Restrictive Covenants - Detailed Analysis

Last Updated: October 2022

(a) Onus

In the context of an employment contract, the party relying on the covenant bears the onus of establishing that it is reasonable.1 By contrast, in the commercial context, i.e. the sale of a business, the Supreme Court of Canada held in Payette v. Guay that “a restrictive covenant is lawful unless it can be established on a balance of probabilities that its scope is unreasonable.” 2While the decision was rendered under the civil law of Quebec, the principle is equally applicable under common law.

  1. Shafron v. KRG Insurance Brokers, [2009], 1 S.C.R. at para. 27; Maguire v. Northland Drug Co. Ltd., [1935] SCR 412, 1935 CanLII 35 (SCC) at p. 416; Friesen v. McKague, 1992 CanLII 4023 (MBCA) at p. 5.
  2. Payette v. Guay inc., [2013] 3 SCR 95, 2013 SCC 45 (CanLII), at para. 58.