Dynamic Lawyers Blog» Employment

Employee Termination Contract | Agreement (Ontairo): FREE DL Guide!

admin — Sat, 28 Aug 2010 18:25:32 +0000

Employee Termination Contract | Letter | Agreement

This is the full and FREE DL Guide that comes with every purchase of an Employee Termination Agreement on Dynamic Lawyers:

When you purchase an Ontario Employee Termination Agreement from Dynamic Lawyers, you get a lawyer-prepared and customizable legal form, a VIDEO TUTORIAL showing you how to customize the legal form, the DL GUIDE (above), plus another DL GUDE (entitled “Is My Legal Form Valid and Enforceable?”) – all for a very low price of just $47 plus taxes! It would cost you thousands of dollars for a lawyer to prepare all of these things for you from scratch! So what are you waiting for? Get your package today!

Employment Agreement | Contract | Template | Form (Ontario): FREE DL Guide!

admin — Sat, 28 Aug 2010 17:59:33 +0000

Employment Contract | Agreement

This is the full and FREE DL Guide that comes with every purchase of an Employment Agreement on Dynamic Lawyers:

When you purchase an Ontario Employment Agreement from Dynamic Lawyers, you get a lawyer-prepared and customizable legal form, a VIDEO TUTORIAL showing you how to customize the legal form, the DL GUIDE (above), plus another DL GUDE (entitled “Is My Legal Form Valid and Enforceable?”) – all for a very low price of just $47 plus taxes! It would cost you thousands of dollars for a lawyer to prepare all of these things for you from scratch! So what are you waiting for? Get your package today!

Termination Letter Template (Part 3): Restrictive Covenants…

admin — Tue, 06 Jul 2010 07:29:24 +0000

Employee Termination Agreement

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you are an employer or employee and need legal advice with respect to employee termination, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. You can contact me directly if you need a lawyer.

This is the third of a series of blog posts I’m writing about employee termination. In this blog, I’ll touch on restrictive covenants that can be included in an employee termination agreement – such as non-competes, non-solicitation, and non-disparagement clauses. In the first blog, I reviewed what these agreements are and how they can be structured. In the second blog, I talked about terms that you could find in these agreements and important things to consider, such as consideration, payment, and release of claims.

Confidentiality
Sometimes, particularly when very important matters are being settled and the media is involved, there may need to be a provision in an Employee Termination Agreement that the parties will keep the agreement (in whole or in part, including its existence) strictly confidential. Alternatively, the parties may want to have a separate Confidentiality and Non-Disclosure Agreement entered into in conjunction with the Settlement and Release Agreement. Since these Agreements are lengthy and may be complicated, it is best to make them separate from the Release and Settlement Agreement. You can purchase a One-Sided Confidentiality and Non-Disclosure Agreement package (which includes the form, video guide, and DL Guides) on Dynamic Lawyers. If that’s the case, make sure that any “Entire Agreement” clause in the General Terms (which effectively says that whatever is in this agreement is the only thing part of the agreement) doesn’t invalidate the other agreement! Just make an exception in the Confidentiality and Non-Disclosure Agreement for the Employee Termination Agreement and vice-versa! If you’re finding this is too complicated, make a post on DynamicLawyers and get a lawyer to review and revise the agreement so that everything dovetails.

Other Restrictive Covenants
Restrictive Covenants are terms and conditions in the Employee Termination Agreement that limit the Employee’s ability to do certain things after the employee is terminated. Typical examples include restrictions on the ability to compete or solicit customers or employees. Non-compete clauses generally say that the Employee will not him or herself compete with the Employer in its business for a set period of time and within a specific geographic area after termination. Non-solicitation clauses generally say that the Employee will not solicit customers or employees of the Employer (or its agents, representatives, etc.) for a set period of time and within a certain geographic area after termination.

Non-Compete, Non-Solicitation, Non-Disparagement
Non-compete clauses are designed to protect the Employer by preventing the Employee from competing in the “Business” (recall from my previous blog that this is a defined term that can appear in the Background Information of an Employee Termination Agreement) after termination. Non-solicitation clauses are another form of restrictive covenant whereby the Employee agrees not to solicit Customers or employees of the Employer. Finally, Non-Disparagement clauses are meant to prevent the Employee from making defamatory statements against the Employer. Make sure to have a lawyer review these clauses for you if you have any doubts as there are strict legal tests that must be met in order for these clauses to be enforceable.

