In a recent B.C. case, http://casealert.canadalawbook.ca/summaries/acws/acws-13029018.html, a court had to decide whether a non-compete agreement between two veterinary practices was enforceable.  The court concluded that the non-competition period was too vague, too lengthy and included a damages clause that was more of a penalty, which is prohibited.

Dr. Stephanie Rhebergen became licensed as a veterinarian in June 2010 in B.C.  She obtained a position with the Creston Veterinarian Clinic just after graduating.  As a term of joining Creston VC, she signed an employment agreement which, among other things, stated that if she “set up” a veterinary practice in Creston B.C. or within 25 miles of it, she would pay various penalties ranging from $150,000 in year 1 to $90,000 in year 3.

A little over a year later, she resigned.  She then filed a court application to ask the B.C. Supreme Court to declare that the non-competition covenant was void and unenforceable.

The court agreed.  It had little difficulty concluding that the large amount to be paid if Dr. Rhebergen were to open a competing veterinary clinic was really functioning as a type of restrictive covenant.  Justice Betton of the B.C. Supreme Court concluded that language of the covenant itself was vague and unreasonable as it did not define what it would mean to “set up a veterinary practice” within 25 km of the Creston V.C.  The Court also concluded that this non-compete agreement contained a “penalty clause” that would be an unreasonable restraint of trade.  As well the three year time period was unreasonably lengthy.

The case is another example of the fact that courts, across Canada, simply do not like non-competition agreements and are usually quite willing to strike them down.

The only drawback is that litigation is expensive.  To actually wind up with a Court decision like this, that makes it clear that a person is free to ignore a signed non-compete agreement, can be a costly and sometimes lengthy process.

However, given the amounts at stake for Dr. Rhebergen in this case, it was well worth her while to bring the application and get the court order, even though she still may face an appeal by Creston VC.  Given the court decisions that are prevalent across the country, it seems likely that the B.C. Court of Appeal would uphold the lower court’s decision.