CANADIAN EMPLOYMENT LAW TODAY
The rules of engagement:
Restrictive covenants
Difference in purpose of covenants
in commercial sale and employment contracts
| BY NIKOLAY CHSHERBININ |
recent decision, Guay Inc. c. Payette, the
Supreme Court of Canada considered
RESTRICTIVE covenants relating to important issues relating to the interpreemployment and competition have been tation of restrictive covenants limiting
an integral part of our law for many employment and competition in a conyears, typically taking the form of non- tract for the sale of assets that resulted
competition and non-solicin a contract of employitation clauses. While
ment with the vendor's
EMPLOYMENT
restrictive covenants can
principal. The top court
CONTRACTS
be found in commercial
affirmed that whenever a
and employment contracts, their inter- restrictive covenant is negotiated in conpretation requires the application of dif- nection with the sale of assets, employferent rules.
ment law rules do not apply. In addition,
With a presumed imbalance of power it did away with the requirement to limit
in an employer-employee relationship, non-solicitation clauses geographically.
the interpretation of restrictive
Gauy Inc., a crane rental company,
covenants is stricter than in a commer- acquired assets belonging to corporacial context, where an imbalance of tions controlled by Yannick Payette. The
power is not presumed to exist. In its sale agreement contained non-competi-
tion and non-solicitation clauses. To
ensure a smooth transition following the
sale, the parties also agreed to include a
provision in the agreement in which
Payette would work full-time as a consultant for six months. At the end of the
transition period, they entered into a
contract of employment, originally for a
fixed term and later an indefinite term.
Four years later, Payette was dismissed without cause and went to work
for Gauy's competitor. Gauy brought an
injunction in the Superior Court compelling Payette to comply with the
restrictive covenants set out in the
agreement, which was dismissed. Subsequently, the Court of Appeal overturned
Continued on page 9
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Published by Canadian HR Reporter, a Thomson Reuters business 2013
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