The challenges of enforcing non-competition and non-solicitation
clauses in employment contracts are well known. It is less
renowned that such clauses may increase the reasonable notice
period owed by an employer to a dismissed employee, as we were
reminded in a recent decision by the Supreme Court of British
Columbia: Ostrow v Abacus Management Corporation Mergers
The defendant, a private equity company, employed Mr. Ostrow as
a senior manager to provide tax advice. There was a termination
clause in his employment contract that allowed for "reasonable
notice according to the law or pay in lieu of notice in accordance
with the law". The contract also included a six month
The defendant terminated the plaintiff after nine months and
provided him with one weeks' pay in lieu of notice, being the
minimum notice required under the Employment Standards
Act. The termination letter reminded the plaintiff of
the non-competition clause.
The Court held that the termination clause did not permit the
employer to limit notice or pay in lieu to the statutory
minimum. Rather, the termination clause was interpreted to
mean that the employee was owed reasonable notice at common
law. In addition to the traditional factors at common law
which determine the reasonable notice period (i.e. age, length of
service, character of employment, and availability of similar
employment), the Court considered the existence of the
non-competition clause. The defendant employer insisted that
it had not sought to enforce the non-competition clause.
However, the plaintiff was found to have a reasonably held belief
that the employer would seek to enforce it.
The Court decided that the presence of the non-competition
clause in the employment contract increased the reasonable notice
owed to the employee upon termination of his employment without
cause, regardless of whether the clause was ultimately relied on by
the employer or even enforceable.
The Court awarded Mr. Ostrow, a 42 year old who had been
employed for nine months, six months of notice.
Implications for Employers
As a general rule, absent a termination clause in an employment
contract, the employee will be entitled to a generous and uncertain
reasonable notice period in accordance with the common law.
In the Ostrow case, although the employment contract
contained a termination clause, it did not expressly limit the
notice period to anything less than the common law. As a
result, the Court was left to determine the reasonable notice
period and consider relevant factors, including the restrictive
Employers should carefully consider the necessity and
enforceability of restrictive covenants in their contracts, the
relationship such restrictions may have with the termination
obligations, and how to address their existence at the time of a
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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