Applying non-solicitation covenants

Ex-employee doing business with client who called

Colin Gibson
Question: A former employee signed an employment contract with a non-solicitation covenant which said she couldn't solicit our clients if she left. She resigned and went to a competitor and we have now discovered that she is doing business with one of our clients. She claims the client called her. Does the non-solicitation clause still apply?

Answer: The question of what constitutes “solicitation” will depend on the circumstances of each particular case and the language and requirements of the specific covenant. Generally, “solicitation” requires some active step to be undertaken by the employee in seeking business. If a client comes to the employee, without the employee seeking out that client, this is unlikely to breach a restrictive covenant.

In your situation, if the client called the former employee, this is unlikely to trigger the non-solicitation clause, because the contact was not the result of the employee actively seeking out the client.

If the former employee provided her new contact information to the client, then the question of whether there was a breach of covenant is less clear. A non-solicitation clause does not prevent an employee from advertising or publicizing her new contact information to the public at large, or to a general group of potential clients. Subject to the specific wording of the clause, it is only if the former employee contacts a specific client in order to seek their business that the clause would be breached. Without knowing more about the circumstances under which the former employee gave the client her contact information, it would be impossible to prove this was solicitation.

If the former employee happened to see the client at an industry event and the two exchanged business cards, this would not likely constitute solicitation. Conversely, if the former employee systematically contacted clients to provide her new information to all of them, this would amount to a breach of the covenant.

It is also important to remember an employer faces a number of hurdles when trying to enforce a non-solicitation clause or other form of restrictive covenant. First, the onus of proving an employee has taken steps which breach this obligation is on the employer. Where the alleged solicitation was in the course of a casual conversation and the employee denies she was seeking the client’s business, it may be very difficult to meet this onus of proof.

As a further hurdle, the employer must establish the covenant is enforceable. A court will attempt to balance the legitimate interests of the employer, the interests of the employee in being able to earn a living and the interests of the public in having access to the employee’s services as a way to ensure the former employee’s rights are restricted no more than necessary to protect the legitimate interests of the employer.

As set out in Aurum Ceramic Dental Laboratories Ltd. v. Hwang, to enforce a restrictive covenant, an employer must prove:

•the covenant protects a legitimate proprietary interest of the employer;
•the restrictions in the covenant are reasonable in terms of duration, scope, nature of activities prohibited and overall fairness;
•the terms of the restriction are clear and certain; and
•the restrictions are reasonable with reference to the public interest.

Further, if a restrictive covenant is ambiguous, this will be construed against the interests of the party that drafted the clause — usually the employer. Unless the employer has a well-drafted non-solicitation clause and clear evidence of a breach, it is unlikely to succeed in enforcing such a restrictive covenant.

For more information see:

Aurum Ceramic Dental Laboratories Ltd. v. Hwang, 1998 CarswellBC 170 (B.C. S.C.).

Colin G.M. Gibson is a partner with Harris & Company in Vancouver. He can be reached at [email protected] or (604) 891-2212.

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