Are Non-Competes Enforceable?

A non-compete is a “restrictive covenant”.

What is a restrictive covenant?

In employment contracts, restrictive covenants are clauses that stop employees from doing specific things. Examples of restrictive covenants are:

    • Confidentiality clauses – stop employees from sharing confidential information.
    • Non-competition (non-compete) clauses – stop employees from working in competing businesses.
    • Non-solicitation clauses – stop employees from taking clients or other employees with them when they change jobs.

Are restrictive covenants enforceable?

Courts do not like to stop employees from working, but also recognize that employers need to be able to protect their business. Courts will enforce “reasonable” restrictive covenants that go “no further than necessary” to protect the employers’ interests.

What does “reasonable” and “no further than necessary” mean?

When deciding whether to enforce a restrictive covenant or not, the court will consider whether it is limited in time, geography and scope. The Court will also consider whether the terms are clear, certain, unambiguous, overly broad or against the public interest. The clearer, narrower and less restrictive the restrictive covenant is, the more likely it is to be upheld.

Will the court fix a poorly drafted clause?

Generally if any part of the restrictive covenant is defective or unreasonable, the whole clause fails.

Case Study

In the case of IRIS The Visual Group Western Canada Inc. v. Park 2017 BCCA 301, Dr. Park provided contract optometrist services to Iris. Dr. Park’s agreement with Iris contained a non-competition clause that was meant to stop her from working in a competing business within 5 km of Iris. Dr. Park stopped providing services to Iris and set up her own optometrist practice 3.5 km away. Iris sued Dr. Park to enforce the non-competition clause.

The non-competition clause read:

  1.       NON-COMPETITION

7.1      The Optometrist hereby covenants and agrees that during the term of this Agreement and for a period of three (3) years from the date this Agreement is terminated the Optometrist will not, without first receiving the written consent of OpCo and IRIS do any of the following:

(a)        Compete either directly or in partnership or in conjunction with any person or persons, firm, association, syndicate, company or corporation, directly or indirectly carry on or be engaged in any part thereof or be employed by any such person or persons, company or corporation carrying on, engaged in, interested in or concerned with a business that competes with OpCo or IRIS within 5 km of the Location. For greater clarity, a “business that competes with OpCo or IRIS” is defined as any entity that dispenses performs [sic] any sort or [sic] prescription or non-prescription optical appliances including eye glasses or sunglasses, vision correcting lenses and contact lenses, or is an optical retail dispensary, optometry clinic, an ophthalmology clinic, or any laser eye surgery centre and/or any location that performs optical refractions and/or complete or partial eye examinations or eye health assessments,

(b)        disclose to any person, firm or corporation any information concerning the business or affairs of OpCo or IRIS at the Location, including, without limitation, the customer list for the Business.

(c)        solicit, interfere with or endeavor to entice away any customer, patient, company or organization that is in the habit of dealing with OpCo or IRIS or to interfere with or endeavour to entice away any of OpCo or IRIS’s employees or optometrists.

The Court found the clause to be unenforceable and refused to fix it. Amongst other criticisms, the Court said that the clause was overly broad, ambiguous and went further than was necessary to protect Iris interests.

Takeaway

Restrictive covenants need to be drafted carefully, clearly and narrowly or they will not be enforceable.

Need help with a restrictive covenant? Give our team a call.

 

This blog is not intended to serve as legal advice, and only provides general information. Every situation must be considered on its own facts. Need legal advice? Contact us by phone at 604 535-7063 or email [email protected].

A Win for Mom – tribunal finds employer discriminated against employee on maternity leave

The Human Rights Tribunal recently found that Prince George Ford (“Ford”) discriminated against new mom Mellissa LaFleche based on sex and family status contrary to the section 13 of the Human Rights Code.  

While on maternity leave, employee Ms. LaFleche went to her employer, Ford for a meeting about her return to work. It was an informal meeting and Ford had not thought through what it was going to say. There was conflicting evidence about what Ms. LaFleche was told at that meeting, but the Tribunal found:

  • “the clear inference from this discussion is that, at best, Ms. Callaghan [the woman filling in for Ms. LaFleche during her maternity leave] would retain marketing manager duties and Ms. LaFleche’s role would significantly change”, (paragraph 44).
  • “It was clear from the surrounding discussion that [Ms. LaFleche] would not be returning to the same duties and role…” (paragraph 45).
  • LaFleche felt humiliated, distressed and nervous about money and lost sleep, her appetite, a sense of security and enjoyment of maternity leave (paragraph 50).

