| Business Law | | Case Problems For Discussion – Case 6 |

| Business Law | | Case Problems For Discussion – Case 6 |

Presented To: Darren Walsh

April 3, 2012
Authored by: Margaret Rideout
Presented To: Darren Walsh

April 3, 2012
Authored by: Margaret Rideout

Table of Contents Discuss the factors the courts should consider in deciding this case. Render a decision. 3 Restrictive covenant and its effects on post-employment positions 3 Supreme Court of Canada Addresses Enforceability of Restrictive Covenants in Employment Agreements 6 The Courts decision. 8 Conclusion 10 Works Cited 11

Introduction
The legality of the subject matter of a contract determines its validity and enforceability. Legality is generally determined on the basis of public policy or public interest; any agreement contrary to these considerations may be illegal or void.
Agreements to between businesses that restrain competition contrary to the Competition Act are illegal. Agreements that violate specific laws are generally treated in this legislation as being either void or illegal. Other contracts in restraint of trade at Common Law may be simply unenforceable in a court of law.
Some restraint of trade agreements that are beneficial to the parties and do not often public policy may be enforced if the restrictions can be shown to be reasonable and necessary. (Willes & Willes, 2009)

The Suburban Medical Centre was founded in 1981 as a medical clinic by eight physicians and surgeons. In 1998, the clinic advertised in the medical press for an obstetrician. Umesh, a medical specialist, answered the advertisement. Following an interview, Umesh was employed by the clinic and signed an employment contract that contained the following clause:
Should the employment of the party of the Second Part by the parties of the First Part terminate for any reason whatsoever, the party of the Second Part COVENANTS AND AGREES that he will not carry on the practice of medicine or surgery in any of its branches on his own account, or in association with any other person or persons, or corporation or in the employ of any such person or person or corporations within the said suburbia or within ten kilometres of the limits thereof for a period of five (5) years thereafter. Umesh proved to be a difficult, but hard-working employee, and after some years an argument arose between Umesh and one of the founders of the clinic. As a result of the argument, Umesh resigned. He immediately set up a practice in the same city. The clinic continued to operate without the services of Umesh and later brought an action for damages and an injunction against him. Discuss the factors the courts should consider in deciding this case. Render a decision.
Restrictive covenant and its effects on post-employment positions
A restrictive covenant is usually a clause in a contract which prohibits an employee from competing with his ex-employer after the employee has parted company with the business, or prevents the ex-employee from soliciting or dealing with customers of the business by using knowledge of those customers gained during his prior employment.
The starting point for any such post-termination restriction is that it is void on the grounds of illegality. It follows that an employer generally is not entitled to protect himself against competition from his ex-employees. However, if the ex-employer can convince a court that the covenant is: * designed to protect his legitimate business interests; and * That it extends no further than is reasonably necessary to protect those interests then it will be upheld and enforced.
A non-compete clause may be enforced to protect a legitimate business interest – for example, client connection, confidential information or a stable workforce – and not simply to stifle or prevent competition.
The standard types of restrictions which can be used by employers are: