Do Restrictive Covenants Work?
By Paul Lewis It’s a competitive world. In recognition of this, employers frequently attempt to protect themselves against their competitors through the use of non-solicitation and non-competition covenants. A Cautionary Tale A recent Ontario Court of Appeal decision – H.L. Staebler Company Ltd. v. Allan – serves to clarify the law. In the Staebler case, two employees with written non-competition covenants resigned their employment and began selling commercial insurance for a competitor of Staebler. Within two weeks of their departure, approximately 120 clients moved their business from Staebler to Staebler’s competitor. Not surprisingly, Staebler brought an action. The non-competition covenant that was the focus of the litigation stated: “In the event of termination of your employment with the Company, you undertake that you will not, for a period of 2 consecutive years following said termination, conduct business with any clients or customers of H.L. Staebler Company Limited that wer
