When a former apprentice or employee starts a competing business, there’s not much an employer can do
By Jeffrey R. Smith
When an employer takes on an apprentice or trainee and devotes time and money in making the newcomer well-versed in their field, the employer hopes it will reap the benefits of the apprentice’s developing skills.
But there’s always the nagging concern the apprentice will leave and use those skills to work for a competitor.
Some employers in highly-skilled industries try to get employees to sign non-compete agreements, which require a certain passage of time after an employee leaves before she can do similar work in proximity to the employer. The enforceability of these types of agreements varies, depending on how reasonable the restrictions are and whether it’s truly protecting the employer’s business from harm.
But what happens when an apprentice signs up, works independently and leaves? Can the apprentice have restrictions imposed upon leaving? This was the question for a Saskatchewan tattoo artist, who apprenticed with an experienced artist.
When the apprentice signed on, the established tattoo artist had him sign an agreement that, if their relationship was terminated, the apprentice couldn’t set up shop as a tattoo artist within 320 km for three years, unless he paid $10,000. When the apprentice completed his apprenticeship, he continued to work at the parlour, renting a chair from his mentor and serving his own clients. The apprentice was responsible for his own finances and expenses.
After spending three years at the tattoo parlour, the former apprentice decided to stop renting the chair and left to set up his own shop nearby. He only informed his own clients of the move and didn’t take any of the mentor’s existing clients. The mentor sued for $10,000, but a court found the original agreement wasn’t enforceable.
There was no reasonable justification for preventing the former apprentice from setting up shop within the geographical area and during the time period outlined in the agreement, and the new shop didn’t take away any of the mentor’s business, said the court. It found the agreement was designed to eliminate competition, not protect the mentor’s proprietary interests.
How far can a non-compete agreement go to protect a business? Does it make a difference if the signatory is a full employee or an independent contractor? Can an employer ever really make a valid agreement to lessen competition, regardless of whether an employee or apprentice signs it willingly?
Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at employment law from a business perspective. He can be reached at [email protected]. For more information, visit www.employmentlawtoday.com.