Restrictive Covenant Tips
It’s worthwhile to spend some extra time discussing restrictive covenants (to help make sure that they are as valid and enforceable as possible). So, apart from ensuring that your proposed restrictive covenants are clear, complete, and reasonable, and that “Consideration” exists (as discussed above), here are some additional tips to help strengthen the enforceability of your restrictive covenants:

Explain why it’s needed
It’s not a bad idea to include in a non-compete or non-solicitation agreement the reason for having those types of restrictive provisions. This will form part of what the parties knew at the time, as well as the consideration (i.e. the benefits and detriments that passed between the parties as part of making the fundamental exchange). So the reason for having a non-compete or non-solicitation agreement could include:

The Employee was provided with confidential information as part of his or her job;
The Employer invested a lot of time, energy, and resources to developing a trade secret, patent, or technology;
The Employee had direct access to clients and client lists;
The Employee was a representative of the business (such that the public equates the identity of the Employee with the identity of the business);
The Employee gained significant insight into the Employer’s business; and
The Employer’s industry is new, specialized, or very competitive.

Pay for it!
Always remember that asking an Employee to give up a right doesn’t come for free. Their right to compete and solicit can only be restricted temporarily and in exchange for Consideration (i.e. pay, benefits, etc.). So just make sure to equate this Consideration with the right that they Employee is agreeing to give up!

How long is too long?
Sometime less than 2 years seems to be reasonable and capable of being upheld by Ontario courts – particularly in the Employment context. 10 years is unlikely to be enforceable. Courts will look at a number of factors to determine whether the temporal limits are reasonable – such as the Employee’s age, position, experience, time with the employer, and termination pay (the more they are paid, the longer the restrictive covenant will tend to be enforceable for). What’s reasonable will depend on the specific facts applicable in each situation.

How far is too far?
You want to be pretty precise here in terms of language, but also reasonable. If you as the Employer try to say something like “you can’t compete in the same area as where my customers live”, it’s unlikely to be enforceable (because it’s too vague: where the heck do the customers live?). Also, you can’t ask for the moon by saying that an Employee can’t compete within a very large geographic area (e.g. country). Sometimes, an Employer will be able to claim an entire country or province as off limits, but that will be because the Employer actively operates throughout that area. You need to be fair and reasonable here or else your restrictive covenant won’t be enforceable. What’s fair and reasonable will depend on the mutual expectation of the parties at the time the Employee Termination Agreement is made.

Take time to review, get legal advice, and negotiate
It’s always a good idea for an Employer to provide time to the employee to read and understand the agreement, get legal advice (this will effectively impute the knowledge of the lawyer onto the employee), and even negotiate the terms of the restrictive covenants. Showing these things will help to mitigate potential challenges. It’s particularly important for the Employer to demonstrate that the Employee negotiated the clause (and just didn’t accept things blindly), as this will prevent the Employee from arguing things like they were under duress, undue influence, etc. which forced them to sign. Independent legal advice is also important for the Employer: courts will not look kindly on those parties who have had such advice and then later claim they didn’t understand or agree to the restrictive covenant.

By the way, if you need an Employment Agreement or Employee Termination Agreement, you’ve come to the right place. We have both! The Employee Termination Agreement can be used by an Employer to terminate an Employee’s employment. It is drafted in favour of the Employer: it contains a release of liability, settlement of claims relating to the employment and termination thereof, and includes restrictive covenants (e.g. non compete and non solicitation clauses). If you’re looking for an employment agreement, just go here. Both sell for only $47 and they come with video tutorials and 2 free written guides (the form and the written guides are lawyer-prepared).

Here’s the sample Video Guide that comes with this Employee Termination Agreement:

This information and this sample video guide is NOT legal advice and is provided for informational purposes only. If you need an Ontario lawyer, go to Dynamic Lawyers and make a post.

Termination Letter Template (Part 2): Important Considerations

admin — Tue, 06 Jul 2010 07:19:51 +0000

Employee Termination Agreement

This is the second of a series of blog posts I’m writing about employee termination. In this blog, I’ll briefly discuss some nuances that you should be aware of when it comes to an Employee Termination Agreement. In the first blog, I reviewed what these agreements are and how they can be structured.

Consideration
Before getting into the nuts and bolts of a basic Employee Termination Agreement, it is worth discussing one important element that helps make these agreements valid and enforceable to begin with. That element is called “Consideration”. Consideration is something of value given by both parties to a contract that induces them to enter into the agreement. Consideration is typically something like money for goods or services, etc. One party receives something of value and the other party receives something of value. This makes the contract valid, binding, and enforceable. For an Employee Termination Agreement, the Consideration will be the money that the Employer pays the Employee. This amount could reflect the common law (i.e. judge-made law) or statutory (i.e. Employment Standards Act, 2000) requirements of minimum or reasonable payment in lieu of notice which the Employer is required to provide when terminating an Employee. In exchange for receiving this money, the Employee agrees to settle all real and possible disputes and release all claims against the Employer relating to his or her employment and termination thereof.

Defining the “Released Claims”
In the background section of the Employee Termination Agreement, the Employer gets the chance to describe the claims that are going to be settled and released. Typically, this will relate to claims that could arise from the Employee’s employment or way in which they were terminated. This description becomes a defined term – the “Released Claims” – for ease of reference to be used throughout the rest of the Agreement. While the Employee will want to have a narrow interpretation of the Released Claims (to help cast a wide net of liability on the Employer), the Employer will want a very broad interpretation of the Released Claims (to help reduce the likelihood that the Employee will go after it for future claims).

Payment
The first part of the body of the Employee Termination Agreement typically says something to the effect that the Employee agrees to settle and release the Employer in respect of the Released Claims in exchange for money. Now, here’s where you can get a bit more detailed:

When is the money to be paid (e.g. immediately after signing the agreement, within a set period of time, promptly but in any event within a few days, etc.)?
How is the money to be presented (e.g. cash, certified cheque, money order, personal cheque, readily available funds, etc.?) and paid (e.g. lump sum, over time, is there a deposit?)
Are there any taxes involved that need to be included in the settlement amount?

Release of Claims
So now that the Employee has his or her money and has agreed to settle the claims, the Employer wants to have a bullet proof release of claims section. Not only does the Employer want to be released from past, present, and future claims of any kind and in any forum whatsoever, but it also wants its LEGAL REPRESENTATIVES released as well. So who are these other persons? Well, there’s a whole bunch of different terms here worth going over:

Directors and Officers: these are individuals who manage a corporation.
Heirs: someone who would benefit (under the law) when the Employer dies without a Will.
Executors / Administrators: a person appointed by a testator to carry out his or her will.
Successors: typically used for corporations that succeed and assume the obligations of other corporations
Assigns: a person who receives the benefit of an assignment, and can include individuals andcorporations

As you can see, directors, officers, heirs, executors and administrator relate to individuals while successors and assigns can relate to both individuals and corporations. Who exactly goes into the release will depend on how the Employer carries on business: is it a sole proprietor, partnership, corporation, etc.? If it’s a corporation, it will have officers, directors, employees, etc. to act on its behalf, so they should be included in the release. For sole proprietorships, there won’t be any officers or directors.

No Claims, Assignment, Assistance, Admission
In addition to getting an air-tight release for both itself and other important persons, the Employer also wants to make sure that the Employee does not do a few more things. First, the Employee can’t start or maintain any claims respecting the Released Claims. If he or she has started a claim already, it would be wise on the part of the Employer to put in a requirement that the claim (and describe it as best as you can) be immediately released, cancelled, settled, etc. with the court at the Employee’s sole expense and that proof thereof be provided immediately thereafter to the satisfaction of the Employer. You can play around with the language but you get the point. Next, what if the Employee had previously assigned its rights to go after the Employer, for example, to a trustee in bankruptcy? Well, the Employer will want the Employee to give a representation that he or she has not and will not assign his or her rights to be able to go after the Employer. A full settlement first means that the Employee is capable of settling (i.e. that he or she is entitled to go after the Employer but that it will not because of the settlement). Next, the Employer wants and the Employee to acknowledge that it will not assist any person in any claim respecting the Released Claims. Remember: these are contractual terms so a breach of this term could result in damages being sought and awarded. Finally, the Employer wants the Employee to acknowledge that there is no admission of guilt or liability. In fact, the only thing being admitted here is that there is no such admission!

