While many employers may be aware of the difficulties in enforcing non-competition clauses, they may not be aware of another risk associated with such clauses: their potential to increase the reasonable notice period.
Last October, I discussed a case in which an employee with only 4 years of service was awarded damages equivalent to 12 months of notice.This result was due, in part, to the fact that the employee was subject to a 12-month non-competition clause.
More recently, in Ostrow v Abacus Management Corporation, Mergers and Acquisitions, 2014 BCSC 938, the British Columbia Supreme Court stated that “a non-competition clause in the employment contract is a factor which may increase the length of the reasonable notice period.” (para 79)
In that case, the 42 year-old plaintiff was employed as a specialist in US taxation for 9 months. His written employment contract stated that upon termination he would be provided with “reasonable notice according to the law or pay in lieu of notice in accordance with the law…”. It also contained a six-month non-competition clause.
Despite his short length of service, the Court held that the plaintiff was entitled to a reasonable notice period of six months. The Court concluded that the plaintiff was entitled to a longer notice period than similar cases because of the following factors:
- the specialized character of his employment;
- the lack of available similar employment;
- his reasonable expectation of job security based on the employer’s assurances when he was hired; and
- the existence of a non-competition clause.
The Court stated that although the employer did not seek to enforce the non-competition clause, the fact that the plaintiff was led to believe that he was bound by the clause made it relevant to the determination of the reasonable notice period.
This case serves as a caution to employers that if they require an employee to be bound by a non-competition clause, they could be required to prove the employee with an increased reasonable notice period in exchange.
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