Wrongful dismissal weakens restrictive covenants (Legal view)

Alberta decision highlights complexities of such agreements
By Nikolay Chsherbinin
|Canadian HR Reporter|Last Updated: 09/27/2011

In an era of high employee mobility, employers frequently attempt to safeguard business interests by contractually preventing employees from competing, soliciting or using confidential information once they leave.

Typically, this is achieved through restrictive covenants, such as non-competition or non-solicitation clauses. But, historically, judges have been hostile towards the enforcement of restrictive covenants, correlating them with invalid restraints of trade.

The judicial trend towards a discriminatory enforcement of restrictive covenants — rooted in sensitivity to employer-employee inequality — continued with a decision by the divided Alberta Court of Appeal in Globex Foreign Exchange Corp. v. Kelcher. This decision had strong dissent and raises important employment law issues, including the effect of wrongful dismissal on the enforceability of restrictive covenants, mitigation to consideration.