Lexpert Magazine

64 LEXPERT MAGAZINE | MAY 2018 TECHNOLOGY | COLUMNS | George Takach is a senior partner at McCarthy Tétrault LLP and the author of Computer Law. in the Ceridian case to be unenforceable was that it purported to limit its former employees from doing anything for a com- petitor, not simply writing the same sort of soware code he had previously worked on. As the Ceridian decision noted, the NCA, if read literally, would have restricted for- mer employees from even being a jani- tor for a competitor. at role, of course, would not risk revealing trade secrets, so that extensive restriction would no longer operate to protect a vital proprietary inter- est of the prior employer. KEEP THE RESTRICTION AS NARROW AS POSSIBLE ere was another flaw in the NCA in the Ceridian case. It purported to restrict former employees from working not just for a competitor, but also any affiliate of a competitor, even where the affiliates had nothing to do with soware devel- opment, let alone developing the type of soware that Ceridian was developing. As the judge put it in the Ceridian deci- sion, the affiliate could have been in the business of gi cards, which had nothing to do with SaaS HR soware. So, again, by attempting to cast the protective net too broadly — to include affiliates of competitors in unrelated industries — Ceridian was guilty of overreach. Learning from the Ceridian case, the reasonable restriction in your NCA should cover only those entities of a competitor that make a product or service that com- petes with the particular product or service that you produce and that the employee directly worked on. In effect, you should be content if the employee goes to work for an affiliate of the new employer as a janitor (i.e., in a different kind of job entirely), and when that affiliate is in an entirely different field from yours. You might be thinking at this point, "Why didn't the judge in Ceridian simply cut back the scope of the restriction in the broadly draed NCA"? e short answer, given by the court in that decision, is that judges will not re-dra NCAs for plain- tiffs. While some courts might have done that at one time, those days are long gone. It's up to you to cra your NCA carefully and precisely; don't count on a judge revis- ing it for you. And here's the thing: if the NCA is too broad it will be completely knocked out in court. So the question is: is it better to get more certainty on a lesser degree of protec- tion or go broader in the NCA and end up with nothing? NOT TOO LONG IN DURATION, EITHER Assuming you have craed a narrow scope in the NCA, as suggested above, there are a couple of more tweaks you need to make to the clause. First, the duration of the restric- tion has to be reasonable, which effectively means it should be for a relatively short pe- riod of time. For example, if in your market it is typical that a new release of soware comes out once each year, then it`s probably safe to say that any restriction longer than 12 months will be considered overly long, and hence will be found unenforceable. In other words, the duration of the protection again cannot be longer than that which is sensibly necessary to protect the reasonable proprietary interests of the prior employer. e duration of the NCA should also be made clear when the employee signs the NCA. In Ceridian, the NCA contained an unusual mechanism providing that the duration could be up to one year, and that Ceridian would tell former employees what the actual duration would be at the time employment was terminated. Again, to the court this amounted to unilateral overreach by Ceridian, and made the clause void for uncertainty. e bottom line is this: to stand any chance of being enforced in a court of law in Canada, the restrictive covenant must be made clear at the outset of the employment relationship and the employee must under- stand exactly the parameters of the provi- sion. Your NCA should be of a fairly short duration that reflects the business cycle in your industry. AND GEOGRAPHICALLY REASONABLE, TOO In the Ceridian case, the geographic scope of the NCA restriction was "North Ameri- ca." Ceridian's customer base was essential- ly in Canada and the United States. Again, the court found overreach in the clause, be- cause it held that North America included Mexico and the Caribbean, two regions where former employees' scope of work was not relevant. e message is clear. e NCA requires a geographic limitation, and it should be as narrow as the actual geographic param- eters of the employee's day-to-day work. If the employee works in a division that serves clients in Canada only, then don`t include the US in your NCA. Or, if the employee covers both Canada and the US, then don't include Europe. You get the idea. ere are some jurisdictions where post- employment non-competes are truly a non- starter, such as California, where they are banned by law. Canadian jurisdictions are not there yet. A carefully craed, reason- able NCA still stands a chance of being upheld under the right circumstances, but only if the clause is not guilty of overkill. IN THE CERIDIAN case, the geographic scope of the NCA restriction was "North America." Again, the court found overreach in the clause, because it held that North America included Mexico and the Caribbean, two regions where employees' scope of work was not relevant.

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