In our earlier post (Are Non-Competition Restrictions Enforceable?), we reviewed “restrictive covenants” – these are clauses under which employees are bound by restrictions such as non-competition restrictions, non-solicitation obligations, and other controls on the employee’s behaviour which bind the employee after termination.
In Eagle Professional Resources v. MacMullin, 2013 ONSC 2501, the court considered a dispute between two competitors – Eagle and Maplesoft.
Eagle alleged that its ex-employees took confidential information from Eagle, and began soliciting clients, employees, and contractors of Eagle to work for Maplesoft. The defendant ex-employees argued that they did not use any confidential information to solicit business. They asserted that any contact information that they used was already publicly available through LinkedIn or Facebook accounts.
When reviewing the enforceability of restrictive covenants in the employment context, the court reiterated a three-part test (when in doubt, there is always a handy three-part test ):
- Does the employer have a proprietary interest entitled to protection?
- Are the temporal and spatial features of the restrictive covenant too broad? (Put another way, are there reasonable limits in time and geographic space?)
- Is the covenant unenforceable as being against competition generally, as opposed to a more limited covenant against solicitation of former clients?
The court concluded that “there is no evidence from Eagle, other than a very bald assertion, that it had any proprietary interest entitled to protection. According to the Defendants, the information that they learned at Eagle was all publicly available and obtained from such sources as social media websites.” There are a few take-aways from this decision:
- When drafting restrictive covenants in the employment context, non-solicitation and confidentiality clauses are more likely to stand up, whereas non-competition clauses are likely to be struck down as unenforceable, as in this case. Make sure to have your agreements reviewed;
- If a “confidential customer list” is virtually the same as the employee’s LinkedIn or Facebook contacts, then there will be no proprietary interest to protect, since the information will be publicly visible to anyone.
- The court will assume that the employer will lead with its strongest evidence. Compelling evidence of specific cases of solicitation or competition is critical for success in an application by the employer – as the court quipped “Lead with trump or risk losing”. In this case, the evidence was ambiguous or it fell outside the non-competition period.
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