In the next blog, I’ll continue my discussion of the various terms you can find in an Employee Termination Agreement.

Here’s the sample Video Guide that comes with this Employee Termination Agreement:

This information and this sample video guide is NOT legal advice and is provided for informational purposes only. If you need an Ontario lawyer, go to Dynamic Lawyers and make a post.

Termination Letter Template (Part 1): What is an Employee Termination Agreement

admin — Tue, 06 Jul 2010 07:14:45 +0000

Employee Termination Agreement

This is the first of a series of blog posts I’m writing about employee termination. In this blog, I’ll briefly discuss what is an Employee Termination Agreement and how it can be structured. In the next blog, I’ll discuss some important elements of this Agreement.

What is an Employee Termination Letter?
An Employee Termination Agreement allows an Employer to terminate an individual’s employment. It’s simply not a good idea for an Employer to end that relationship by saying to an Employee: “you’re being let go and we’ll send you your final pay check in the mail”. This could lead to costly and time-consuming litigation claims related to things like whether the termination pay was adequate, whether the method of termination was heavy-handed, or whether the Employee is able to compete against the former Employer. To help prevent these and other types of disputes from arising, an Employer should have an Employee Termination Agreement. It serves two main purposes for an Employer. First, it allows the Employer to settle any and all real or possible disputes with the Employee concerning the employment and termination thereof in exchange for payment. Second, it allows the Employer to require the Employee to agree to restrictive covenants such as non-compete and non-solicitation clauses. If the employment relationship was already governed by a written agreement which contained such clauses (such as the Employment Agreement that can be found here), it’s still a good practice to have the Employee re-acknowledge these terms upon termination.

Structure of Employee Termination Letter
Various terms and conditions are typically included in an Employee Termination Agreement, such as:

Introductory clause
Background information
Payment by Employer to Employee
Release of Claims by Employee
No Claims to be made by Employee
No Assignment of Claims by Employee
No Assistance by Employee
No Admission of liability by Employer
Non-Compete, Non-Solicitation, Non-Disparagement
Restrictions Reasonable
Injunctive Relief
General Terms

Here’s the sample Video Guide that comes with this Employee Termination Agreement:

This information and this sample video guide is NOT legal advice and is provided for informational purposes only. If you need an Ontario lawyer, go to Dynamic Lawyers and make a post.

FREE Employee Termination Agreement? Not Quite! But it’s the next best thing!

admin — Mon, 05 Jul 2010 20:27:40 +0000

FREE Employee Termination Agreement Template? Not quite…but it’s the next best thing…

We have just released an Employee Termination Agreement for Ontario. While it’s not FREE, it’s pretty darn affordable: ONLY $47! In addition to the lawyer-prepared, customizable, and downloadable legal form, you get a FREE Video Tutorial (watch an example of how to customize it), a FREE WRITTEN GUIDE (read helpful information about this legal form) and ANOTHER FREE WRITTEN GUIDE (entitled “Is My Legal Form Valid and Enforceable?”). All for just $47? Awesome! Best of all, if you need a lawyer, just go to www.DynamicLawyers.com and make a post to get free quotes.

This legal form can be used by an Employer to terminate an Employee’s employment. It is drafted in favour of the Employer: it contains a release of liability, settlement of claims relating to the employment and termination thereof, and includes restrictive covenants (e.g. non compete and non solicitation clauses). You can also find an Employment Agreement (indefinite term) to purchase on www.DynamicLawyers.com.

Employment Agreements | Contracts for Employment – What you need to know (Part 2)

admin — Wed, 23 Jun 2010 06:39:12 +0000

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to Employment Agreements in Ontario, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. If you’re looking for an employment or independent contractor agreement, then check out our legal forms + video guides. You can contact me directly if you need a business lawyer.

