will only be
enforced in unusual circumstances
where other forms of protection,
particularly non-solicitation
covenants, would be inadequate.
In most cases, this was extremely
difficult to establish. However, a
recent decision by the Ontario
Superior Court of Justice may be
indicative of change brought about
by the changing nature of our
economy.
In Mason v. Chem-Trend Lim-
ited Partnership, [2010] O.J. No.
3680, Tom Mason, a technical
sales representative, was dis-
missed after 17 years of service at
Chem-Trend, and brought an
action for wrongful dismissal.
Chem-Trend counterclaimed,
seeking damages for the breach,
among other things, of a restrict-
ive covenant, which provided:
“I agree that if my employment
is terminated for any reason by me
or by the Company, I will not, for a
period of one year following the
termination, directly or indirectly,
for my own account or as an
employee or agent of any business
entity, engage in any business or
activity in competition with the
Company by providing services or
products to, or soliciting business
from, any business entity which
was a customer of the Company
during the period in which I was
STUART
RUDNER
an employee of the Company, or
take any action that will cause the
termination of the business rela-
tionship between the Company
and any customer, or solicit for
employment any person employed
by the Company.”
Mason brought an application
to have the covenant declared
unenforceable.
The leading Canadian decision
on the enforceability of non-competition clauses is Elsley v. J.G.
Collins Ins. Agencies, [1978] S.C. J.
No. 47 by the Supreme Court of
Canada. Elsley had entered into an
agreement that contained a covenant prohibiting him from engaging
in the business of a general insurance agent throughout his employment and for five years following
termination. Liquidated damages
for breach of the covenant were
fixed at $1,000.
Justice Dickson outlined the
test for determining whether such
a covenant is enforceable: “A
covenant in restraint of trade is
enforceable only if it is reasonable
between the parties and with ref-
erence to the public interest.”
Justice Dickson went on to
explain that reasonableness is
assessed on a subjective basis; spe-
cifically, what is reasonable is
determined with reference to the
agreement, and most importantly,
the circumstances surrounding
the particular case, including the
nature of the business, the charac-
ter of the employment, the inter-
ests of the parties and the protec-
tions they require. In deciding
what is reasonable, Justice Dick-
son provided that the following
questions should be considered:
Did the employer have a propri-
etary interest entitled to protec-
tion (for example, trade secrets,
business connections, confidential
information, or good will)?
Stuart Rudner is a partner in
Miller Thomson LLP’s Labour &
Employment Law Group, prac-
tising out of Toronto/Markham.
He thanks Melissa Schulman, a
student-at-law at the same firm,
for her assistance with this article.
accordance with the criteria
established thereunder.”
Employer must respond to potential Code violations
Baisa
Continued From Page 10
HRIA
Continued From Page 11
but rather, reasonableness.
Moreover, he noted that, “It is
not the role of this Tribunal to
consider whether a corporate
respondent has complied with
every detail of an internal anti-discrimination policy. Rather,
the issue for this Tribunal is
whether a respondent has complied with its obligation to take
reasonable and adequate steps to
respond to its awareness of a
potential violation of the Code in
We Practise At the
CUTTING EDGE
We Practise At the
CUTTING EDGE
able resolution was provided to
the complainant as well as notice
of the actions taken to put an end
to the offending behaviour.
The employer satisfied the criteria for fulfilling its duty to
respond to violations of the Code.
In making this ruling, Vice-Chair
Mark Hart reiterated that the
standard is not one of perfection
Soma Ray-Ellis is a partner
and co-chair of the Employment
and Labour Group at Himelfarb
Proszanski LLP in Toronto. She
is also the author of Halsbury’s
Laws of Canada — Discrimina-
tion and Human Rights and the
Federal Equity Manual. She
acted as counsel for the respond-
ents in Baisa.
You are a corporate counsel, a lawyer who does not practice
employment and labour law, or a member of a firm which
has been conflicted out or does not have an office in
Ontario. You have an important matter which requires
representation you will be confident with.
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The Human Rights Matrix
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We practise at the cutting edge assisting a wide spectrum of
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