What Are Restrictive Covenants in Employment Law?
Employers often include clauses in their employment agreements that attempt to prevent former employees from conducting themselves in a manner that could cause potential harm to the company. These restrictive covenants can be very difficult to enforce, particularly when seeking to prevent a departed employee from working for a certain period of time and earning a livelihood.
In the recent case of Camino Modular Systems Inc. v. Kranidis, 2019, Grosman Gale Fletcher Hopkins LLP successfully defended an employee from his former employer’s overaggressive attempts to enforce the restrictive covenants of his employment contract.
No Proprietary Interest and Too-Broad Language
Our client felt that his role had been marginalized by his long-term employer and sought work elsewhere. He ultimately resigned to work for a direct competitor in a niche area of the construction industry that he has worked in for the majority of his career.
His former employer commenced a lawsuit and brought a motion for injunctive relief to enforce the restrictive covenants contained in his employment contract. The Court ruled in favour of our client and dismissed the motion, with costs, for the following reasons:
- The former employer could not establish that it had a proprietary interest entitled to protection from our client through the enforcement of the non-competition clause. Further, the language used to draft the clause was overly broad in the activities it covers.
- The former employer did not have a strong prima facie case that the non-solicitation clause in the employment agreement was enforceable. The employer did not have a proprietary interest in its employees’ knowledge, and the language of the clause was found to be extremely broad and ambiguous.
- Our client’s former employer could not meet the test for an injunction restraining the use of its confidential information. The Court found that the allegedly confidential information did not constitute a proprietary interest and there was no evidence to show that our client has actually misused any confidential information.
- The Court found there was no evidence that the former employer would suffer irreparable harm if the injunction was not granted and also that the balance of convenience favoured our client.
Onus on Employers is a High Bar
This decision is a further example of the uphill battle that employers face when trying to enforce restrictive covenants, particularly through an injunction. An employer will not be successful unless it can prove that it has a particular proprietary interest that must be protected and that the language of the restrictive covenants is clear, unambiguous and not overly broad.
Get Advice Before You Act
If you have questions about this issue or any employment issue, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise employees and employers on issues in the workplace. Contact us online or by phone at 416-364-9599 to schedule a consultation.
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