Non-Compete Agreements Enforceable in BC

Update by Volodymyr Burlachenko and Erin Brandt, Cofounder

Non-competition agreements have been the subject of serious debate lately, particularly with Ontario banning them for most employees. However, the recent case of Quick Pass Master Tutorial School Ltd. v Zhao, 2022 BCSC 1846  highlights that non-competition agreements are still enforceable in BC.

Background

This case involves a dispute between Mr. Wang, owner of Quick Pass Master Tutorial School Ltd. (“Quick Pass”) and Mr. Zhao, a former tutor at Quick Pass.

Quick Pass provides tutorial services to students seeking to obtain their real estate trading, mortgage broker and rental property management licenses. Quick Pass requires students to sign a non-disclosure agreement to prevent unauthorized use of educational materials. Similarly, Mr. Zhao signed confidentiality, non-competition and non-solicitation agreements.

Under the non-competition agreement, Mr. Zhao agreed not to start or work for a similar tutoring service in Vancouver, Burnaby, or Richmond for 18 months after his contract with Quick Pass ended. However, just one day after the end of his contract with Quick Pass, Mr. Zhao opened a competing school in Burnaby, using teaching materials he helped develop while at Quick Pass.

Decision

Mr. Wang went to court in May 2018 and obtained an injunction which prevented Mr. Zhao from operating his competing school in Vancouver, Burnaby, or Richmond until the non-competition agreement was scheduled to expire. In response, Mr. Zhao moved his school to New Westminster (about 10 minutes away).

Mr. Wang returned to court in October 2022 to seek compensation for Mr. Zhao’s breaches of his agreements with Quick Pass. In a recent decision, the BC Supreme Court (the “BCSC”) found the non-competition agreement reasonable and enforceable. One of the factors considered by the BCSC was that Mr. Zhao had been paid an additional $15 per hour in exchange for his agreement to accept the non-compete restraints.

Ultimately, the BCSC found that Mr. Zhao had breached both the confidentiality and non-competition agreements and ordered Mr. Zhao to pay Quick Pass $50,000 in damages.

Key Take Away for Employees

Employees should carefully read their employment contract before signing, as a contract in BC can include a restriction that the employee can’t compete with their former employer for a reasonable period of time. While many non-competition agreements are not enforceable due to drafting problems, violating an enforceable non-competition agreement can lead to costly legal problems.  

Key Take Away for Employers

A properly drafted and legally compliant non-competition agreement may in fact be enforceable in BC. Employers should ensure that these agreements are reasonable and no broader than necessary to protect a legitimate business interest. Employers hiring workers outside BC should seek local legal advice, as the legal requirements do vary from province to province.