In Catch Engineering Partnership v. Mai, 2023 ABKB 279, the Alberta Court of King’s Bench awarded $112,320 in damages against a former employee who breached the non-solicitation provisions in his employment contract. This case underscores the importance for both employers and employees to understand the nuances of non-solicitation agreements and their implications within the legal framework of Ontario.

What happened to cause Catch to file a claim against Mr. Mai?

In Catch Engineering Partnership v. Mai, Mr. Mai, an engineer employed by Catch Engineering Partnership (“Catch”), resigned from his position after 10 months of service. Shortly after tendering his resignation, Mr. Mai contacted one of Catch’s significant clients, CNRL, to offer his services through another technical services company. This action led to CNRL terminating its engagement with Catch. Subsequently, Catch filed a claim against Mr. Mai for breaching his employment agreement, particularly the non-solicitation provisions therein.

How did the court rule in this case?

The court’s ruling in this case provides several key insights into the enforceability of non-solicitation clauses:

1. The Presumption of Invalidity: Non-solicitation provisions are considered restrictive covenants and are presumed to be invalid unless they can be justified as reasonable in the circumstances. This presumption arises from the concern that such clauses may unduly restrict employees’ ability to seek alternative employment.

2. Factors Supporting Enforceability: The court identified specific factors that supported the enforceability of the non-solicitation clause in Mr. Mai’s employment agreement:

a. The nature of Catch’s business necessitated protection of client relationships.

b. The clause was narrowly focused on protecting Catch’s legitimate business interests without unreasonably restricting Mr. Mai’s ability to find work.

c. Mr. Mai had negotiated his employment terms, indicating no imbalance of power in the agreement.

d. The prohibited activity was clearly defined and unambiguous.

3. Breach and Consequences: The court found Mr. Mai in clear breach of his non-solicitation obligations, resulting in adverse consequences for Catch, including the loss of a significant client. Consequently, Mr. Mai was ordered to pay Catch damages.

What do you need to know about non-solicitation clauses?

• First, employers must ensure that non-solicitation clauses are drafted clearly and unambiguously, specifically defining the prohibited activities and individuals covered by the restriction.
• Second, non-solicitation clauses should be narrowly tailored to protect the employer’s legitimate business interests, such as client relationships, without unduly restricting employees’ ability to seek alternative employment.
• Third, it is always advisable for both employers and employees to seek guidance from experienced legal professionals when drafting, interpreting, or challenging non-solicitation clauses.

This case highlights the significance of non-solicitation clauses in employment agreements and the criteria for their enforceability. Employers must exercise diligence in drafting these clauses, ensuring they strike a balance between protecting their interests and respecting employees’ rights. Similarly, employees should be aware of their contractual obligations and seek legal advice if uncertain about the implications of such clauses. Understanding and adhering to the legal principles surrounding non-solicitation clauses is essential for fostering fair and transparent employment practices.

If you are an employer who requires council on the drafting or the enforceability of your non-solicitation employment contract clause or an employee who has a non-solicitation clause in their employment contract and require advice and guidance, Whitten & Lublin can help. As experienced employment lawyers, we have dealt with thousands of non-solicitation employment contract clauses. If you would like more information about what Whitten a& Lublin can do for you, please contact us online or by phone at (416) 640-2667 today

Author – Carson Healey