N.B. court finds restriction unreasonable in geographic scope and duration
A New Brunswick engineering firm's attempt to enforce a non-competition clause against two former employees failed — even though the restriction was embedded in a shareholder agreement
The Nov. 17, 2025 court decision carries lessons for employers with equity compensation programs.
Justice Danie Roy of the Court of King's Bench of New Brunswick granted summary judgment in favour of defendants Louis Ruest and Alain Carrier, rejecting Le Groupe Roy Consultants' $706,499 claim for damages and ordering the company to pay $3,000 in legal costs.
The ruling establishes that making employees shareholders does not allow employers to impose broader restrictions than would be permitted in a standard employment contract.
Shareholder status doesn't change employment reality
Ruest and Carrier worked as engineers at Roy Consultants' Edmundston office starting in 2009, with Ruest serving as regional director starting in August 2014. On Nov. 1, 2014, both purchased shares in the parent company, 603414 NB Inc., and joined an existing unanimous shareholder agreement from October 2010 containing a three-year non-competition clause.
The restriction prohibited shareholders from working in the same field "in all the territory served by the company and/or the affiliated company" for three years after disposing of their shares. By the end of March 2019, Ruest held 169 shares and Carrier held 234 shares in the company.
Despite their shareholder status, neither Ruest nor Carrier were members of Roy Consultants' board of directors or management team. The court found this distinction critical in determining how to interpret the restrictive covenant.
Non-compete blocked engineers from earning living
In May 2019, both engineers resigned and joined competitor Englobe Corp. Roy Consultants argued the shareholder agreement should be interpreted as a commercial contract, placing the burden on the defendants to prove the non-compete unreasonable.
Justice Roy disagreed, concluding that "the restrictive clause in the Unanimous Shareholder Agreement must be interpreted from the perspective of an employment contract and not in a commercial context."
The court found the restriction unreasonable in both geographic scope and duration. The clause effectively prevented the engineers from working throughout New Brunswick and eastern Quebec for three years, which Justice Roy determined "restricts the ability to earn a living in a way that is, in my opinion, unreasonable."
No link between damages and departures
Even if the non-compete had been enforceable, Roy Consultants failed to prove causation between the alleged damages and the employees' resignations. The company claimed losses including a $452,012 property investment for new Edmundston office space acquired in October 2017 and $19,907 in mortgage interest
The court noted that the property acquisition decision was made by the board of directors without shareholder approval, and that operating profits at the Edmundston office fluctuated between 2015 and 2022 for reasons unexplained by the evidence.
Justice Roy concluded: "I cannot conclude that there is a link between the damages claimed and the fact that Louis Ruest and Alain Carrier resigned from Roy Consultants to work at Englobe Corp."