Ford told Ms. LaFleche that it would follow up with her after the meeting about what position or duties it would have for her on her return, but it did not.

The Tribunal considered whether Ford had constructively dismissed Ms. LaFleche – constructive dismissal is a form of termination of employment that occurs when an employer fundamentally unilaterally changes the terms of employment – and concluded Ford had. It ordered Ford to pay Ms. LaFleche significant wage loss damages (about $70,000 less about $3,750 already paid to her) and injury to dignity damages ($12,000). Notably, the award for wage loss damages included both actual wage losses of about 7.5 months wages (about $40,000) and loss of maternity and parental benefits during Ms. LaFleche’ next year long maternity leave (about $30,000).

Take-aways:
  • Moms / New Parents:  Being told by your employer that they like your replacement better and you’ll have different duties on your return to work is discrimination.
  • Employers: absent reasons totally unrelated to the employee’s leave, you need to return employees to the same position they held before going on leave. Think carefully about what you say to employees on leave and about how they could take it.

This blog is not intended to serve as legal advice, and only provides general information. Every situation must be considered on its own facts. Need legal advice? Contact us by phone at 604 535-7063 or email [email protected].

Forced Vacation Time? Another Covid-19 Consideration

Forced Vacation Time? Another Covid-19 Consideration

Can an employer require employees to take vacation time where is a slowdown in work? This is a question we are getting regularly from workers and businesses.  There is no simple answer, but we have set out some information below.

(This blog is relevant only to non-union workers in provincially regulated industries in professions/occupations/industries covered by the Employment Standards Act.  This information will apply to most non-union workers in BC.)

Can an employer force its employees to take vacation?

Maybe. Look at the employment contract and any vacation policies and see what they say about vacation scheduling. Unless the contract or policy gives the employee the right to choose their vacation time, then yes, employees can be forced to take vacation if work is slow. The BC Employment Standards Branch says this:

Employers can choose when employees take vacation. You must schedule an employee's vacation in periods of one week or more, unless they ask for a shorter amount of time.

An employee earns annual vacation during the first year they're employed. After 12 months, they get two weeks of vacation. After five years, they get three weeks of vacation.

Employers may:

      • Cancel employee vacations due to a shortage of employees
      • Require employees to take vacation if there isn't enough work for staff

How does forced vacation impact layoff or termination?

Whether you are an employer or employee you should keep these provisions of the Employment Standards Act in mind as well:

Scheduling Vacation

Section 67(1) prohibits an employer from scheduling an employee’s vacation to coincide with notice of termination of employment.

Section 59 of the Act prohibits an employer from granting time off as a bonus or sick time and later reducing an employee’s vacation entitlement as a result of the previously granted leave.

If the employee is going to be let go permanently, vacation has to be paid out and cannot be scheduled to coincide with termination notice or lay, per section 67(1) of the Employment Standards Act.

Will vacation impact Employment Insurance?

Employees and employers should consider the Employment Insurance ramifications of taking vacation or forcing employees to take vacation if layoffs are expected.  If the employee is going to be temporarily laid off but eventually return to work, forcing them to take their vacation before the lay-off will delay their 7 day “interruption in earnings” of no work and no pay, which is required to qualify for E.I. Employees may also want to keep some vacation time for after things start up again.

 

This blog is not intended to serve as legal advice, and only provides general information. Every situation must be considered on its own facts.

Need legal advice? Contact us by phone at 604 535-7063 or email [email protected].

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Severance for a Contractor? What, no way!

I hired this person to work in my business. They asked to be a contractor. They wanted the flexibility and the write offs. It didn’t work out and now they want severance. What?! I don’t owe them anything! … do I?  

They hired me as a “contractor” but always treated me like an employee.  Then they let me go with no notice. Can they really do that to me!?

