Canada: Restrictive covenants constantly under the judicial microscope

Last Updated: September 24 2014
Article by Mark Josselyn

When an employee or contractor leaves a company, they always leave with knowledge and sometimes try to leave with customers and staff.  Restrictive covenants in contracts are meant to resist and limit that, but these covenants have proven increasingly difficult to enforce.

Employers and their counsel need to be aware of the degree of judicial scrutiny that will be brought to the restrictive covenants which they attempt to enforce with their employees. Employee interests are so carefully guarded now by the courts that employer actions to enforce restrictive covenants can be summarily dismissed without a trial, as shown in the recent ThyssenKrupp Elevator (Canada) Limited v. Amos et al., 2014 ONSC 3910 (discussed below). 

It is instructive to review the landscape within which Canadian employment law operates and to consider the often quoted words of Justice Iacobucci of the Supreme Court of Canada inMachtinger v. HOJ Industries Ltd., [1992] 1 SCR 986:

"Work is one of the most fundamental aspects in a person's life, providing the individual with a means of financial support and, as importantly, a contributory role in society.  A person's employment is an essential component of his or her sense of identity, self-worth and emotional well-being."

When examining the enforceability of restrictive covenants in the employment law context, the starting point is the Supreme Court of Canada decision in Elsley v. J.G. Collins Insurance Agencies, [1978] 2 SCR 916 which held that the reasonableness of any such provisions is to be assessed against three criteria:

1.         Does the employer have a proprietary interest entitled to protection?

2.         Are the temporal and spatial features of the clause too broad?

3.         Is the covenant enforceable as being against competition generally, and not limited to prescribing solicitation of clients of the former employer?

Elsley has been much interpreted in the more than 35 years since 1978.  In 2009, the Supreme Court of Canada in Shafron v. KRG Insurance Brokers (Western) Inc., [2009] 1 SCR 157 acknowledged that restrictive covenants give rise to a tension in the common law between the concept of freedom to contract and public policy considerations against restraint of trade.  Justice Rothstein confirmed that in determining reasonableness one must review the geographic coverage of the covenant, the period of time in which it is effective, as well as the extent of the activity sought to be prohibited.  However, there can be no such determination unless the restrictive covenant is unambiguous as the reasonableness of a covenant cannot be determined without first establishing the meaning of the covenant.

This proposition has received further support in the decision of Justice Myers of the Ontario Superior Court of Justice released June 26, 2014 in ThyssenKrupp Elevator (Canada) Limited v. Amos et al., 2014 ONSC 3910.  In this case Justice Myer was presented with a motion for summary judgment by the Defendant and was required to assess the following non-competition and non-solicitation provisions:

"7.l  Amos shall not, during the term of his employment hereunder and for a period of one (1) year from its termination, either directly, or indirectly, individually or in partnership, carry on or be engaged in, or concerned with, or interested in, in any capacity whatsoever (including that of principal, agent, shareholder, employee, lender or surety) any person, firm, association, syndicate, or company engaged in or concerned with or interested in, the conception, designing, development, fabrication, construction, modernisation, maintenance, marketing, distribution, advertising, franchising or sale of products or services similar to those conceived, designed, developed, fabricated, constructed, modernized, maintained, marketed, distributed, advertised, franchised or sold by the Corporation in the course of his employment with the Corporation, within the Province of Ontario.


7.3  During the period contemplated by Section 7.1, Amos shall not, directly or indirectly, solicit or attempt to solicit, interfere with or endeavour to entice away any business, client, prospective client or contract of the Corporation then existing or contemplated by the Corporation within 12 months prior to the termination of Amos.  Amos shall perform his services for the Corporation from its offices located in London, Ontario."

Justice Myers concluded that these were not two sophisticated commercial parties of equal bargaining strength and also held that Mr. Amos, in an entry level management post, was in no sense a fiduciary.

The non-competition provision was declared invalid as a "...naked restriction on competition with no apparent rationale for its breadth of scope and geography..."

The court held that while non-solicitation clauses are viewed as being inherently more reasonable, they must still first and foremost be unambiguous and must clearly advise the former employee which customers are off-limits.

There was no way for Mr. Amos to know what business his former employer was contemplating at any time in the past year anywhere in Canada, nor could he have known all of the prospective customers across the country.

As there was no evidence that the Defendant had breached any duty of confidentiality or released any confidential information, the court held that there were no material facts requiring a trial and dismissed the action.

Interestingly the court noted that the Plaintiff had taken no additional steps to obtain documents from the Defendant during a cross-examination or otherwise and had not sought directions to compel documentation or sought to conduct discoveries in advance of the motion.  Justice Myers confirmed the "culture shift" that has occurred as a result of the Supreme Court of Canada's decision in Hryniak v. Mauldin, [2014] 1 S.C.R. 87 and the movement away from the "full trial model" in order to fairly and justly adjudicate disputes by way of a timely, affordable and proportionate procedure.

* * *

To read more about Hryniak v. Mauldin, referred to above, check this 2014 Gowlings newsletter article  Hryniak v. Mauldin: Supreme Court Loosens Restrictions on Summary Judgment Imposed by Combined Air

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
20 Oct 2016, Seminar, Ottawa, Canada
A panel of Gowling WLG and insurance experts will offer their perspectives on current trends and solutions available in the insurance market.
8 Nov 2016, Seminar, Ottawa, Canada

The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.

22 Nov 2016, Seminar, Ottawa, Canada

From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.