I recently finished season 3 of ‘Emily in Paris,’ the Netflix series about an American marketing executive living as an ex-pat in the City of Lights. All the negative press notwithstanding, the series is pure dreamy escapism. Over three seasons, Emily navigates a complicated relationship with her very attractive neighbour (who happens to be a chef—of course), rubs elbows with fashionistas and millionaires, and saunters around the city in brightly-coloured designer clothes and dangerously high heels.
So imagine my surprise when, early in season 3, the series explores the ramifications of breaching a non-compete agreement, a restrictive covenant in an employment contract, a key aspect of my commercial litigation practice.
When we first meet Emily, she moves to Paris to work at Savoire, a French marketing firm that was acquired by the Gilbert Group, Emily’s employer in Chicago. At the start of season 3, Savoire’s French employees quit, establish a new marketing firm, and attempt to solicit existing clients of the Gilbert Group, which in turn threatens to sue them for breaching their non-compete agreements. The French employees quickly back down and regroup, ultimately managing to reclaim their office space and certain high-profile clients. As is typical of the series, the dispute resolves quickly, with no harm, no foul.
How would this work in Ontario?
In the employment context, non-competition agreements are now illegal. On December 2, 2021, the Employment Standards Act was amended to prohibit non-compete agreements in employment contracts as of October 25, 2021.
Even before those amendments came into force, non-compete agreements attracted close scrutiny by the courts under the common law. As a general rule, non-compete agreements, or restrictive clauses within employment or business agreements prohibiting competition, were routinely found by the courts to be invalid and enforced only where the restriction was reasonable between the parties and with reference to the public interest. To determine whether a non-compete agreement is reasonable, the courts would consider whether the former employer has a proprietary interest to protect, if the temporal and spatial features of the agreement are broad rather than narrow, and if the agreement limits competition generally or only with respect to specific clients.
We typically saw former employers attempting to enforce non-compete agreements by seeking an injunction order against the former employee. To be successful, the former employer had to show, among other things, that they had suffered irreparable harm (i.e., harm that cannot be quantified in damages) as a result of the breach of the non-compete agreement.
The Employment Standards Act amendments do allow for non-compete agreements in two exceptions, essentially for executives and sales of a sole proprietorship or partnership. Non-competes are expected to be less common but certainly will not disappear from the Ontario landscape with these exceptions.
Alas, Ontario litigation over non-compete agreements is not as rosy as Emily in Paris portrayed. While all’s well that ends well for the intrepid characters on the show, business owners and employees alike should seek advice before entering into, enforcing, and/or defending against non-compete agreements.