Restrictive Covenants - Detailed Analysis

Last Updated: October 2022

(e) Contract Renewals, Former Contracts, Expired Contracts

Where a company inserted a non-competition clause into a renewal agreement with a consultant without drawing it to his attention, the court held it not to be enforceable. Two previous written contracts has been identical and had not contained a non-competition agreement. The individual had not reason to suspect that, just because the company had shifted its contracts to an electronic portal, it was changing terms to insert the non-competition clause. The court held that company should have clearly and unambiguously advised its consultants of that fact.1

In another decision, the employer asserted enforceability of a covenant where the employee resigned to work for a competitor, returned to the employer a few weeks later without a new written agreement, then resigned again a number of years later. The employer’s argument that the restrictive covenant contained within the employment agreement in effect before the first resignation applied. The court soundly rejected this argument, stating:

In my view, an implied restrictive covenant, entered into ten years after the last written contract between the parties expired, and after Mr. Roszkowski left his employment with PointOne to work for a competitor, and then was rehired without complaint about his having done so, is more than ambiguous – it is a fiction. As the Supreme Court of Canada held in RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54, [2008] 3 S.C.R. 79, citing Imperial Sheet Metal v. Landry, 2017 NBCA 51, courts should not be reading restrictive terms into employment contracts when the parties have not bargained for them. In my view, neither should courts read in or imply a restrictive covenant into an employment contract where the parties have bargained for one, and then allowed it to lapse.2

In another decision, a court held that a consultant’s contract had simply expired, and was not terminated by mutual consent. As the restrictive covenant was only applicable following “termination” of the agreement, not following expiry, it was not called into play.3

  1. S.I. Systems Partnership v. Geng, 2020 ONSC 8086, at para. 70.
  2. PointOne Graphics Inc. v. Roszkowski et. al., 2021 ONSC 629, at para. 25.
  3. Mirage Consulting Ltd. v. 5573344 Manitoba Ltd., 2021 MBQB 186, at para. 32.