On February 1st, 2016, Justice Lukasz Granosik of the
Superior Court of Quebec rendered an interesting decision regarding
the application of the terms of a fixed-term employment contract
after the tacit renewal of the employment contract for an
Overview of the facts
In January 2000, the Employee, Danny Kennel (the
"Employee"), was hired by Traffic Tech Inc.
("Traffic Tech") as a transport
specialist. He signed a three-year fixed-term employment agreement,
which contained a renewal clause to the effect that "the
Employer will provide the employee with a notice at least sixty
days prior to the expiration of the contract advising as to the
renewal or the non-renewal of the contract. The renewal would be
for a one-year period and from year to year thereafter as the
parties see fit". The employment agreement also contained
a confidentiality clause and a clause prohibiting the solicitation
of employees and clients.
At the end of the three year period, Traffic Tech did not send
the Employee a notice of renewal or non-renewal, however the
Employee continued to work. In 2004, the Parties signed a new
fixed-term employment agreement for a three-year period (the
"Agreement"), which contained the same
renewal clause, and the same confidentiality and non-solicitation
At the end of the term, no notice of renewal or non-renewal was
given by Traffic Tech and the Employee continued to work for
In 2011, the Employee was approached by a competitor and induced
to leave his employment with Traffic Tech. They also asked that
three members of his sales team join him. As a result, while the
Employee was still working for Traffic Tech, he met with the three
employees from his team and presented them with offer letters from
the competitor, which they all decided to accept. Accordingly, in
April 2012, the Employee met with management of Traffic Tech and
presented the four resignation letters to Traffic Tech effective
Traffic Tech subsequently instituted proceedings against the
Employee alleging a violation of the non-solicitation and
confidentiality clauses of his Agreement and a breach of his legal
duty of loyalty. Among other things, Traffic Tech sought the amount
of $1.28 million for breach of the non-solicitation clause in the
The Court's decision
The Superior Court decided that the non-solicitation and
confidentiality clauses in the Agreement were inapplicable.
Specifically, since the Agreement had not been renewed in
accordance with the renewal clause contained therein, but the
Employee had continued working more than five days past the
expiration thereof, the Employee's employment was tacitly
renewed for an indeterminate term, in accordance with article 2090
of the Civil Code of Quebec (C.C.Q.).
However, in accordance with the previous case law in this
regard, the Court declared that the tacit renewal only applied to
the essential conditions of the Agreement, and specified that this
includes the Employee's salary or hours of work. Nonetheless,
in an unprecedented decision, the Court concluded that
confidentiality clauses, non solicitation clauses, and other
restrictive covenants are not essential conditions of the
employment agreement. In short, and to the extent that the
employee's obligations of confidentiality and non-solicitation
exceed the legal duty of loyalty provided at article 2088 of the
Civil Code of Quebec, those obligations are not
It should be noted that the Court did find a breach of the
Employee's duty of loyalty since he had solicited members of
his sales team while he was still an employee of Traffic Tech.
Nonetheless, the Court did not award any damages to Traffic Tech
since Traffic Tech was unable to prove that it incurred any damages
as a result of the Employee's breach.
Important takeaways for employers
This decision really highlights the dangers for an employer to
allow an employee under a fixed-term employment agreement to work
beyond the expiry of the term. Firstly, it is clear that this
decision set an important precedent in that confidentiality
clauses, non solicitation clauses, and non competition clauses will
not be enforceable in the event of the tacit renewal of the
Furthermore, there will also be uncertainty when dealing with
clauses that exceed salary, hours of work or other basic employment
conditions as to whether they fall within the definition of
"essential conditions of employment".
As a result, when hiring an employee, an employer should
strongly consider whether it is even advantageous to enter into a
fixed-term employment agreement or whether an indeterminate term
agreement may be safer.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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