Article 2089 states three limits and then reverses the onus. A covenant that is silent on any one of the three does not get a reasonableness argument; it fails on its face, and the employer has to prove it did not.
At a glance
A national distributor bought an industrial fastener business serving OEMs and resellers around Quebec City, on an asset purchase. Under CCQ art. 2097 the employment contracts were not terminated by the sale and bound the buyer as successor, so the nine retained sales staff arrived with their service intact.
The buyer nonetheless asked all nine to sign its standard employment agreement at closing, to bring them onto common terms. The agreement was the buyer's Ontario template with the governing-law clause changed. It carried two restrictive covenants: a non-competition clause running three years from the end of employment, covering all of Canada and any activity in competition with the employer; and a non-solicitation clause running twelve months and confined to twenty-one named accounts.
Five months after closing the regional sales manager resigned, joined a competitor six kilometres away, and three of the twenty-one accounts followed him within eight weeks.
The buyer's first instinct was the non-compete, because it was the broader clause. In Quebec that instinct is usually wrong, and here it was wrong on the face of the article.
Article 2089 reads: “The parties may stipulate in writing and in express terms that, even after the termination of the contract, the employee may neither compete with his employer nor participate in any capacity whatsoever in an enterprise which would compete with him”. And then: “However, the stipulation shall be limited as to time, place and type of employment, to what is necessary for the protection of the legitimate interests of the employer”. And then, in its own sentence: “The burden of proof that the stipulation is valid is on the employer”.
The requirements are stated rather than developed. Writing. Express terms. And limits on all three of time, place and type of employment — conjunctive, in the article itself, not as a gloss.
The measure is necessity, not reasonableness: each limit must be confined to what is necessary to protect the employer's legitimate interests.
And the onus is reversed by a sentence of its own. The employer must prove validity; the departing employee does not have to prove overreach.
The buyer's covenant limited time (three years) and, in form, place (all of Canada). It said nothing at all about type of employment. It prohibited any activity in competition with the employer — which is not a limitation on type of employment, it is the absence of one.
The manager's twenty-one named accounts carried $2,140,000 of annual revenue. Three moved with him, worth $284,000.
The non-competition clause was abandoned once counsel read art. 2089 against the drafting. Enforcing it would have required the buyer to prove that three years was necessary, that all of Canada was necessary for a manager whose entire territory was the Quebec City region and the Beauce, and that a bar on any competing activity was necessary — three affirmative proofs, on a clause silent on the third axis.
The non-solicitation clause was a different matter and did the work. Twelve months, twenty-one accounts named in a schedule. On Payette's reasoning a non-solicitation clause of that kind is not subject to the same territorial-limitation requirement as a non-competition clause, because the accounts themselves define its reach — a paraphrase of the judgment, which is cited below and not quoted. Two of the three accounts returned inside the twelve months, carrying $196,000 of annual revenue. Enforcement cost $28,000.
The buyer then re-papered the remaining eight covenants: twelve months rather than three years; the province of Quebec rather than Canada; and a stated type of employment — technical sales of industrial fasteners and fixings to distributors and original equipment manufacturers. That is three limits on three axes, each of which the buyer could argue is necessary rather than merely convenient.
The unit question is which body of rules the covenant is assessed under, and it was settled before anyone read the clause. The manager held no shares, received no part of the purchase price, and gave the covenant in an employment agreement in exchange for continued employment. There was no sale characterisation available; art. 2089 applied, and applied on its own terms.
That is the boundary with the sale-covenant file next to this one. There, the covenant was accessory to a purchase price and art. 2089's statutory limits and reversed onus did not govern it. Here, the covenant is accessory to a job, and they do.
The three axes are worth stating separately, because a covenant is usually attacked on one and this one failed on the one nobody drafts. Time is the axis every template limits. Place is the axis most litigation is about. Type of employment is the axis that a clause phrased as any competing activity silently abandons, and on the article's wording a stipulation not limited on that axis is not limited as the article requires.
The reversed onus then removes the practical fallback. A covenant that is arguably overbroad but not obviously so can survive at common law if nobody can be bothered to litigate it, because the party attacking it carries the running. Article 2089 puts the running on the employer and does so in a sentence written for that purpose.
The non-competition clause was abandoned, the non-solicitation clause was enforced as to the three named accounts, and two of them returned. The remaining eight covenants were redrafted on all three axes.
The wider change was where the buyer put its enforcement weight. In Quebec the non-solicitation clause is the workable instrument for a departing salesperson, because the accounts define its scope and it does not have to survive a three-axis necessity test. The non-competition clause is for the situation where a customer list is not the thing being protected — a technical process, a pricing model, a manufacturing method.
See the non-solicitation covenant entry for the glossary treatment of the two instruments, and a covenant that had to choose which contract it belonged to for the covenant that belonged to a sale rather than a job.
The buyer used one template in nine provinces. Run in Ontario, a three-year Canada-wide covenant for a regional sales manager would have been argued on reasonableness and would probably have failed — but it would have been argued, and the employee would have carried the running.
Run in Quebec it was not arguable, and every one of the nine retained employees was in Quebec. The entire restrictive-covenant package on the deal was drafted on the assumption that one jurisdiction's rules travel. The template change cost a paragraph.
The tell is a covenant with a duration and a map and no job description. Read the clause and ask what work the employee is prohibited from doing. If the answer is anything competitive, the clause has skipped the axis the Civil Code names third.
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