In a May 2023 decision, an Alberta court ordered a worker to pay his former employer over $112,000 in damages after the worker quit and stole one of the employer's major clients in blatant breach of their contractual non-solicitation and confidentiality obligations, as well as their duty of good faith at common law. In Catch Engineering Partnership v. Mai ["Catch"], the Court of King's Bench of Alberta ruled that the Defendant, Binh Mai, had blatantly breached his non-solicitation, confidentiality, and good faith obligations to his former employer, Catch Engineering Partnership, when he engaged in a "calculated course of action designed to benefit himself at the expense of his employer, all while still employed and drawing a salary from [his employer]."
Catch is notable because it is a relatively rare example of a Canadian court awarding substantial damages against an employee, and because it illustrates that employers can successfully enforce non-solicitation clauses and recover damages for losses caused by an employee breaching them.
Mai was hired by Catch Engineering Partnership ("Catch Engineering") as an electrical engineer in February 2019 for the express purpose of being seconded to one of its major clients, Canadian Natural Resources Limited ("CNRL"). Notably, a significant part of Catch Engineering's business model was seconding (the act of sending an employee to work somewhere else temporarily) experienced engineers to work for its clients, and CNRL had been engaging Catch Engineering for several years for this purpose. Catch Engineering hired Mai because CNRL needed an engineer who had experience with a particular type of specialized software called SPEL. (CNRL could not hire him directly due to a hiring freeze).
Mai signed an employment contract with Catch Engineering which contained a non-solicitation clause and a confidentiality clause. The non-solicitation clause stipulated that, during Mai's employment and for 12 months afterwards, Mai could not "intentionally act in any manner that is detrimental to the relations" between Catch Engineering and its clients or solicit any Catch Engineering clients which Mai had dealt with in the previous year to transfer their business to him or another employer. Similarly, the confidentiality clause stipulated that Mai could not use the confidential information of Catch Engineering or its clients, except for performing his duties.
Mai began working as a contractor at CNRL through Catch Engineering, and he was advised in November 2019 that CNRL was happy with his work. Subsequently, in December 2019, Mai requested that Catch Engineering change his status from a salaried employee to an independent contractor, because Mai believed he could earn more money this way. Mai tried to negotiate an hourly rate of $65 per hour, but he ultimately agreed to work as an independent contractor for $60 per hour.
However, Mai unexpectedly provided Catch Engineering with two weeks' notice of resignation the very next day via email, which he claimed was due to "differences" they had during the hourly fee negotiations. Just three minutes later, while Mai was still employed by Catch Engineering, he emailed his supervisor at CNRL to ask if he could work for CNRL as an independent contractor through another agency. Notably, Mai had a meeting with Catch's president afterwards, during which the President tried to talk him out of resigning and reminded him of his non-solicitation obligations. In response, Mai dishonestly advised the President that he was not planning to continue working with CNRL, even though he had already taken steps to do so.
Shortly thereafter, while Mai was still employed by Catch Engineering, he secured a position with another company called Normatec and asked CNRL to engage his services through Normatec, which CNRL did. As a result, Mai continued to work at CNRL through Normatec immediately after he left Catch Engineering, doing the same work that he did before, and CNRL ended its contract with Catch Engineering.
Consequently, Catch Engineering commenced legal action against Mai, alleging that he had breached his contractual non-solicitation and confidentiality obligations, as well as his common law duty of good faith to Catch.
The Court's Decision
The Court of King's Bench of Alberta ruled in Catch Engineering's favour, holding that Mai had blatantly breached his non-solicitation, confidentiality, and good faith obligations to Catch Engineering. The Court ordered Mai to pay Catch Engineering over $112,000 in damages.
In reaching this conclusion, the Court held that restrictive covenants are often presumptively void for public policy reasons, however non-solicitation clauses are enforceable where they are fair, reasonable, unambiguous, and narrowly focused on protecting a legitimate business interest. Moreover, the Court also held that there is a common law duty of good faith that applies to all contracts, including employment contracts. In the employment context, employees have a duty to be "honest, reasonable, candid, and forthright" with their employer, and not appropriate their employer's clients or confidential information for their own benefit and to their employer's detriment.
Applying the law to the facts, the Court held that the non-solicitation clause in Mai's employment contract was legally enforceable and that he breached it by soliciting CNRL to transfer its business from Catch Engineering to Normatec. This is because the Court found that Catch Engineering had a legitimate business interest in its clients that required protection and the clause was reasonable in the circumstances.
Similarly, the Court held that Mai also breached his confidentiality obligations and duty of good faith to Catch Engineering. In particular, the Court found that Mai used information about CNRL that was not publicly available for his own benefit and to Catch Engineering's detriment, which constituted confidential information of one of Catch's clients, such that Mai breached the clause. Moreover, the Court found that Mai had also committed a "flagrant" breach of his duty of good faith by soliciting CNRL and lying about it while still employed by Catch Engineering.
In the result, the Court held that Mai was liable to Catch Engineering for the damages it suffered by losing its contract with CNRL, which the Court found to be over $112,000.
Catch demonstrates how valuable well-drafted non-solicitation clauses can be for employers in industries where there is risk of current or former employees soliciting the employer's clients. Accordingly, employers in such industries should strongly consider including non-solicitation clauses in their employment contracts if they have not done so already.
Additionally, even where an employer cannot rely on a non-solicitation clause, Catch illustrates that employers can still have legal recourse where an employee is soliciting their clients using confidential information or in breach of their duty of good faith.
If you require assistance adding enforceable non-solicitation clauses to your employment contracts or enforcing any existing non-solicitation or confidentiality obligations, please do not hesitate to contact us for expert legal advice and guidance.