Customers Are King
Most companies are in business because of their customer base, and those relationships must be strongly guarded.
Companies are also reliant upon employees to develop and maintain customer relationships on behalf of their employer, and in such situations, companies may want to ensure that employees will not exploit their role to set up a competing business and take customers with them.
This is where non-solicitation clauses come in.
Employers sometimes include non-solicitation clauses in employment agreements, which limits the extent to which ex-employees can deal with their former employers’ customers.
When an ex-employee solicits customers in breach of a non-solicitation clause, employers need to act fast to contain or prevent the damage.
An employer may want to send a warning letter to the ex-employee or initiate legal proceedings.
Seeking a Court Order to Protect Your Customers
Within a legal proceeding, an employer may want to seek an Order from the Court preventing the ex-employee from breaching their non-solicitation obligations on an interim basis, until such a time as the legal proceeding is finally determined on the merits. Such Orders are called “Interlocutory Injunctions”.
However, seeking these injunctions are difficult and employers need to be prepared to satisfy the Court of three things:
Do You Have a Case?
First, employers need to satisfy the Court that there is a serious issue to be tried. At this step, the employer needs to show that the lawsuit is not frivolous or vexatious, and that the employer has a genuine case against their ex-employee.
The validity of the non-solicitation clause may become an issue at this step. Ontario Courts have increasingly taken a strict approach to non-solicitation clauses, and vague or overly broad clauses have been held to be invalid and unenforceable.
Will You Suffer Irreparable Harm?
Secondly, the employer needs to show that they will suffer irreparable harm if the injunction is not granted. Irreparable harm is any harm that cannot be fixed by the payment of damages. An example of irreparable harm would be if the former employee steals every customer of their former employer, and puts that company out of business.
On Balance, Should You Get Your Injunction?
Third, the Court needs to be satisfied that the granting of the injunction is on balance better than allowing the employee to continue their activities. In conducting this balancing exercise, the Court needs to consider the harm that each party may suffer, any broader public interest in granting or denying the injunction, and any other factors about the conduct of any of the parties that may weigh for or against them.
What Happens When You Get Your Order
If the Court grants an interlocutory injunction, the employer can take some comfort in the fact that the ex-employee cannot continue their damaging conduct – at least until the lawsuit is determined on its merits.
The employer can then preserve what they have retained and turn their attention to the recovery of the damages caused by the ex-employee’s breaches.
At Mills & Mills LLP, our litigation lawyers have experience prosecuting and defending lawsuits related to breaches of non-solicitation clauses in employment agreements.
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