Restrictive Covenants in Employment

Document Type

Article

Publication Title

Law Now

Volume

34

Issue

1

DOI

10.11575/PRISM/34168

First Page

1

Publication Date

January 2009

Abstract

The restrictive covenant must be clear in its restrictions. Given the public policy concern, the courts do not start out favourably disposed to these clauses, and if they are ambiguous, the courts may be inclined to rule them unenforceable. One common example is the use of the word "radius" in the context that the employee is not to work within the radius of X kilometres. A radius requires an identifiable point from which to "radiate" the territory. This might be a local landmark or the front door of the employer. The corporate limits of a large municipality are not a finite point from which to draw a radius. The reasonableness of activity, time, or geographic restrictions cannot be determined if they are ambiguous. An ambiguous restrictive covenant is, on its face, unreasonable and unenforceable. The question was then whether the Court could interpret it in such as way to render it reasonable. The Supreme Court of Canada said that "notional severance," reading down a clause to make it legal and enforceable, is inappropriate to cure an ambiguous restrictive covenant. Courts will not simply rewrite a covenant to what it subjectively considers reasonable, or employers would draft overly broad restrictive covenants and invite the court to sever any unreasonable parts or read down the covenant to what is reasonable. The Supreme Court said this would alter the risks assumed by the parties and increase the chances that employees will face unreasonable restrictions. The Court also considered "blue.pencil severance" which involves deleting part of the clause. The expression came from a 1920 English case which said, "the part severed can be removed by running a blue pencil through it." In Shafron, could the word "Metropolitan" be simply deleted? The Court said that "Metropolitan," while technically meaningless here, was a part of the bargain the parties struck going to the essence of this restriction, and it could not be removed in this way. Nor could the doctrine of rectification be invoked to rewrite the bargain between the parties. In the result, the whole restrictive covenant was struck out as unenforceable because of the ambiguity created by the generic word "Metropolitan."

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