These questions come up all the time and the lawyerly answer to both is “it depends.” Why? Because the law says that even if you have a “contractor agreement” with someone, you can owe them severance. So when is a “contractor” entitled to severance? We have to look beyond the agreement and examine the true nature of the relationship between the company and the “contractor” to answer this. It often boils down to whether the contractor was really running their own business or whether they were really working for the company. Key factors are:

  • Exclusivity – Was the contractor able to work elsewhere? Did they? How dependent were they on the income? The more exclusive and dependent the relationship, the more likely the person is to be entitled to severance.
  • Control – Did the employer control the contractor’s work and hours? The more control the company has over the contractor, the more likely the company owes the contractor severance.
  • Tools and Expenses – Who owned them? Who paid to repair them? Was the contractor reimbursed for expenses? Contractors normally supply their own tools and are not reimbursed for personal expenses –expenses that are not passed through to a client. True independent contractors are not entitled to severance.
  • Profits and losses – If the contractor completed the job quickly, did she get the profit? If it took too long, did she take the loss? If the contractor had little opportunity for profit or loss, they are more likely to be seen to be working for the company and owed severance.
  • Workers – Could the contractor hire its own workers to get the job done? If not, the contractor is more likely to be seen to be working for the company and owed severance.
  • Contract – What does it say? Did it reflect the true reality of the situation? We have even seen “contractor” agreements that refer to the contractor as an “employee” throughout!

Whether you are a company or a contractor, it is important to have a contract that reflects the true intentions and the reality of the situation. If you don’t:

  • as a company you can be surprised with liabilities such as having to pay severance to “contractors” and sanctions for not complying with Employment Standards, tax and other legislation; and
  • as a “contractor” you can be out of work on little or no notice with potential claims that you have to fight about instead of something fair upfront.

Whether you need a contact, or are involved in a claim, a knowledgeable employment lawyer can help.

This blog is not intended to serve as legal advice, and only provides general information. Every situation must be considered on its own facts.

Need legal advice? Contact us by phone at 604 535-7063 or email [email protected].

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Pregnancy Discrimination – Mom’s the Word

Monthly, sometimes weekly, and at times even daily, we are asked about expectant moms’ rights:

  • I announced that I am pregnant and was:
    • passed over for a promotion,
    • denied opportunities or training,
    • left out of meetings,
    • reassigned to work on less important projects, or
    • fired.
  • People at work are making negative comments about me and:
    • my (lack of) commitment to work,
    • my need to take time off, or
    • my modified duties …
  • My employer can’t do that… right?

We also get regular questions from our employer clients:

  • She went on maternity leave and we like her replacement better…
  • We were having issues with her performance before she said she was pregnant, and we were going to fire her…
  • We are going through a major restructuring and eliminating a bunch of positions including a pregnant woman’s position...
  • We can let her go… right?

There is so much misinformation and confusion about the rights of working pregnant women. The law is clear, being fired, laid off, denied opportunities or experiencing other negative treatment because you are pregnant is discrimination.

Treating an employee differently (negatively) because they are pregnant or are taking maternity or parental leave is discrimination. Pregnancy does not have to be the only reason or even the main reason for the differential treatment. If it is any part of the reason for the negative treatment, it is discrimination. But pregnancy does not excuse an employee from meeting performance expectations or insulate them from the effects of a company-wide restructuring. Whether there was discrimination is unique to each case.

The protections working pregnant women in BC have come from the BC Human Rights Code, the BC Employment Standards Act and case Law. The Human Rights Code says that:

a person must not refuse to employ or refuse to continue to employ a person, or discriminate against a person regarding employment or any term or condition of employment, because of the persons sex.

The Supreme Court of Canada held in Brooks v. Canada Safeway Ltd., [1989] 1 SCR 1219 that sex discrimination includes discrimination based on pregnancy.

The Employment Standards Act says that:

an employer must not, because of an employee’s pregnancy or leave terminate her employment or change a condition of her employment without her written consent. It also says that as soon as her leave ends, the employer must place her in the position she held before taking leave, or a comparable position.

If you are an expectant mom concerned about any of these issues, or an employer thinking about letting an expectant mom go (even for a good reason) you should consult with an employment/workplace human rights lawyer. These can be tricky issues to manage for soon-to-be/new parents and businesses.

For expectant moms, we can help you navigate this stressful situation, inform you of your rights and come up with a plan for you moving forward.  Plans are unique to each person and can include everything from helping educate your employer about its obligations to you, to helping you leave your workplace and get compensation.

For employers, we can help you understand your obligations and risks, and how to act in a manner that is consistent with the law and achieve your own best outcome.

This blog is not intended to serve as legal advice, and only provides general information. Every situation must be considered on its own facts.

Need legal advice? Contact us by phone at 604 535-7063 or email [email protected].

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