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Clean hands crucial if you are persuing your old employer’s clients

If there’s any chance that you will get caught up being sued by your former employer claiming you breeched an obligation not to solicit their clients, make sure your hands are squeaky clean.
If your hands have dirt on them, judges tend to make decisions that can be a bit surprising.

Hendrik worked for an international manufacturer of concrete and steel lighting poles and lighting fixtures for 6 years. By the time he resigned he was the Sales Manager for the U.S. Northeast and all of Canada.  He had signed an agreement indicating that for 2 years he would not compete with the employer in any way after leaving his employment. The agreement also indicated that for 2 years he would not “contact any person, farm, corporation, or governmental agency who was a customer of the employer at any time during my employment.”.
When Hendrik initially resigned he told his employer he was considering job offers from competitors and non-competitors.  That was a lie. He had already agreed to move to a competitor.

The case law in Ontario has been clear for a long time with respect to non-competition agreements.  Almost without exception, unless you are a major shareholder, they are not enforceable. Judges will not keep you from working in the industry. It is considered a restraint of trade and contrary to public policy.

Most employment lawyers have stopped including non-competition agreements in contracts because they know they are not enforceable. 

Non-solicitation agreements can be enforceable if they are clear, unambiguous and reasonable. Most non-solicit agreements would simply indicate that you cannot solicit clients to sell them a competitive product or service where you had dealt with that client in the last 24 months of your employment. Judges accept that the employer has the right to protect themselves from the employee exploiting relationships the employer paid them to establish for a competitive advantage. The agreement Hendrik signed, however, would prohibit him from talking to people he had never met or dealt with just because at one point during the past 6 years they had bought something from the company, whether he remembered or not.  Quite frankly, most case law would indicate that such a provision is overly broad and it would be struck down.  Part of the reason is that the employer is trying to keep Hendrik from contacting people who may not have even been their customers for the last 5 years.  The non-solicitation clause Hendrik signed was trying to do through the back door what it could not do through the front door.  It was effectively trying to keep Hendrik completely out of the business since his employer had been a major player in that industry for a long time.

The judge in Hendrik’s case seemed to recognize this as he noted that Hendrik could always use his sales skills in another industry.  It would appear that the judge understood that enforcing the non-solicit would force Hendrik to work in a different industry but he ordered Hendrik nonetheless to comply with the provision for the 2 years set out in the contract.

This decision runs contrary to most of the case law in Ontario but it appears that Hendrik may have dug his own grave. He was not always forthright when being cross-examined and probably combative and cagey with his answers.

If you are ever in Hendrik’s situation be completely and utterly honest.  The law was on Hendrik’s side but he managed to inadvertently convince the judge that he was out to steal his employer’s clients. The judge had 2 choices: either strike down the badly worded non-solicitation clause for being too broad or let Hendrik get away with it. Perhaps he chose the just option.
 
Ed Canning
Ed Canning
P: 905.572.5809
ecanning@rossmcbride.com