This is the second of a series of blogs I’m writing about written employment agreements. Here, I’ll be talking about how Employers and Employees view these agreements differently. Since there will sometimes be a negotiation at the beginning of the relationship or when it comes time to renegotiate, it’s important for both sides to understand where the other side’s interests lie.

If you’re an employer, you’ll want to make sure that you have the right person for the job. That person must have the skills, experiences, and knowledge that the position requires. You’ll want to be clear about pay, benefits, vacation, etc. When it comes to restrictive covenants, you don’t want the employee to share or use confidential information during and after the employment relationship comes to an end; nor do you want the employee to take their new-found knowledge and connections and set up shop down the street to compete with you or solicit your customers or employees. That’s why you’ll include restrictive covenants which are both reasonable (to make them enforceable) yet in your interests. You’ll want to specify how the relationship can come to an end and what your obligations are in those circumstances (e.g. notice, payment in lieu thereof, severance, etc.). Finally, you’ll want to make sure that the employee does not have strong grounds to challenge the process by which he or she entered into the employment agreement to begin with. By this, I am referring to things like the employee later complaining that:

they did not understand the employment agreement because they were not given enough time to review it;
the employee did not have independent legal advice (while this is not a legal requirements, it is still good to have); or
the employee was pressured or under duress and therefore signed involuntarily.

Now, for their part, the employee will want to know their role and have a clear idea of their remuneration. That remuneration may be in the form of salary or wages, bonuses, stock options (in the case of a corporation), commissions, and allowances (e.g. car, gym, etc.). They will also want a generous termination package. Finally, they want the LEAST restrictive covenants possible; in fact, it’s their preference that there not be any at all!

So, for these two parties to reach an agreement, there may need to be compromise. Generally, the Employer has more bargaining power over the Employee if there is an abundant labour supply and the Employee does not have any special knowledge, skills, or experiences. But if the Employee brings a lot to the table, the Employer have to yield. If the parties are relatively equal, one party being too aggressive may kill the deal. That’s why its best for both parties to realize the interests of the other party and try to come to a mutually fair and reasonable arrangement. Don’t try taking advantage of the other side; it may cause more damage than good in the long-term (remember: these parties will be working together for what could be a very long time!).

By the way, if you’re an Employer and looking for an Employment Agreement (indefinite term), then you’ve come to the right place:

Employment Agreement (Client) – Indefinite Term

This Ontario Agreement can be used by an Employer who wants to hire an Employee. The “indefinite term” part means that the Agreement starts on a date provided for in the Agreement and then comes to an end only when the Employee resigns or is terminated by the Employer (by giving notice, payment in lieu of notice, or for Just Cause). Here’s the sample Video Guide that comes with this Employment Agreement – Indefinite Term:

Employment Agreements | Contracts for Employment – What you need to know (Part 1)

admin — Wed, 23 Jun 2010 06:15:52 +0000

This is the first of a series of blogs I’m writing about written employment agreements. If you’re an employer, you need to realize the benefits of having a written employment agreement. First, it’s a written contract. It sure beats an oral contract for obvious reasons:

it defines the employee’s roles, duties and responsibilities;
it indicates how much the employee will be paid and what bonuses, benefits, and vacation they will be entitled to;
it may impose restrictive covenants – such as confidentiality, non-compete and non-solicitation provisions;
it may set out a probationary period; and
it will specify how the employment may be terminated (e.g. by giving notice, for Just Cause) and also identifies the employee’s entitlements upon termination.

So having a written employment agreement helps to clarify the relationship in a number of important ways. It manages the employee’s expectations with respect to pay, benefits, duties, reporting obligations, termination, etc.

At the end of the day, the Employer can decide what to initially include in the written employment agreement. Terms will generally be negotiated (the most important being pay and benefits, no doubt) between the Employee and the Employer. It’s important that the Employee NOT start working prior to the employment agreement being signed. The reason: when the Employer ultimately wants the Employee to sign a written agreement without giving additional consideration (e.g. pay, benefits, title, etc.), the Employee can claim that they are being forced to enter into a NEW contract which they don’t want to accept. In these situations, they can claim that they were constructively dismissed and seek damages for lack of notice or payment in lieu of notice! To avoid these types of situations, the Employer should give consideration (i.e. pay, benefits, etc.) to the Employee as part of signing the comprehensive employment agreement.

