A British Columbia court recently explored a novel issue – whether a noncompetition clause is enforceable against a seasonal employee.
Facts
In See Thru Window Cleaners Inc. v. Mahood, 2016 BCSC 2134, the employer was in the seasonal business of window cleaning, gutter cleaning, and pressure cleaning. It employed most workers in the spring, summer, and autumn months and then laid them off for the winter. One of those seasonal workers was the defendant, Mr. Mahood.
Mahood was hired as an entry-level window cleaner. He worked for See Thru on and off for 15 years. He was laid off each winter, only to be rehired the following year. At times, he would find other work while laid off. At other times he would collect employment insurance benefits. This pattern was repeated throughout most of his employment.
In October 2008, Mahood became the crew foreman. He was then required to enter into a noncompetition agreement.
In February 2009, Mahood left See Thru. But he returned to the company’s employ one year later. At that point, in early 2010, he signed another noncompetition agreement. In it he agreed not to establish his own competing business within the city of Kamloops for a period of three years after leaving his employment with See Thru.
After signing this second agreement, Mahood worked for See Thru on a seasonal basis until November 2015, as follows:
- February 18, 2010, to November 22, 2010;
- February 21, 2011, to November 11, 2011;
- April 30, 2012, to August 13, 2012;
- April 4, 2013, to December 12, 2013;
- March 24, 2014, to November 28, 2014; and
- March 9, 2015, to November 14, 2015.
On January 14, 2016, Mahood resigned. He started a business named Adam & Eaves Window and Gutter Cleaning. It competed directly against See Thru.
See Thru sought an injunction against him that would prohibit him from competing against it for a period of three years from the end of his employment on January 14, 2016.
Court’s decision
Mahood defended the action by saying that his employment with See Thru was terminated each year when he was laid off. The three-year restriction he’d agreed to in 2010 therefore had expired well before January 2016.
To decide this issue, the court looked at the definitions of “temporary layoff” and “termination of employment” in the B.C. Employment Standards Act (ESA). Under that ESA, a layoff is not temporary and employment is terminated when an employee is laid off for more than 13 weeks in a period of 20 consecutive weeks without right of recall.
The court found that Mahood’s employment was terminated in November 2011 when he was laid off for more than 24 weeks. This was well in excess of the 13 weeks set out in the ESA. As a result, the 2010 noncompetition agreement started to run in November 2011. The three-year restriction expired in November 2014. That was well before Mahood set up his business. As a result, he was free to operate it.
Lessons for employers
Consider the applicable definition of “temporary layoff”: The exact formulas will differ, but each Canadian jurisdiction has employment standards legislation that defines when employees are temporarily laid off and when they are terminated. Employers seeking to impose post-employment restrictions should consider precisely when a termination occurs under the applicable legislation.
Noncompetition clauses are rarely enforceable: We want to highlight the fact that courts are reluctant to enforce noncompetition clauses against regular employees. The court in this case noted that the three-year noncompetition clause was likely overbroad and unenforceable in any event.
A better option that is more likely to be enforced by a court is a well-worded, narrowly defined nonsolicitation clause that will protect the existing clients of the employer. Each situation is likely to be decided based upon its own unique facts so we recommend seeking advice from an experienced employment lawyer.
On April 24, Fasken Martineau attorneys Gilda Villaran and Cindy Switzer will present Canadian Work Permit Requirements: How to Manage Temporary Work Permits, Business Travel, and Relocation, a 90-minute webinar on how Canada’s immigration system runs with respect to recruiting and employing foreign workers. Click here for more information or to register.
