In the recent decision of Rhebergen v. Creston Veterinary Clinic
Ltd., 2014 BCCA 97, the British Columbia Court of Appeal
upheld a unique non-competition clause in an employment contract.
Many employers do not take advantage of restrictive covenants and
they can be challenging to enforce. This case is a good example of
careful consideration of the circumstances of the position and the
use of a creative strategy to help protect the employer's
Dr. Rhebergen was a veterinarian employed by the defendant
company. She entered a three year agreement with Creston Veterinary
Clinic ("CVC") to gain experience and training in dairy
medicine. Her contract stated, in part, as follows:
The Associate covenants and agrees that in consideration of the
investment in her training and the transfer of goodwill by CVC, if
at the termination of this contract with CVC she sets up a
veterinary practice in Creston, BC or within a twenty-five (25)
mile radius in British Columbia of CVC's place of business in
Creston, BC, she will pay CVC the following amounts:
If her practice is set up within one (1) year termination of
this contract - $150,000.00;
If her practice is set up within two (2) years termination of
this contract - $120,000.00;
If her practice is set up within three (3) years termination of
this contract - $90,000.00.
Our Courts routinely hold that a restrictive covenant in the
employment context will be void unless the party seeking to uphold
the clause can prove it:
Protects a legitimate "proprietary interest";
Is "reasonable" in terms of duration, geographic
location, nature of activities prohibited, and overall fairness to
both parties (i.e. court attempts to strike a balance of
proportionality between the interests of the employee and
Has clear, certain, and not vague terms; and
Is not otherwise contrary to public interest.
When it comes to non-competition clauses (usually where a
departing employee is restrained from competing within a certain
area and/or time) and non-solicitation clauses (usually restraining
a former employee from soliciting former clients, business
associates, and employees), Courts will not enforce a
non-competition clause when a non-solicitation clause will do.
In this case, the employer brought evidence that the
non-competition clause was implemented due to previous experience
with an associate and their calculations of the investment the
employer expected to make in Dr. Rhebergen for mentoring, training
and equipment. Further, with respect to the proprietary interest,
given the relationships she was developing, the employer estimated
the impact on the clinic's goodwill and client volume if Dr.
Rhebergen did compete for business. The Court noted the covenant
did not prohibit Dr. Rhebergen from establishing her own veterinary
practice (as is typically seen in non-compete clauses), she simply
had to pay CVC a substantial amount of money if she chose to do so
within a 25 mile (40 kilometre) radius and within 3 years of
Ultimately, Dr. Rhebergen left the CVC and wanted to work for
herself. Thus, the dispute focused on whether there was ambiguity
with the phrase "sets up a veterinary practice". Dr.
Rhebergen wanted to start a mobile veterinary clinic which she
argued was not really "set up" in any place.
Nevertheless, she intended to target the same eight dairy farms
from which CVC received most of its business. The Court considered
the realities of practising in an area such as Creston, where there
were really only two options: working at CVC, the only veterinary
clinic within a 100-mile radius or working for oneself.
In a rare win for an employer, the Court found the
non-competition clause enforceable. As with all elements of the
employment contract, careful drafting is essential. Courts will not
enforce a time or area restriction on competition in many cases.
The particular conditions of this case demonstrate there is still
room for restrictive covenants in appropriate circumstances.
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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