Now, sometimes it’s customary for an Employer to provide the Employee with a written OFFER OF EMPLOYMENT. This will typically be a SHORT document that outlines the basics of the employment relationship, such as:

the Employee’s personal information (name, address, SIN, etc.)
the Employee’s proposed job title, hours, pay, supervisor, start date etc.
a probationary period; or
a reference to the Employer’s policies and benefits.

Even though these OFFERS OF EMPLOYMENT are signed by both the Employer and the Employee, it MUST be made clear that they are simply AGREEMENTS TO AGREE at some future time. They are NOT the employment agreement that will ultimately govern their relationship. Think of it more like a letter of intent: the parties want to get the basic terms agreed upon before the formal employment agreement is signed. Once again, an Employer SHOULD indicate that a separate written employment agreement is required to be entered into PRIOR to the Employee starting to work. There should also be a clause in the OFFER OF EMPLOYMENT that states that it is non-binding upon the parties and simply an agreement to agree.

By the way, if you’re an Employer and looking for an Employment Agreement (indefinite term), then you’ve come to the right place:

Employment Agreement (Client) – Indefinite Term

Avoiding Constructive Dismissal Claims…

admin — Tue, 01 Jun 2010 04:13:49 +0000

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to employment-related matters, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. If you’re looking for an employment or independent contractor agreement, then check out our legal forms + video guides. You can contact me directly if you need a business lawyer.

So in this blog, I’ll be talking about how an employer can make fundamental changes to an employee’s employment without triggering a constructive dismissal claim. Recall from previous blogs that, if an employer changes a fundamental aspect of an employee’s job (e.g. increased responsibilities, decreased pay, decreased benefits, relocation, etc.), then the employee can claim that they were constructively dismissed and seek damages for reasonable notice. In order to avoid the cost and time of litigating a constructive dismissal case, an employer should wise-up so that it does not INADVERTENTLY terminate the employee.

Wronko v. Western Inventory Ltd.
This leads me to my discussion of Wronko v. Western Inventory Services Ltd. 2008 ONCA 327, leave to appeal refused, 65 C.C.E.L. (3d) 185 (Supreme Court of Canada). This was an Ontario Court of Appeal decision. In this case, after working for the company for 16 years, an employee was promoted to management. Later that same year, the employee signed a new employment agreement that provided him with a payment of 2 years’ salary and bonus in case he was terminated without cause. About a year and a half later, the employee was presented with a revised employment agreement. This new agreement cancelled and replaced his previous termination package with a simple “3 weeks for each year of service” up to a maximum of 30 weeks’ notice package. This new package was designed to match other packages for senior executives. This did not sit well with this particular employee, since he stood to gain more under the previous termination package. So he refused to sign. The president of the company sent an email to the employee, advising him that the amended employment agreement was in “full force and effect”. The employee fought back, claiming that he had been constructively dismissed. He launched a lawsuit.

The Court of Appeal found that the president’s email was evidence of the employer terminating the employment relationship. It was a unilateral and unequivocal change to a fundamental aspect of that relationship. The employee had also repeatedly and steadfastly rejected the amendment – but to no avail. Since the employer had terminated the relationship, the employee had 3 options: (1) accept the change, (2) reject the change and sue for damages for constructive dismissal, or (3) make it clear to the employer that the new terms are being rejected (at which point the employer has to decide whether to terminate the employee with proper notice and offer re-employment on new terms or acquiesce to the employee’s position). In the case of (3) above, if the employee does not terminate the employee and permits him or her to keep fulfilling his or her job requirements, then the employee is entitled to insist on adherence to the terms of the original employment contract!

In this particular case, the Court of Appeal found that the third option above fit the bill. Specifically, the employee explained that he had rejected the new changes. Instead of terminating the employee and offering re-employment on new terms or continuing his employment based on the old terms, it simply terminated him. This triggered the old termination clause (not the new one, since that agreement had not been accepted by the employee). As such, the employee was entitled to 2 years’ termination pay!

