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Competing in a Non-Compete World

Non-compete agreements or restrictive covenants is more appropriately named seemed to be the bane of many an employee and employer. Jock Climie, former CFL standout and  a partner in the firm of Ottawa-based Emond Harnden is a well-versed and highly respected restrictive covenant trial lawyer who has worked on behalf of many notable corporations.  He only represents employers, but his clients’ employees are also able to seek him out for advice.  He’s conducted many trials throughout Ontario and Québec including the courts of appeal. Jock was kind enough to offer his take on this topic.

Restrictive covenants are quite enforceable when worded correctly, and sometimes individuals receive incorrect advice that they are not.  The courts are often very prone to interfere as they don’t want to see competition damaged or an individual’s chances of employment lessened.  In his experience, usually employers are within their rights to protect their legitimate proprietary interests.  But, a retailer can’t hire someone to sell shoes, and then tell that employee they can ever sell shoes again should they leave their employ.  The differentiator is if the sales person develops relationships that could result in repeat sales.  This area is rarely overturned.

Also from the retailer’s perspective, issues could arise if an employee for instance is a buyer with existing supplier relations and knows certain proprietary information about costs and capacity. If in an outside sales role, it could be a sales rep with an existing customer base.  As mentioned, if the sales rep has repeat sales customers, you can usually continue your relationships with these people if you switch companies.  But if there’s a non-solicitation clause on customers that you specifically developed while the in the employ of your company it’s a roll of the dice; if the company invested in developing that specific relationship, for instance, allowing the sales rep to treat their customer to dinner or golf that the company paid for, they may do well in court.  It’s a very gray area Jock says, and courts can use their built-in flexibility with regards to interpretation.

An employee without a non-compete clause can’t be forced to sign one after they join their company unless the company gives them a raise.  But they probably better get legal advice at this point, as the company may be trying to enforce something that truly isn’t enforceable.  When looking at your employment agreement, Jock suggests that you look at the restrictive covenant clause and if you feel you can live with the specific terms than sign it… but if your feeling is that it might impact your ability to make a living outside your current employer, don’t sign it or have the clause narrowed down after seeking legal advice.

Many times salespeople move for what appears to be a lucrative opportunity and its well worth the fight to do so.

That being said, Jock suggests you ensure you don’t poke your finger in your former employer’s eye so to speak.  The example he provided was Dentist 1 who buys Dentist 2’s practice and employs dentist 1 and makes him sign a non-compete clause that covers a new practice within 15 km from the current practice.  Dentist 1 later goes out and sets up a practice 16 km away (he believes), but simply drove from one office to the other to establish that distance.  Dentist 1 then spends hundreds of thousands of dollars to set up his new practice…and no surprise was sued by dentist 2 who determined that the practice was in fact 14 km apart as the crow flies.  The point is, Dentist 1 was still hoping his old customers would return to him, which the courts saw as unfair as dentist 2 bought his business and even offered to employ Dentist 1.

Jock is not suggesting that candidates walk away from situations that appear could get messy down the road, but that they simply seek out advice that will help them make an informed decision.  He says that employers are always entitled to protect their legitimate business…but that in many cases, courts are worried about the “little guy” being able to earn a living, and will side with them despite what appears to be an open and shut case.

It’s all as clear as mud, but that’s why experts like Jock Climie do what they can despite a gray area in the legal system.

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