Focus On

CONTRACT OF EMPLOYMENT - Express terms - Restrictive covenants 

Friday, October 02, 2020 @ 5:59 AM  


Lexis Advance® Quicklaw®
Appeal by the defendant from an order granting the respondent an interlocutory injunction to enforce a non-competition clause. The appellant sold his towing business to the respondent. The appellant also entered into an employment agreement and a non-competition agreement with the respondent. The employment agreement contained a non-solicitation clause and a non-competition clause restraining the appellant for one year following termination of employment with the respondent. The Non-Competition Agreement restrained the appellant for five years from the date of the Asset Purchase Agreement from competing with the respondent in Alberta, B.C. and Saskatchewan and any other location within Canada where the respondent and its Affiliates carried on the business during the restriction period. The appellant resigned from employment with the respondent after one year and commenced employment with a competitor. The appellant argued the chambers judge erred in failing to identify the correct legal test for an injunction, finding the tripartite test for an injunction had been met, and granting an order broader than contemplated by the restrictive covenants. The appellant also argued that the non-competition provision was unreasonably broad and therefore unenforceable because it extended to B.C. and Saskatchewan.

HELD: Appeal allowed in part. The chambers judge erred in analyzing the geographical scope of the non-competition agreement by looking not at the activities of the business sold by the appellant, but at the respondent’s business. There was no evidence that the appellant’s business carried on any business outside of Alberta, such that the restrictive covenant prohibiting the appellant from competing in B.C. and Saskatchewan was geographically overbroad and therefore unreasonable. The goodwill in the appellant’s business was limited to Alberta. While the restrictive covenant was unreasonably broad in its application to Alberta, B.C. and Saskatchewan and the reference to affiliates of the respondent, there was a strong prima facie case that it was enforceable upon severance of the references to B.C. and Saskatchewan. No reviewable error was demonstrated in the chambers judge’s conclusions as to irreparable harm and balance of convenience. It was an error to grant the injunction for five years from the date of the Order rather than the date of the Asset Purchase Agreement.

City Wide Towing and Recovery Service Ltd. v. Poole, [2020] A.J. No. 894, Alberta Court of Appeal, F.F. Slatter, M.B. Bielby and S.J. Greckol JJ.A., August 27, 2020. Digest No. TLD-September282020009