Lessons learned
So what can be gleamed from Wronko? Well, if you’re an employer and you want to avoid being sued for constructive dismissal, you need to offer fresh consideration (something of value to the employee) when you unilaterally change a fundamental aspect of employment. That “consideration” cannot simply be continued employment. There must be additional pay, benefits, etc. to reflect a bargain. Furthermore, this fresh consideration must be accepted by the employee. It’s best to document this acceptance through a new employment agreement or amendment to the existing one. If that consent is not forthcoming, then the employer has a few options: (1) terminate the employee based on the provisions of the employment agreement (or common law or employment standards legislation) and offer re-employment based on new terms or (2) allow the employee to maintain their employment based on the old and existing terms.

Non-Compete and Non-Solicitation Agreements (Part 4): Watch out!

admin — Sat, 15 May 2010 00:31:57 +0000

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to Non-Compete or Non-Solicitation clauses in Ontario, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. If you’re looking for Non-Compete and Non-Solicitation clauses within an employment or independent contractor agreement, then check out our legal forms + video guides. You can contact me directly if you need a business lawyer.

This is part 3 of a series of blogs I’m writing about non-compete and non-solicitation agreements. In my first blog, I discussed what they were and when you need them. I also talked about what tests and factors a court will consider in determining whether to enforce a non-compete clause. In my second blog, I tackled the question of when should an employer or human resources manager require an employee to sign a non-compete or non-solicitation agreement. In this blog, I’ll be discussing the things that employers and human resources managers should be on the lookout for if they want to try to mitigate lawsuits from happening or succeeding in court.

Clear
As with any legal contract, if a restrictive covenant is vague or ambiguous such that it is open to multiple interpretations, it may not be enforceable. So watch out! Make sure your term is clear in what it purports to do. If you need help, contact a lawyer. Remember: there’s an age-old rule of interpretation called contra-proferentum which states that, in the case of an ambiguity, the provision should be interpreted against the party who wrote it. Ouch! Don’t use wishy-washy language, such as “may”; use definitive language such as “must” or “shall”. Finally, don’t provide alternatives in the restrictive clause itself – for example “the non compete clause may last 1, 2, or 3 years”; this will make it unenforceable for vagueness.

Complete
If your restrictive covenant is missing an important term (e.g. timeline, geographic limit, etc.), then it may be rendered incomplete and unenforceable.

Reasonable
Recall that only reasonable restrictive covenants are enforceable. They must be reasonable as between the parties’ legitimate interests and for the public in order to be upheld. What’s reasonable, you ask? Well, it will depend on the circumstances of each case. But you need to make sure that the proprietary interest you’re trying to protect (e.g. client lists, trade secret, pricing policies, technology), your timeline (i.e. the length of time you want the restrictions to last for), your geographic limits, and your scope of protection are all reasonable. With respect to the latter, are you preventing a person from competing in the entire business or simply from soliciting clients? What exactly will the former employee be prevented or limited from doing? If a restrictive covenant goes above and beyond what is “reasonable”, then the employer may run into trouble.

The employee will be provided with confidential information for his or her job;
The employer has invested a lot of time, energy, and resources to developing a trade secret, patent, or technology;
The employee will have direct access to clients and client lists;
The employee will be a representative of the business (such that the public equates the identity of the employee with the identity of the business);
The employee will gain significant insight into the employer’s business; and
The employer’s industry is new, specialized, or very competitive.

Pay for it!
Always remember that asking an employee to give up a right doesn’t come for free. Their right to compete and solicit can only be restricted temporarily and in exchange for consideration (i.e. pay, benefits, etc.). So just make sure to equate this consideration with the right that they employee is agreeing to give up.

Things change over time: make amendments
It’s always a good idea to review your non-compete and non-solicitation agreements every now and then and renew them (i.e. by reinforcing their existing and providing additional consideration for the employee to agree). Why? Well, if your 10 year old restrictive covenant says that the employee cannot compete in the business and the business has changed over time, then it may be too vague to enforce. You need to be more specific and have the agreement reflect with some precision what the business is. Only that way can you mitigate against potential court challenges. The same thing goes if you say that the business involves the employer selling products or services. What it sells today may be different from tomorrow. And if that changes, then so too should the contract.

