Former employees can work for competitor despite signing non-competition agreement

Ontario court rejects non-competition clause, upholds non-solicitation clause
|employmentlawtoday.com

Two former employees of an Ontario company can work for a competitor despite a signed agreement to the contrary, according to the Ontario Superior Court of Justice. However, the two men must honour other clauses of the agreement which prevent them from contacting the company’s clients for one year or disclosing confidential information about the company.

Rob Bryans, 26, was hired as an account manager and Adam Kennedy, 25, as a technical product specialist by Trapeze Software Inc. of Toronto, a company involved in the research, development, marketing, installation and servicing of automated computer software for the transportation industry.

Bryans and Kennedy started their jobs on June 14, 2004 and June 6, 2005, respectively, and both signed a proprietary rights agreement which stated they could not “become engaged” with a direct competitor nor solicit any Trapeze clients for a competitor for a period of 12 months after resigning. The agreement also contained a clause preventing either of them from disclosing any confidential information about Trapeze they may have acquired during their tenure with the company. In signing the agreement, Bryans and Kennedy agreed that these clauses were reasonable.

Kennedy resigned from Trapeze on Sept. 26, 2006, and Bryans on Nov. 2, 2006, in order to accept positions with Transched Systems Limited. Both men said they did not consider Transched to be a competitor of Trapeze and neither had come across anything while at Trapeze to indicate otherwise. Bryans had in fact accepted a position with a company called Moore Resource Systems (Ontario) Limited, though it is an affiliate of Transched and Bryans worked out of the Transched office on Transched-related matters most of the time.

Trapeze disagreed with this contention, however, and requested an injunction against Bryans and Kennedy enforcing the non-competition clause in the agreement signed with Trapeze. Trapeze argued that preventing the pair from working with Transched, a direct competitor, was the only way to protect the confidential information they had gained while working for Trapeze. The company noted Bryans had told his supervisor at Trapeze that his new employer was not involved in the transit software business. This type of cover-up, according to Trapeze, indicated Bryans and Kennedy believed Transched was a direct competitor and working for them violated the non-competition agreement. Trapeze proposed that the two companies were in direct competition with each other for the transit software business in North America, listing five types of software which both companies produced and seven common transit clients. Trapeze also pointed out that the non-solicitation clause in the agreement was breached on Dec. 7, 2006, when Trapeze employees found a Transched business card at the office of a Trapeze client containing Bryans’ name. It became evident Transched was bidding on the same project as Trapeze.

Bryans and Kennedy insisted that, at the time they joined Transched, they did not know the company was a competitor of Trapeze in any way and though the companies may overlap in some markets, Transched is not a significant competitor of Trapeze. Bryans acknowledged his presence at the office of the Trapeze client on Dec. 7 but said it was as part of a meeting with other Transched employees and Transched’s bid predated his joining the company. Kennedy acknowledged he had met with Transched clients who had Trapeze software products but, again, these had also been Transched clients before Kennedy had joined the company.

The Ontario Superior Court of Justice found Bryans’ and Kennedy’s employment with Transched was acceptable and dismissed Trapeze’s motion to enforce the non-competition clause signed by the two men as unreasonable. However, the court recognized Transched was enough of a competitor and the two men had gained sufficient inside knowledge of Trapeze to support the non-solicitation clauses in the agreement. An injunction was granted preventing Bryans and Kennedy from soliciting Trapeze’s clients or sharing confidential information.

For more information see:

Trapeze Software Inc. v. Bryans

, 2007 CarswellOnt 364 (Ont. S.C.J.).

Related articles

Rock climber’s non-competition clause unenforceable

A non-competition clause between a rock-climbing instructor and his ex-employer is unenforceable, an Ontario court has ruled

Restrictive clauses in salesman’s employment contract too broad to be enforceable

Salesman who joined a competitor and lured away one of his former employer’s most lucrative accounts did nothing wrong

Add Comment

  • *
  • *
  • *
  • *