Canadian Employment Law Today

December 11, 2013 Ask an Expert with Colin Gibson Harris and Company, Vancouver Have a question for our experts? Email jeffrey.r.smith@thomsonreuters.com. Duration and enforceability of restrictive covenants Question: What would be a reasonable time period for a non-competition or non-solicitation clause? If an employee agrees to and signs such an agreement, can it still be ruled unenforceable? Answer: The enforceability of a restrictive covenant depends on many factors, including the wording of the clause, the position of the employee and the legitimate interests of the employer. A restrictive covenant is a term in an employment contract that expressly limits post-employment activities. The broadest type of restrictive covenant is a non-competition clause — it prohibits an employee from competing with her former employer within a certain geographic area and time period. A non-solicitation clause, on the other hand, prevents an employee from soliciting her former employer's clients for a specified period, but does not place restrictions on where she may work. Where an employer seeks to enforce a restrictive covenant, the court will attempt to balance the legitimate interests of the employer, the interests of the former employee in pursuing her livelihood and the interest of the public in having access to a broad range of services. In balancing these interests, the court will ensure the former employee's rights are restricted no more than necessary to protect the employer's legitimate business interests. Restrictive covenants have been found by the courts to be "in restraint of trade" and therefore prima facie unenforceable. To enforce a restrictive covenant, an employer must be able to prove the provision is necessary to protect a legitimate proprietary interest; the restraint is reasonable as between the parties in terms of its duration, geographic scope, the nature of the activities prohibited 2 and overall fairness; the terms of the restraint are clear and certain; and the clause is reasonable in terms of the public interest. If the employer is unable to prove all these elements, the court can strike down the covenant even if it is contained in an employment agreement that has been signed by the employee. The reasonableness of the time period is dependent on the specific circumstances of each case. An employer may have difficulty enforcing a covenant that restricts post-employment activities for more than 12 months, absent special circumstances. For example, in Rhebergen v. Creston Veterinary Clinic Ltd., the British Columbia Supreme Court found that a restrictive covenant that limited a veterinarian's activities for a three-year period post-employment was To enforce a restrictive covenant, an employer must be able to prove the provision is necessary to protect a legitimate proprietary interest. "too long," noting the application of the clause to the veterinarian's circumstances would have resulted in restraint for more than 2.5 times the duration of her employment. In some cases, even periods shorter than 12 months will be considered excessive. In Travel Co. v. Keeling, for example, an eight-month restraint for an entry-level employee was struck down as unreasonable. A 12-month restriction on an insurance broker, although struck down for other reasons, was found to be reasonable in length in Hub International (Richmond Auto Mall) Ltd. v. Mendham. A six-month restriction on a senior advertising consultant was upheld in Rawlco Radio Ltd. v. Lozinski. In that case, the employee was the face of the company and had significant contacts with the clientele. As a result, the court was satisfied the proprietary interest of the employer required protection. Any restrictive covenants should be carefully and precisely drafted. The duration of the clause should be only as long as is necessary to protect the employer's legitimate interests. Disclosure of disability post-dismissal her severance pay in lieu of notice. The employee now claims her performance problems were caused by a disability and she has offered to provide a doctor's note. We didn't know about any disability when we terminated her. Are we required to do anything? Answer: The legal obligations of an employer facing a post-termination claim of disability will depend on what the employer knew, or should have known, before the employee was terminated. Human rights legislation across Canada protects employees against discrimination based on certain protected grounds, which include mental or physical disability. An employee will be able to establish prima facie discrimination where she can demonstrate that she has a disability, that the employer treated her adversely and that the disability was a factor in the treatment. Where a workplace standard is discriminatory, an employer must show it is a bona fide occupational requirement and the affected employee has been accommodated to the point of undue hardship. This duty to accommodate may require an employer to modify or dispense with discriminatory workplace policies. The duty generally arises once an employer knows, based on notification from the employee, that the employee has a status or condition requiring accommodation. The duty, however, may also be triggered where an employer ought to know an employee needs accommodation. Employers must, therefore, be aware of signals such as marked changes in personality or work performance. Where such circumstances exist, the employer is under a "duty to inquire" and must seek additional information about the employee's condition, prognosis and abilities. A wide range of remedies, including payment of lost wages and expenses, damages for injury to dignity, and in some cases reinstatement, is available to employees who have suffered discrimination based on a protected ground. The duty to inquire was considered by the British Columbia Human Rights Tribunal in Sylvester v. British Columbia Society of Male Survivors of Sexual Abuse. In that case, the employee exhibited a change in behaviour and provided notice to her employer that she was going to take a medical leave of absence. Rather than investigate the matter, however, the employer dismissed the employee and provided her with severance pay. In its finding of discrimination, the tribunal held that the employer Question: We dismissed a non-union employee for poor performance and gave Published by Canadian HR Reporter, a Thomson Reuters business 2013 Continued on page 7

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