How long is too long?
Sometime less than 2 years seems to be reasonable and capable of being upheld. 5 years is unlikely to be enforceable. Courts will look at a number of factors to determine whether the temporal limits are reasonable – such as the employee’s age, position, experience, time with the employer, and termination pay (the more they are paid, the longer the restrictive covenant will tend to be enforceable for).

How far too far?
You want to be pretty precise here in terms of language, but also reasonable. If you as the employer try to say something like “you can’t compete in the same area as where my customers live”, it’s unlikely to be enforceable (because it’s too vague: where the heck do the customers live?”). Also, you can’t ask for the moon by saying that a person can’t compete within a very large geographic area (e.g. country). Sometimes, an employer will be able to claim an entire country or province as off limits, but that will be because the employer actively operates throughout that area. You need to be fair and reasonable here or else your restrictive convenant won’t be enforceable.

Time to review, get legal advice, and negotiate

Finally, it’s always a good idea for an employer to provide time to the employee to read and understand the agreement, get legal advice (this will effectively impute the knowledge of the lawyer onto the employee), and even negotiate the terms of the restrictive convenant. Showing these things will help to mitigate potential challenges. It’s particularly important for the employee to demonstrate that the employee negotiated the clause (and just didn’t accept things blindly), as this will prevent the employee from arguing things like they were under duress, undue influence, etc. which forced them to sign. I can’t stress having a clause in the agreement that says that the parties have had independent legal advice. Courts will not look kindly on those parties who have had such advice and then later claim they didn’t understand or agree to the restrictive covenant. The court may say: too bad!

By the way, if you’re an Employer and looking for an Employment Agreement (indefinite term), then you’ve come to the right place:

Employment Agreement (Client) – Indefinite Term

FYI, in case you’re looking for an Ontario, lawyer-prepared, customizable, downloadable and AFFORDABLE Non-compete Agreement, then look no further:

NON-COMPETE | NON-COMPETITION AGREEMENT

You can use this form to prevent a party from competing with you in a business during and after the term of an agreement. If you’re an employer hiring an employee, you can purchase an Employment Agreement (indefinite term), which comes with non-compete clauses in it. If you’re an employer and you are terminating an employee, you can find non-solicitation clauses in this Employee Termination Agreement. If you’re a client and wish to engage an independent contractor, you can purchase an Independent Contractor Agreement, which also comes with non-compete language in it. If you’re just doing a business deal with a party (e.g. sharing information, joint venture, partnership or shareholders, services, etc.) and want to prevent them from competing, then you need one of these agreements!

The Video Guide (below) is just a sneak peak of the video guide that comes with the Non-Compete Agreement Legal Form + Video Guide All of Dynamic Lawyers’ legal forms are lawyer-prepared, simple to read, easy to customize, and only a fraction of the price a lawyer would charge. Also, each legal form comes with a FREE VIDEO GUIDE (watch a useful example of how this legal form can be customized), a FREE DL GUIDE (read helpful information about this legal form), and another FREE DL GUIDE that sheds valuable insight into how legal forms can be challenged. What are you waiting for? Best of all, if you DO need a lawyer and need some legal advice, simply make a post and get FREE quotes from Ontario lawyers focusing on the area of law you require!

Also, in case you were looking for a NON-Solicitation Agreement, you’ve come to the right place:

Non Solicit | Non-Solicitation Agreement Ontario

This legal form can be used to restrict one party’s ability to solicit the customers and employees of another party. If you’re looking for Non-Compete Agreements, Confidentiality and Non-Disclosure Agreements, you can purchase them as well on Dynamic Lawyers.

If you’re an employer hiring an employee, you can purchase an Employment Agreement (indefinite term), which comes with non-solicitation clauses in it. If you’re an employer and you are terminating an employee, you can find non-solicitation clauses in this Employee Termination Agreement. If you’re a client and wish to engage an independent contractor, you can purchase an Independent Contractor Agreement, which also comes with non-solicitation language in it. If you’re just doing a business deal with a party (e.g. sharing information, joint venture, partnership or shareholders, services, etc.) and want to prevent them from soliciting customers or employees, then you need one of these!

This information and this sample video guide is NOT legal advice and is provided for informational purposes only. If you need an Ontario lawyer, go to Dynamic Lawyers and make a post.