With or without contractual non-competition and non-solicitation clauses, commercial and employment relations frequently require lawyers to examine whether one party’s conduct is or would be contrary to rules governing unfair competition and solicitation of clients or employees.
RSS litigators Jean-Pierre Sheppard, Normand Laurendeau and Matthew McLaughlin were recently involved in two cases, opposing an application for an injunction in one case, while seeking the injunction in the other.
RSS was successful in both cases.
Opposing the injunction: Procedural grounds
In Patriot Freight Services Inc. c. Men- zies, RSS represented a leading transportation company which was contesting an application by a competitor for a provisional interlocutory injunction aimed at preventing our client from soliciting the competitor’s employees and clients. The competitor also sought similar conclusions against three of its former employees now working for our client, relying on restrictive covenants signed by them.
We successfully opposed the issuance of the provisional injuncti on notwithstanding the validity of the noncompetition and non-solicitati on clauses invoked. We convinced the Court that the conditions justifying the provisional injunction simply did not exist:
- The plaintiﬀ did not have a strong case at ﬁrst glance;
- It did not suﬀer a serious or irreparable prejudice;
- Granting an injunction would have much harsher eﬀects on defendant employees than on the plaintiﬀ, since their livelihood was at stake; and
- There was no urgency.
Asking for an injunction: Implicit obligations not to compete unfairly
In another case, this time unreported, RSS successfully applied for an interlocutory and permanent injuncti on on behalf of an integrated provider of manufacturing and engineering services in the aviation industry.
We obtained some crucial orders:
- An order for the return of operational, accounting and ﬁnancial documents misappropriated by former employees of our client;
- An order prohibiting former employees from using the conﬁdential information related to the operations, accounting and business of our client, including information relating to costs of materials, pricing, sales history and forecasts, market studies and strategies and technical product specs;
- An order prohibiting them from soliciting their former employer’s clients for several months.
Opposing counsel had put forth the position that the non-competition clauses invoked were invalid. RSS successfully argued that employees responsible for business development and customer service, who have a close relationship with clients and access to conﬁdential information, owe a legal duty of loyalty to former employers, as well as the duty not to compete unfairly, even in the absence of any non-competition clause.
What must we conclude?
Even in the absence of speciﬁc non-competition or non-solicitation clauses, an employee:
- May not use unfair tactics to compete with his former employer
- May not libel or slander it, or spread unfounded disparaging rumours
- May not use conﬁdential informati on acquired during his employment to appropriate clients or pursue opportunities that he may have learned about when he was an employee.
In summary, the presence or absence of non-competition and non-solicitation clauses, whether in an employment contract or in a commercial contract for the sale of a business or shares therein, is not necessarily determinative.
Careful examination of the facts and circumstances in each case might show that what looks like a clear open and shut case is not necessarily so.