A Rose By Any Other Name Is Not As Sweet: When A Non-Solicit Is Actually A Non-Compete
22, September 22, 2016 - Filed in: Court Cases
The Ontario Court of Appeal has held that the words "accept business", in what the employer intended to be a non-solicitation clause, served to restrict competition and is therefore not merely a non-solicitation clause.
In this case, the personal defendant, Mary Murphy, was employed by the plaintiff Donaldson Travel Inc. ("DTI") as a travel agent from October 2004 to April 2007 and then again from June 2007 to February 3, 2012, when she resigned from that employment. On February 6, 2012, Ms. Murphy commenced employment as a travel agent with the defendant, Goliger's TravelPlus ("Goliger's").
Following Ms. Murphy's resignation, DTI brought claims of breach of contract, misappropriation of confidential information, inducing breach of contract and interference with contractual relations against Ms. Murphy, Goliger's and its President and director. Its claims were dismissed on a summary judgment motion, and DTI appealed to the Court of Appeal.
One of the issues on appeal was whether the motion judge erred in finding that the restrictive covenant in Ms. Murphy's contract with DTI was in fact a non-competition clause rather than a non-solicitation clause, and therefore that it was unreasonable and unenforceable.
The clause at issue stated:
Mary agrees that in the event of termination or resignation that she will not solicit or accept business from any corporate accounts or customers that are serviced by Uniglobe Donaldson Travel, directly, or indirectly.
The Court of Appeal agreed with the motion judge that, based primarily on the language "or accept business", the restrictive covenant did in fact restrict competition and was therefore a non-competition clause. Further, the Court of Appeal held that since this non-competition clause contained no temporal limitation, there was no basis on which to interfere with the motion judge's conclusion that the clause was unreasonable and therefore unenforceable.
DTI's appeal was dismissed with costs of $7,500.00 awarded to each defendant.
The key takeaway from this case is to ensure that the language of restrictive covenants is carefully chosen, so as to avoid inadvertently going beyond what is considered sufficient in the circumstances (in this case a non-solicitation clause) to protect an employer's proprietary interest.
Note: This a reprint of an article by Chelsea Rasmussen of Dentons.