In this case, the Alberta Court of Appeal clarified, in obiter, several points of employment law relating to non-competition covenants. First, the Court stated that non-competition covenants are not enforceable against an employee whose employment contract has been wrongfully terminated. Second, the Court stated that continued employment, without more, is not sufficient consideration for making an amendment to the employment contract - namely, a non-competition covenant - that is adverse to the employee.
The case concerned three employees who agreed to non-competition covenants with Globex Foreign Exchange Corporation. One employee was wrongfully dismissed by the company; the other two agreed to the covenants during their employment, but received no new benefits for doing so, and later left the company. All three were sued by Globex for violating the non-competition covenants, but the trial judge found none of the covenants to be enforceable.
Justice Hunt, for the Alberta Court of Appeal, found that the non-competition covenants were unenforceable because they were overly broad and vague, and therefore violated the reasonableness test in Shafron v. KRG Insurance Brokers (Western) Inc., a 2009 Supreme Court of Canada case. In obiter, Justice Hunt stated that the General Billposting principle - that an employer cannot enforce a non-competition covenant against an employee that it has wrongfully dismissed - remains good law in Canada. Justice Hunt, referring to a 2005 Alberta Court of Appeal case dealing with the same matter, further stated that continued employment, without more, can not serve as consideration for an amendment to the employment contract that is adverse to the employee.
In dissent, Justice Slatter disputed the majority's holding on grounds relating to the standard of review. He also disagreed with the two issues addressed above. Justice Slatter argued that General Billposting is inconsistent with later Supreme Court of Canada cases, and therefore would not have applied it. Instead, he would have held that, despite the wrongful termination of an employment contract, non-competition covenants in that contract are still enforceable. Justice Slatter also would have held that continued employment can serve as consideration for an amendment to the employment contract. He reasoned that, since ongoing "at will" employment can be terminated at any time, a "tacit promise" that the employment would not soon be terminated could be found in this case.
August 10, 2011
Link to Decision
Sierra Robart & Kai Sheffield
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