Non-Competition Provision Results In Increased Notice Period

In the recent case of Ostrow v. Abacus Management Corporation Mergers and Acquisitions, 2014 BCSC 938, the B.C. Supreme Court followed an approach taken in a small handful of cases (predominantly out of Ontario but including an appellate case out of B.C.) and confirmed that a non-competition provision may well result in an increased notice period for a wrongfully dismissed employee.

Facts

Adam Ostrow worked for Abacus Management Corporation Mergers and Acquisitions ("Abacus") as a specialist in US taxation. His employment lasted for the nine month period from March to December 2011.

Ostrow's employment with Abacus was terminated without cause with immediate effect. He was provided with one week's pay in lieu of notice. This was the statutory compensation for length of service to which he was entitled under the B.C. Employment Standards Act.

In a letter provided to him on termination of his employment, Ostrow was specifically cautioned about the non-competition provision in his employment contract. He was also verbally reminded by the Human Resources manager at Abacus of the provision which "restrict[ed] him from working for other employers" for a period of six months.

Ostrow became re-employed 16 months after his dismissal from employment. On the new job, his pay was 30 percent less than at Abacus.

Ostrow sued Abacus for wrongful dismissal. Because Abacus chose not to dispute liability (a wise strategic decision in the writer's considered view), the only issue before the Court was the amount of damages arising out of the wrongful dismissal.

Decision of B.C. Supreme Court

The Court found that Ostrow was entitled to "damages in lieu of notice in the amount of six months' pay which include[d] benefits, Canada Pension Plan contributions, and bonus". While there are other interesting aspects of the Court's decision, the part of the decision that warrants special attention is the effect of the non-competition provision on the notice period.

The Court began by observing that the limited case law on point was consistent in holding that "a non-competition clause in the employment contract is a factor which may increase the length of the reasonable notice period".

The Court then ruled that the non-competition provision in Ostrow's contract increased the notice period to which he was entitled. It rejected Abacus' submission to the effect that it did not seek to enforce the restrictive covenant against Ostrow and had never before "taken legal action...