Rosenberg Attorney Inc.1000 de la Gauchétière, 24th FloorMontreal, 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 act reasonably AND in Good Faith.

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

• Contract of employment is usually deemed to be a contract of adhesion where the essential elements are predetermined upon signing 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 unreasonably detrimental to the consumer or the adhering party and is therefore not in good faith; in particular, a clause which so departs from the fundamental obligations arising from the rules normally governing the contract 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, and4. Existence of an imbalance between the respective obligations of

each party.

Latreille c. Industrielle Alliance (L ‘), compagnie d’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 of termination;• In the case of multiple terminations at different points in time, the employer must

assess the notice of termination from the time of the last employment contract;• Fixed term employment continued as a contract with an indeterminate term

cannot be considered in its entirety for the calculation of a reasonable notice 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 CCQThe employee is bound not only to carry on his work with prudence and diligence, but also to faithfully and honestly and not to use any confidential information he may obtain in carrying on or in the course of his work.These obligations continue for a reasonable time after cessation of the contract, and permanently where the information concerns the reputation 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 case and the interpretation of each item previously referred to must be referred to a judge which takes time and money.

As a risk management tool, introducing properly drafted restrictive covenants into a employment contract can avoid the high costs of litigation 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-competition if he has terminated the contract without a serious reason or if he has himself 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 even before they are hired and continues throughout the relationship. Termination is a foreseeable risk that must be planned in advance and ultimately documented in the employment contract using clear language, reasonable restrictions and all must be negotiated in good faith.

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?