MacMillan Tucker & Mackay

Unfriendly Competition

25 October 2018

Employee Elliott worked at a pet store in Cloverdale owned by Bob Boss called Pets-R-Us. When Employee Elliott started at Pets-R-Us, he was asked to, and did, sign an employment contract. The contract contained a clause which stated that when Employee Elliott left Pets-R-Us, he would not open up or work for another company that was in the business of selling pets, pet accessories, or pet food in the Lower Mainland for a period of ten years after his departure.

After working at Pets-R-Us for a few years, Employee Elliott decided he wanted to move on to bigger and better things. When he left, Employee Elliott opened his own pet store on the other side of Surrey. Bob Boss was not happy about this and applied to the court to stop Employee Elliott from opening his store based on the clause in the employment contract. Employee Elliott argued that the clause was overly broad and should not be enforced.

Via Pexels

If you were the Judge, how would you decide?
Non-competition clauses or “restrictive covenants” which are contained in contracts have historically been unenforceable as they are considered to be restraints on trade and so not in the public interest. However, the clause will be enforceable if the party seeking to rely on it proves that it is reasonable when balancing the interests of the employer against those of the community.

In determining whether a clause is reasonable the court considers whether the clause protects a “proprietary interest” of the employer, such as a trade secret or confidential information, whether the length of time and geographic area it restricts are too broad or far reaching, and whether it is limited to protecting the former employers’ interests or broad enough to be detrimental to competition generally.

“Employee Elliott opened his own pet store….”
“Bob Boss was not happy….”
“…a trade secret or confidential information…”

It is unlikely that the court would enforce the clause in Employee Elliott’s contract as the geographic area it covers is very large, it covers a variety of business activities, and it would apply for a lengthy period of time. Had Bob Boss scaled back the clause to apply only in Surrey and only for a year or two, it is much more likely that it would have been enforced.

Written by Cassandra Douma
Cassandra is a lawyer who practices in Cloverdale with the firm MacMillan Tucker & Mackay at 5690 – 176A Street, Cloverdale (Surrey), B.C.  At MacMillan Tucker & Mackay, lawyers are available to answer questions about wills and estates, ICBC claims, personal injury, professional negligence, family matters and other issues.  If you require legal assistance, please call (604) 574-7431 to book an appointment.

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