Rosenberg Attorney Inc.

1000 de la Gauchétière, 24th Floor

Montreal, QC H3B 4W5

Welcome!

• Non-Competition & Non-Solicitation: Update

• Duties owed Pursuant to the Law (C.C.Q.)

• Duties owed Pursuant to the Contract

• Contractual Basics –Employment

• Employment Termination

• Termination Notice Periods & Related Concerns

• Indemnities, Benefits and Salary Continuance

Agenda/Topics To Be Covered

• Employer must not abuse his contractual rights and must always actreasonably AND in Good Faith.

• Content of contract must not contravene public order, employmentlaws or, if applicable, a collective agreement.

• Contract of employment is usually deemed to be a contract ofadhesion where the essential elements are predetermined uponsigning by the Employer.• Interpretation Rules are very different – Be Careful…..

Basic Contractual Rules Employment

• External clauses must be provided at the time of formation;

• Illegible or incomprehensible clauses are null and void;

• Abusive clauses that put adherent at an exorbitant and unreasonable disadvantage in the contractual relationship are null and void.

Interpretation Rules of Contracts of Adhesion in a Nutshell

An abusive clause is a clause which is excessively and unreasonablydetrimental to the consumer or the adhering party and is therefore notin good faith; in particular, a clause which so departs from thefundamental obligations arising from the rules normally governing thecontract that it changes the nature of the contract is an abusive clause.

Article 1437 CCQ

CA dismisses appeal and reiterates criteria for determining whether a term is unfair.

1. Commercial usage;

2. Employees duties towards employer;

3. Ease of understanding the clause in question, and

4. Existence of an imbalance between the respective obligations of each party.

Latreille c. Industrielle Alliance (L ‘), compagnied’assurance vie, 2009 QCCA 1575

• Resignation of the employee;• Death or permanent disability of employee;• The mutual agreement between the parties to terminate the employment

contract;• Force majeure;• Expiry of fixed term contract;• Retirement of employee;• By the employer “for just cause”;• By the employer “WITHOUT just cause” or a serious reason.

Termination of Employment – Common Causes

1. Express conditions of employment contract;

2. Application of labour standards legislation, and

3. Implied terms of the contract of employment imposed by CCQ.

• The “Rules” concerning termination without cause are derived from three sources:

Termination Without Cause

Do not confuse severance pay with pay in lieu of notice;• An employer who dismisses without cause has the duty to give all

pecuniary benefits accumulated during the period of the notice oftermination;

• In the case of multiple terminations at different points in time, theemployer must assess the notice of termination from the time of the lastemployment contract;

• Fixed term employment continued as a contract with an indeterminateterm cannot be considered in its entirety for the calculation of a reasonablenotice period.

Provisions of the CCQ Article 2091

• Employee’s age

• Length of uninterrupted service;

• Work experience/position held at the company;

• Employee’s level of compensation;

• Availability of similar employment elsewhere;

• Whether employee induced or enticed to leave a secure position elsewhere in order to accept the employment in question, and

• The timing and manner of termination.

Notice Period Under the CCQ

• Nature/Source of compensation;• When benefits will end;• Whether termination indemnity will be paid by lump sum or salary continuance;• Whether outplacement counselling will be provided;• How various monetary benefits will be treated such as car allowance, stock options,

employee stick purchase plan or pension plan;• Return of company property;• Whether reference will be provided, and• Whether there are other particular factors to consider such as recent absence from work

or the Linked In profiles associated with Company.

Structuring the Termination Indemnity

• Confirmation of last day of work and/or employment if different;• Confirmation of length of statutory notice period and whether will be satisfied by working notice,

payment in lieu, or a combination of the two;• Confirmation of payment date for the outstanding salary and benefits;• Confirmation of the date various benefits end;• Details regarding the right to convert group benefits to an individual plan including life insurance

benefits;• Amounts of any additional termination indemnities and details of how to be paid;• Whether employee will be required to respect obligation of loyalty and other applicable

restrictive covenants, and• Return of company property by precise date and Reference letter

Summary – The Letter of Termination

Duties pursuant to Québec Law – Article 2088 CCQ

The employee is bound not only to carry on his work with prudenceand diligence, but also to faithfully and honestly and not to use anyconfidential information he may obtain in carrying on or in the courseof his work.

These obligations continue for a reasonable time after cessation of thecontract, and permanently where the information concerns thereputation and private life of another person.

Non-Competition and Non-Solicitation Update

• Exact nature of the duty of loyalty depends on factors such as:• Nature and hierarchical level of position held by employee;• Nature of the behaviour considered disloyal or indiscreet;• Nature/type of information employee holds;• Access to confidential information;• Length of service;• State of competition in the industry & reason for Termination of

employment.

Duty of Loyalty

In assessing the Confidential nature of the information, the courts will consider

• Public knowledge outside if the business;

• How many people privy to the information;

• Extent of secrecy measures taken to protect the information in question;

• Value of the information to the company and/or competitors;

• Amount of effort/money expended in developing the information;

• The ease/difficulty with which information may be acquired/duplicated, and

• The manner in which the information is treated between the confider/confide.

Duty of Discretion

Reasonableness depends on the circumstances surrounding each caseand the interpretation of each item previously referred to must bereferred to a judge which takes time and money.

As a risk management tool, introducing properly drafted restrictivecovenants into a employment contract can avoid the high costs oflitigation and remove most of the risk.

Duties Owed Pursuant to a Contract

• Non-Competition;

• Non-Disclosure;

• Non-Solicitation of Employees/Customers, and

• Ownership and protection of Intellectual Property

Types of Restrictive Covenants to Consider

An employer may not avail himself of a stipulation of non-competitionif he has terminated the contract without a serious reason or if he hashimself given the employee such a reason for terminating the contract.

Article 2095 Civil Code of Québec

Determination of Reasonableness is dependent on facts of each case, however the following list may serve as a guideline:

• The clause must be written in clear/comprehensible language and cannot be agreed to orally;

• Overly aggressive restrictions will not be upheld (moderation is key);

• The 3 limitations of time/space/nature of activity are interrelated;

• Clause must be limited to what is necessary to protect employer’s legitimate concerns.

Contracts of Adhesion (Employment)

Preventative Measures

• Attention to detail in drafting employment contracts written at beginning of employment relationship;

• Audit existing employment contracts in order to ensure compliance with changing legal landscape;

• Adopt business practices which operate to protect trade relationships and trade secrets;

• Adopt policies for the management and protection of confidential business information which are simple and easy to understand, and

• Monitor employee compliance with such policies.

Final Word

Adequate protection of a company regarding its employees begins evenbefore they are hired and continues throughout the relationship.Termination is a foreseeable risk that must be planned in advance andultimately documented in the employment contract using clearlanguage, reasonable restrictions and all must be negotiated in goodfaith.

Singh v. Kohli (2015 QCCA 1135)

In this case the Court of Appeal discussed the binding nature of pre-contracts such as a Memorandum of Understanding or Letter of Intent.Reliance on principle of Good Faith as source of sanction.

THANK YOU AND WE HOPE TO SEE YOU NEXT TIME!

Can you engage your liability by walking away from contractual negotiations?