While non-solicit agreements are notoriously hard to enforce, an Alberta Court recently awarded an engineering firm over $112,000 in damages against a former employee who quit, joined a competitor, and successfully solicited the business of one of its clients. The Court stated the employee’s actions were a “flagrant” breach of the duty of good faith owed to his employer.
Catch Engineering Partnership v Mai, 2023 ABKB 279
The Defendant, Mr. Mai, was employed by Catch Engineering Partnership (“Catch”) pursuant to an employment agreement dated February 21, 2019. Mr. Mai was seconded to provide engineering services to Catch’s client, Canadian Natural Resources Limited (“CNRL”) from February 2019 to January 3, 2020.
In December 2019, Mr. Mai requested Catch change his status from a salaried employee to a contractor, in an effort to earn more money. Despite verbally accepting Catch’s offer, Mr. Mai resigned the following day, citing differences during negotiations. Immediately following the termination of his employment, Mr. Mai went to work for a competitor, Noramtec and was seconded to CNRL, essentially performing the same functions. CNRL then terminated its agreement with Catch.
In response, Catch sued, alleging Mr. Mai breached his employment agreement by using confidential information for his own gain and soliciting the business of CNRL in violation of the non-solicitation clause in his employment agreement. Catch also alleged Mr. Mai breached the duty of good faith and his fiduciary duties to Catch, causing it to suffer damages from the loss of the engagement with CNRL.
The Court found that the non-solicitation clause in Mr. Mai’s employment agreement was enforceable. The Court further reasoned that Mr. Mai made a “clear and unequivocal” invitation to CNRL to discontinue its engagement with Catch and contract his services through another company; and thus, breached the non-solicitation clause. The Court also reasoned that Mr. Mai exploited the confidential information he was given about CNRL to aid in soliciting CNRL’s business. Lastly, the Court found that employees who are seconded to the clients of their employers are in a “unique” position—they are integrated into the client’s business and treated like employees. As a result, Mr. Mai’s actions amounted to a flagrant breach of the duty of good faith owed to his employer. However, the Court found that Mr. Mai did not owe a fiduciary duty to Catch; and thus, there was no breach of fiduciary duty.
To conclude, the Court awarded Catch $112,320 against Mr. Mai, as well as the costs of the litigation.
While this case was decided in Alberta, it offers important lessons for Ontario employers. This case demonstrates that if an employee has an employment agreement with an enforceable non-solicitation clause, their employer may be entitled to damages if they breach their non-solicitation obligations. The Court also emphasized that the enforceability of non-solicitation clauses, which are typically difficult to enforce, will depend on the circumstances of the case. Accordingly, employers should consider obtaining legal advice on non-solicitation clauses in their employment agreements.
The lawyers at Heeney Vokey LLP would be happy to help with any related matters.