(September 21 – 18:15 ET) – The Court of Appeal for Ontario has ruled on a case that gives some insight into current court attitudes to non-solicitation and non-competition clauses.

A decision today, in Lyons v. Multari, dealt with the consideration of the relationship between non-solicitation and non-competition clauses in a professional employment context. The case deals with a couple of Windsor, Ont. dentists, not brokers, but many of the issues are common to those faced by the brokerage industry.

In the initial judgement the Hon. J. Daudlin upheld a non-competition clause between the two dentists and awarded damages of $70,431. The trial judge considered whether such a clause is enforcable, finding that it was because the contract was valid and something worthy of protection was at stake. He also concluded that it was not too restrictive because it called for no competition within a five mile radius for three years.

Among other issues, the appeal dealt with whether the clause was too restrictive. The general rule is that non-competition clauses in employment contracts are void, except where it is reasonable in the interests of the contracting parties and also reasonable in the public interest.

The appeal judge found that the three-year, five-mile limit is not unduly restrictive, but considered whether a non-competition clause, rather than a simple non-solicitation clause is justified. “The non-competition clause is a more drastic weapon in an employer’s arsenal. Generally speaking, the courts will not enforce a non-competition clause if a non-solicitation clause would adequately protect an employer’s interests.”

In general it must be an “exceptional case” where a non-solicitation clause is not strong enough. That must be decided by considering the nature of the business and the nature and character of the employment. The court found that a non-competition clause was not warranted in this case for a variety of factors. Those factors included:

  • the relationship was relatively equal in terms of money earned;
  • there was no confidential information taken by the departing party;
  • common practice in the industry does not demand a non-competition clause; and
  • the departing party was a junior figure, not critical to the business with the public.

In this case, the appeal was allowed and the damages award dropped.
-IE Staff