Originally published in Blakes Bulletin on Labour &
Employment, June 2011
In its recent decision in Mason v. Chem-Trend Limited Partnership,
the Ontario Court of Appeal confirmed that a restrictive covenant
that prohibited a former employee from competing with his previous
employer by providing services to or soliciting business from all
current and former customers of that company anywhere in the world
for a period of one year was much too broad to be enforceable.
In 1992, Tom Mason was hired as a salesperson by Chem-Trend
Limited Partnership, a chemical developer and manufacturer. At that
time, he signed a standard Chem-Trend Confidential Information
Guide and Agreement, which contained the following clause
restricting his future activities after his employment with
...I will not, for a period of one
year following the termination, directly or indirectly, for my own
account or as an employee or agent of any business entity,
engage in any business or activity in competition with the
Company by providing services or products to, or soliciting
business from, any business entity which was a customer of the
Company during the period in which I was an employee of the
Company, or take any action that will cause the termination of
the business relationship between the Company and any customer, or
solicit for employment any person employed by the Company.
When his employment was terminated 17 years later, Mr.
Mason's sales territory spanned all of Canada and certain
mid-Atlantic U.S. states. As a result, he was familiar with a
number of Chem-Trend's customers, some of which operated
worldwide. Moreover, as a technical sales representative, he had
acquired significant knowledge about Chem-Trend's business,
including about its products and pricing.
The Court of Appeal gave four reasons for finding that the
restrictions on Mr. Mason's post-employment activities imposed
by the clause quoted above were not reasonable:
As is the case with many such agreements, in the Chem-Trend
agreement there was a separate confidentiality clause prohibiting
Mr. Mason from using or disclosing any trade secrets or
confidential information after the termination of his employment,
so the additional restrictions on competition and solicitation were
not necessary to protect Chem-Trend's confidential information
or trade secrets.
The prohibition against dealing with former customers was not
justifiable because, among other things, any information Mr. Mason
may have had about former Chem-Trend customers going back over a
period of 17 years was stale and likely of little competitive
Mr. Mason was not the president or CEO of the company, but
simply one of a number of salespeople who dealt with
Chem-Trend's customers in a limited territory, i.e., he did not
have a relationship with or special knowledge about all of
The scope of the prohibited activity was practically
unworkable. It was not possible for Mr. Mason to be sure whether he
was prohibited from dealing with a prospective customer since he
neither knew all of Chem-Trend's customers nor had access to
its full current and archival customer lists.
In balancing Chem-Trend's rights to protect its trade
secrets and customer information with the public interest in free
and open competition in the context of this case, the Court of
Appeal concluded that "the complete prohibition on competition
for one year is overly broad as well as unworkable in practice and
makes the restrictive covenant unreasonable and
In summary, the Court of Appeal affirmed that any restriction on
an employee's post-employment activities must, above all else,
provide clear guidance to the employee and be reasonable. The
prohibited activity, the geographic scope and the time-frame must
be expressly tailored to the specific employee's role within
and actual knowledge of the company's business and customers;
the restrictions must be workable on a practical level (i.e., the
employee must be able to determine what clients he/she is
prohibited from soliciting); and the restrictions must be required
to protect a legitimate business interest beyond the protection of
trade secrets and confidential information that are already
protected by other express provisions.
With this decision, the Court of Appeal reminds employers that
they should not use one-size-fits-all restrictive covenants but
must carefully consider what, if any, restrictions are reasonable
to impose on each employee and then carefully draft restrictive
covenants to ensure that they do not overreach.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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