Restrictive agreements and non-compete clauses (sometimes called post-cessation restrictions) are clauses in an employment contract or transaction contract that prevent an outgoing worker from taking off important clients or employees of his former employer or working for a competitor. An employer can only protect a legitimate business interest and the restrictions must be narrowly defined to be reasonable. The case at hand is such an example – the employee argues that the inclusion of the words “or interested in… any undertaking” (in an otherwise reasonable non-competition clause), which unreasonably prevented it from holding a passive or minority interest in a competitor, that is, which was not necessary to protect the employer`s interests, as it could not constitute a genuine risk of competition. This is a hypothetical concern because it is irrelevant to the facts – she joined the competitor as an employee. Without the reference to participation, the Confederation would have been valid and it would not have been able to work for the competitor, but by incorporating this text, even if it was not based on the facts at issue or if it was not relevant to it, did it make the non-competition clause as a whole too broad and therefore the whole restriction unenforceable? The court then assessed the three criteria that have been confirmed in recent cases. With respect to the first – the blue pencil test – the court found that, although the application of the test may be caprio, “this is an appropriate brake on the ability of employers to be free of… inappropriate reluctance that employers usually write themselves. Id. to . In other words, the test discourages employers who would look to court to save them if a large or poorly drafted contract is called into question.
The court justified this decision by the fact that the courts “are never deemed appropriate” to rewrite the restrictions in order to make them legal, “it should certainly be achieved by legislation,” as it was adopted in New Zealand. Id. With respect to the second criterion – if proper consideration is favourable to the other conditions – the court found that unusual circumstances required the requirement and that “in the usual situation, the second requirement can be ignored.” Id. to . Finally, the third requirement – the effect of severance pay on the character of the contract – is the “decisive criterion”. Id. to . However, the Tribunal considers that this test would be better expressed if the repeal of the provision would not result in a substantial change in the overall effect of all post-employment restrictions in the treaty.
Id. Applying the first and third criteria to the facts before it, the Tribunal decided that the terms “or interested” should be separated, as this would not require completing or amending the remaining text or making a substantial change to the overall effect of the non-competition obligation.