Conventional wisdom suggests that because a non-solicitation
clause is more likely to be enforced by a court than a
non-competition clause, why bother including a non-competition
clause in an employment agreement. The B.C. Court of Appeal's
decision in Edward Jones v. Voldeng (PDF)
suggests that there is still value in including a non-competition
clause. Why? It may be easier to demonstrate irreparable
harm, one of the requirements to obtain an injunction, when a
former employee has breached a non-competition clause.
In this case, the B.C. Court of Appeal considered whether a
court should grant an injunction in order to enforce a
non-solicitation clause. Edward Jones was the former employer
of the departing employee (Voldeng). Voldeng had left Edward
Jones and had gone to work for another employer. Voldeng had an
employment contract with Edward Jones that prohibited him from
soliciting the customers of Edward Jones for a period of six months
after he left Edward Jones.
Prior to leaving Edward Jones, Voldeng managed accounts for
Edward Jones totalling approximately $46 million. Within a
couple of weeks of leaving, approximately $20 million of those
accounts had transferred from Edward Jones to the new employer with
Test for an Injunction
In order to obtain an injunction, a party seeking an injunction
There is a serious question to be tried;
The applicant (former employer) will suffer irreparable harm if
the injunction is not granted; and
The balance of convenience favours granting the
What's Irreparable Harm?
The Edward Jones case deals with the issue of
irreparable harm. If the damages can be calculated such that a
specific amount can be awarded for the loss of the clients, there
is no irreparable harm and an injunction will not be granted.
Generally, there are two types of irreparable harm. The
first is harm that cannot be quantified in monetary terms, such as
permanent market loss or irrevocable damage to business
reputation. The second is harm that cannot be compensated for
by an award of damages because it is unlikely that damages can be
collected from the defendant.
No Irreparable Harm Here
The Court of Appeal said that the value of the portfolio of a
departing employee is generally known, as well as the money made by
the brokerage firm with respect to managing the portfolio. In
effect, Edward Jones could show that the value of the Edward
Jones' clients which had transferred to the new employer with
Voldeng was $20.2 million. Since Edward Jones could show the
actual loss it would experience, the Court found that there was no
irreparable harm. As such, although it said that there was a
strong prima facie case that Voldeng improperly solicited his
clients, it would not order an injunction to prevent the clients
from being solicited by Voldeng and his new employer.
Irreparable Harm more Likely with Non-Competition
The Court went on to compare the loss suffered by Edward Jones
with respect to the potential breach of a non-solicitation clause
with the loss suffered by a potential breach of a non-competition
clause. A non-competition clause prevents a departing employee
from competing with his/her former employer.
The Court stated that in a non-competition situation, the former
employer will not necessarily be able to establish the loss due to
the prohibited competition. Since the employer may not be able
to determine what its potential loss would be, the former employer
is more likely to be able to establish irreparable harm, provided
the former employer meets the other tests for an injunction based
on a non-competition covenant.
The Impact on Employers
The impact of the Edward Jones v. Voldeng decision is
that employers have to decide how to properly draft restrictive
covenants according to the nature of the business involved, and the
potential damage to the employer. Non-competition clauses will
be more enforceable with respect to the issue of proof of
irreparable harm in order to obtain an injunction. However,
non-competition clauses are more likely to be struck down as being
contrary to public policy, vague or overly broad. There's
The moral of the story is that employers should be very aware of
the potential risks of employees who are their customer contacts
leaving them and taking the business with them. A
non-solicitation clause may give rise to an award of damages
suffered by the former employer, but it may not prevent the loss of
the customers. The Court made reference to the fact that it was not
approving the conduct of Voldeng. Whether there was a breach
of Voldeng's employment obligations was left to be determined
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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