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Contract Requiring Ex-Employee to Compensate Former Employer for Competing Ruled Enforceable in British Columbia

A recent decision of the B.C. Court of Appeal has endorsed a novel approach to post-employment competition by upholding an employment contract whereby the employee was required to compensate the employer if she competed soon after her employment ended. In Rhebergen v. Creston Veterinary Clinic Ltd., 2014 BCCA 97, a newly licensed veterinarian signed a three-year employment contract with an established veterinarian clinic in a rural community. Under the contract, the veterinarian was required to pay her employer a set amount if she set up a practice in the same area within three years of the employment contract being terminated. The veterinarian left the clinic after fourteen months and soon established a mobile veterinary practice in the area. The veterinarian went to court to have the payment clause declared unenforceable.

The Court recognized that there were two approaches in establishing whether such a clause was a restraint of trade, either a “functional” approach, which asks whether the clause attempts to, or effectively does, restrain trade, or a “formalist” approach, in which the clause must be structured as a prohibition against competition, which does not include “mere disincentives”. The formalist approach is more commonly used in Ontario, but the B.C. Court of Appeal adopted the functional approach in its analysis, and concluded that the clause was, in fact, a restraint of trade.

Notwithstanding that the clause was found to be a restraint of trade, the Court held that the clause was not a penalty because it reasonably compensated the employer for the costs incurred in training the new veterinarian. The Court split on whether the clause was ambiguous and therefore unenforceable. A non-competition clause is ambiguous if it is not clear as to activity, time or geography. The majority of the Court concluded that there was only one reasonable interpretation to the clause and it was not ambiguous. The clause was therefore enforceable by the employer, and the veterinarian was required to pay the amounts under the contract to her former employer as a result of her competition.

This case demonstrates the continually evolving nature of post-employment covenants, and the fact that courts will give employers some latitude to develop contractual “tools” to provide protection (or at least give financial compensation) in the event a former employee engages in competition soon after employment. The fact that the Court of Appeal was not unanimous demonstrates, however, that this is a complex area requiring careful drafting of contractual terms.

A copy of the B.C. Court of Appeal decision can be found here: http://www.courts.gov.bc.ca/jdb-txt/CA/14/00/2014BCCA0097.htm

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Contract Requiring Ex-Employee to Compensate Former Employer for Competing Ruled Enforceable in British Columbia

Human Rights Tribunal Has No Jurisdiction to Hear Equity Partner’s Human Rights Complaint in British Columbia

 The British Columbia Court of Appeal has unanimously held that the British Columbia Human Rights Tribunal did not have jurisdiction under the BC Human Rights Code to hear an age discrimination complaint filed by a lawyer against a national law firm – a limited liability partnership – in which he was an equity partner.

As part of the law firm’s partnership agreement, there was a mandatory retirement age of 65. The partner filed a human rights complaint on the basis that he was discriminated against by the partnership on the basis of age. The Court of Appeal rejected the argument that a partner could be “employed” for the purposes of the BC Human Rights Code and found that there was no “employment” relationship between the law firm and its partner.  As such, the partner could not advance a human rights complaint that he was discriminated against in “employment”.

The Court of Appeal set aside the decision of the Human Rights Tribunal and the BC Supreme Court, both of which had held that the partner was employed, for the purposes of the BC Human Rights Code, and thus was entitled to advance the age discrimination complaint.

A copy of the decision can be found here: http://www.courts.gov.bc.ca/jdb-txt/CA/12/03/2012BCCA0313.htm

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Human Rights Tribunal Has No Jurisdiction to Hear Equity Partner’s Human Rights Complaint in British Columbia

Proposed New Limitation Period in British Columbia Announced

Bill 34 has been introduced in the British Columbia legislature to establish, for most claims, a basic limitation period of 2 years from the date of discovery of the claim. Currently wrongful dismissal claims in B.C. have a 6 year limitation period.

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Proposed New Limitation Period in British Columbia Announced

Minimum wage goes up in British Columbia

The general minimum wage in British Columbia will be increasing from $9.50 per hour to $10.25 per hour on May 1, 2012.

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Minimum wage goes up in British Columbia

Les prestations de retraite devraient-elles être prises en compte dans l’évaluation des dommages-intérêts accordés pour congédiement injustifié?

La Cour suprême du Canada a accepté d’entendre l’affaire Richard Waterman c. IBM Canada Limitée, 2011 BCCA 337 portant sur la question à savoir si le montant des prestations de retraite d’un régime capitalisé par l’employeur qu’un employé a reçues après la cessation d’emploi aurait dû être déduit du montant des dommages-intérêts qu’il a obtenus pour congédiement injustifié. La Cour suprême et la Cour d’appel de la Colombie-Britannique ont toutes deux conclu que les prestations de retraite versées pendant la période de préavis ne devaient pas être déduites du montant des dommages-intérêts accordés par le tribunal.

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Les prestations de retraite devraient-elles être prises en compte dans l’évaluation des dommages-intérêts accordés pour congédiement injustifié?

Are Pension Benefits Deductible from Damages for Wrongful Dismissal?

The Supreme Court of Canada has granted leave to hear the case of Richard Waterman v. IBM Canada Limited,2011 BCCA 337, on whether employer-funded pension benefits that were paid after an employee’s termination should have been deducted from damages resulting from a wrongful dismissal. Both the British Columbia Supreme Court and Court of Appeal held that pension benefits paid during the notice period were not to be deducted from the damages awarded by the Court.

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Are Pension Benefits Deductible from Damages for Wrongful Dismissal?

Employer’s Changes to Retiree Benefit Coverage Struck Down by B.C. Court

A recent Supreme Court of British Columbia case raises the issue of whether employers may unilaterally change the terms of retiree benefits for already-retired employees.

In Lacey v. Weyerhaeuser Company Limited, five already-retired salaried employees of Weyerhaeuser (and its predecessor company) had a benefits package which included specific retirement benefits coverage paid for by the employer. On January 1, 2010, the employer unilaterally cut its contribution to the cost of their benefits coverage by 50%, and announced that the retirees would be responsible for bearing any future cost increases. The employer stated that these changes were being done to sustain the viability and affordability of the retiree plans and that the employer had the discretion as to whether to provide retirement health benefits.  The five retirees sued.

The affected retirees did not have a written employment agreement setting out what benefits coverage would be provided after retirement.  The Court, after reviewing the company policies and written and oral communications between management and the retirees, concluded that retiree health benefits were intended as a form of deferred compensation and not a gratuitous payment.  Effectively, the employer’s promise to provide the retiree benefits coverage created a contractual obligation to continue to provide that coverage to employees who had already retired. Based on the contractual language in force at the applicable time, the right to make changes to the retirees’ benefits did not extend to changing the terms of an employee’s retirement health coverage after the date of retirement. As such, the retirees were entitled to the extended health benefits coverage as it existed on their date of retirement, without alteration to the scope of coverage, coverage limits or deductibles, and all at the employer’s expense.

A copy of the decision can be found here: http://courts.gov.bc.ca/jdb-txt/SC/12/03/2012BCSC0353.htm. A notice of appeal was filed on April 2, 2012.

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Employer’s Changes to Retiree Benefit Coverage Struck Down by B.C. Court