Adam Ostrow worked for Abacus Management Corporation Mergers and
Acquisitions ("Abacus") as a specialist in US taxation.
His employment lasted for the nine month period from March to
Ostrow's employment with Abacus was terminated without cause
with immediate effect. He was provided with one week's pay in
lieu of notice. This was the statutory compensation for length of
service to which he was entitled under the B.C. Employment
In a letter provided to him on termination of his employment,
Ostrow was specifically cautioned about the non-competition
provision in his employment contract. He was also verbally reminded
by the Human Resources manager at Abacus of the provision which
"restrict[ed] him from working for other employers" for a
period of six months.
Ostrow became re-employed 16 months after his dismissal from
employment. On the new job, his pay was 30 percent less than at
Ostrow sued Abacus for wrongful dismissal. Because Abacus chose
not to dispute liability (a wise strategic decision in the
writer's considered view), the only issue before the Court was
the amount of damages arising out of the wrongful dismissal.
Decision of B.C. Supreme Court
The Court found that Ostrow was entitled to "damages in
lieu of notice in the amount of six months' pay which
include[d] benefits, Canada Pension Plan contributions, and
bonus". While there are other interesting aspects of the
Court's decision, the part of the decision that warrants
special attention is the effect of the non-competition provision on
the notice period.
The Court began by observing that the limited case law on point
was consistent in holding that "a non-competition clause in
the employment contract is a factor which may increase the length
of the reasonable notice period".
The Court then ruled that the non-competition provision in
Ostrow's contract increased the notice period to which he was
entitled. It rejected Abacus' submission to the effect that it
did not seek to enforce the restrictive covenant against Ostrow and
had never before "taken legal action against an employee with
regard to the violation of such a covenant". The question, the
Court said, was whether Ostrow had reasonably believed he was bound
by the restrictive covenant. The Court held:
Upon his termination, Abacus gave Mr. Ostrow a formal letter
which reminded him of the non-competition clause in the contract.
He was also verbally reminded of that clause by Ms. Fong. It was
reasonable at that point for Mr. Ostrow to believe that he was
bound by the clause, regardless of whether Abacus had enforced such
agreements in the past or would do so in Mr. Ostrow's case
The Court did not specify how much the notice period was
increased because of the non-competition provision in Ostrow's
contract. It is, however, interesting that the length of the notice
period to which he was found to be entitled exactly matched the
temporal duration of the restrictive covenant.
As well, it is interesting that the Court did not hold Ostrow to
a particularly exacting standard when considering whether he had
taken reasonable steps to mitigate the loss flowing out of
termination of his employment (as he was legally obligated to do).
In light of Ostrow's "belief that he was bound by a
non-competition clause", it was reasonable, the Court held,
for him to "self-restrict his mitigation efforts" and
take "more than the normal time to right himself".
Take-Away Points for Employers
Human Resource practitioners who work with employers have been
handed one more reason to approach non-competition provisions with
Think carefully about whether a non-competition provision should
be incorporated into an employee's employment contract in the
first place. Regardless of the actual enforceability of a
non-competition provision, consider whether you will remind a
departing employee that he or she is bound by the non-competition
provision in his or her contract. Perhaps even give thought to
whether you will provide the departing employee with notice that
there will be no attempt at all to enforce the non-competition
provision against him or her following termination of his or her
Above all, if you have any questions at all regarding a
non-competition provision (or any other restrictive covenant for
that matter), the desirability of incorporating such a provision
into an employment contract and the overall business and
operational implications, it is prudent to contact a reputable
employment lawyer who can provide you with the necessary legal
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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