Sales rep can compete with ex-employer

What appears to be an eminently reasonable non-competition clause can fall if any one detail seems unreasonable. This is the lesson of a recent decision of Justice Todd Archibald, of the Ontario Superior Court of Justice.

Kent Armstrong sold cardiovascular-intervention products for Medtronic. Because his job was highly specialized and required an average of seven-and-a-half months’ training, after 11 years with Medtronic Armstrong was making more than $100,000 annually.

A person of his experience and standing was particularly valuable in that the market in Ontario, where Armstrong worked, was limited to just 11 hospitals.

One-year competition time limit

The non-competition clause in Armstrong’s employment agreement said that, for one year from the date he left Medtronic, he could not work for any concern “in any geographic area in which Medtronic actively markets a Medtronic product or is preparing, at the time of termination of employment, to actively market a Medtronic product of the same general type or function.”

However, with its attempt not to be illegally in restraint of competition, the agreement was unusual in stating that Armstrong was free to work for competitors in responsibilities different from his former ones at Medtronic.

As well, the agreement stipulated that Medtronic would compensate Armstrong monthly for any sacrifice in salary he had to make to respect the non-competition clause.

One rarely sees such a generous clause, and Justice Archibald has conceded that the one-year time period is highly reasonable in Medtronic’s special circumstances.

(Indeed, that timeframe is common in employment contracts for much less specialized businesses.)

Sells equipment in 110 countries

The clause’s downfall here, despite the extremely limited Ontario market and otherwise generous terms, has been that Medtronic sells cardiovascular equipment in 110 countries.

“In essence,” Justice Archibald concludes, “the agreement forces an employee to take a one-year hiatus from the interventional cardiology products industry or forces the employee to continue working at Medtronic...

“The covenant is a blanket restraint on freedom to compete.”

Pending a full trial, Justice Archibald has refused to prohibit Armstrong from performing the work which he did at Medtronic for its main Ontario competitor.

For more information:

Medtronic of Canada Ltd. v. Armstrong, Ont. Sup. Ct. file 99-CV-180784, Dec. 17/99.

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