Better to fight than be right

Sometimes that's the case when it comes to litigation.

Non-solicitation covenants preventing poaching of your former employer's customers or employees are generally enforceable. But noncompetition covenants are a very different story. Those are the clauses preventing someone from continuing in their trade.

There are many barriers to their enforceability. They are interpreted very harshly against employers. They have to be extremely limited in geographic scope and duration. If the duration or geographical area is too broad, the clause will be struck. They can only restrict direct competition.

If they are drafted too broadly, so as to potentially limit any activity that would do no real damage to the former employer, the entire clause will be struck. The courts will not rewrite it so as to render it enforceable.

Most important, if the potential competition will not significantly damage the former employer, the court will say, as a matter of public policy, that it will not restrain that employee from competing regardless of the clause's wording.

Only limited groups of employees can ever be legally restrained by noncompetition clauses.

That is the legal reality. The practical reality is something else again. I acted for one employer that had two employees working in a different city. Those employees were that employer's brand there and were stars. They earned more than anyone else in the entire company, but not as much as if it was their own business. So they quit and went out on their own, contrary to their noncompetition clauses.

We sued them immediately. The noncompetition clause was probably too broad and we likely would have been unsuccessful in court. But the impact of the lawsuit was to sap their energy, distract them, drain their money when they were attempting to get started, make them second-guess themselves, and look over their shoulders at every turn, fearful of our alleging they were interfering with their former employer's clients — their own former customers.

We eventually settled the case with them giving up considerable commissions that they were owed. But, by then, they had missed the magic window for starting their business. Ultimately, it closed down. The senior of the two realized what had occurred and even later referred me clients.

Some companies commence such actions knowing they have invalid noncompetition and nonsolicitation clauses, hoping for just this result.

David Neeleman was an American-Brazilian entrepreneurial superstar, founding Morris Air, which he sold to Southwest Airlines in 1993. He hoped to succeed Herb Kelleher, Southwest's CEO and co-founder. Kelleher was a very different cat than Neeleman. A devout Mormon, Kelleher used to say that he only owned three books: the book of Mormon, the Bible and Southwest Airlines' annual report. Five months later, Neeleman was fired, with Kelleher informing him: “You are driving everyone insane.”

Neeleman had made $25 million personally from the sale and wanted to start another airline. After a couple of years, Neeleman spoke to a lawyer and was told, correctly, that his five-year noncompetition clause was unenforceable. He called Kelleher, informed him of this and asked to be allowed to compete. Kelleher replied that he would sue him mercilessly if he did so. Despite the legal opinion, and his ability to afford the lawsuit, Neeleman waited the full five years before he started JetBlue and co-founded WestJet.

Like my client's former executives, he realized the stress, anguish and distraction of the lawsuit would not be worth the eventual, but inevitable win.

The point is, the legal merits of a case are only one factor in considering litigation, particularly litigation that can become stressful and complex.

Got a question about employment law during COVID-19?

Write to Howard at levitt@levittllp.com. Howard Levitt is senior partner of LSCS Law, employment and labour lawyers with offices in Toronto and Hamilton. He

practises employment law in eight provinces. He is the author of six books including the Law of Dismissal in Canada.

COURTESY OF BREEZE AIRWAYS David Neeleman, who founded JetBlue and co-founded WestJet, waited five years to start his new firms after former employer Southwest Airlines threatened to sue him.