Court of Appeal for Ontario

Date: December 7, 2018 Docket: C64238 Judges: Simmons, Huscroft and Miller JJ.A.

Between

Steven Kerzner Plaintiff (Appellant/Respondent by way of cross-appeal)

and

American Iron & Metal Company Inc. Defendant (Respondent/Appellant by way of cross-appeal)

Counsel

Alan Riddell and Kyle Van Schie, for the appellant/respondent by way of cross-appeal

Peter MacTavish and Brittany Hinds, for the respondent/appellant by way of cross-appeal

Heard: June 21, 2018

On Appeal

On appeal from the order of Justice Graeme Mew of the Superior Court of Justice, dated July 17, 2017, with reasons reported at 2017 ONSC 4352, 41 C.C.E.L. (4th) 142.

Huscroft J.A.:

Overview

1This is an appeal from an order granting summary judgment in favour of the appellant in his wrongful dismissal action against the respondent, American Iron & Metal Company Inc. ("AIM").

2The appellant, who was awarded six months' pay in lieu of notice pursuant to the termination clause in his 2014 Executive Employment Agreement with AIM ("the 2014 Agreement"), submits that he is entitled to additional damages. The respondent cross-appeals from an order dismissing its counterclaim for breach of restrictive covenants and breach of fiduciary duties.

3The wrongful dismissal action arose in the context of the sale of Bakermet Inc. ("Bakermet") in 2008 to ArcelorMittal Montréal Inc. ("ArcelorMittal"). The appellant was a co-owner and employee of Bakermet at the time of the sale.

4The motion judge concluded that the sale agreement and its accompanying release had the effect of releasing AIM from all claims relating to the appellant's employment prior to the sale in 2008. Further, he interpreted the employment agreements following the sale – between the appellant and AIM's predecessor, ArcelorMittal Ottawa Inc. ("ArcelorMittal Ottawa") – as a series of fixed-term contracts rather than a period of continuous service. Thus, he held that the appellant's right to termination and severance pay under the Employment Standards Act, S.O. 2000, c. 41 ("ESA"), was to be calculated only from 2008 forward. The motion judge found that the termination clause provided for notice that exceeded the minimum notice requirements under the ESA and was enforceable.

5The motion judge rejected AIM's counterclaim, concluding that the restrictive covenants contained in the 2014 Agreement were temporally and geographically unreasonable. He concluded that the record was insufficient to demonstrate that the appellant had breached any ongoing fiduciary obligations he may have owed to AIM.

6The appellant says that the motion judge erred in concluding:

(1) that he validly waived his ESA entitlement to accrued termination and severance pay;

(2) that the termination clause complied with the ESA and was therefore valid and enforceable; and

(3) that his employment relationship with the respondent and its predecessor was structured as a series of fixed-term contracts rather than as continuous service.

7AIM cross-appeals, submitting that the motion judge erred by:

(1) concluding that the restrictive covenants were unreasonable, and therefore unenforceable;

(2) failing to assess whether the appellant had breached the restrictive covenants;

(3) concluding that the appellant did not breach fiduciary duties owed to AIM; and

(4) failing to assess whether the appellant was entitled to contractual termination payments in light of his post-termination conduct.

8I have concluded that although the motion judge properly found that the appellant waived his entitlement to common law notice for service prior to 2008, he erred in concluding that the appellant released his pre-2008 employment for the purposes of determining his ESA entitlements. The motion judge erred, further, in concluding that the termination clause was enforceable. In addition, the motion judge erred in concluding that the appellant entered into fixed-term employment in 2011 and 2014.

9Consequently, the appellant is entitled to ESA termination and severance pay based on the whole period of his employment, and to common law notice for the 2008-2015 period. As I will explain, in the unusual circumstances of this case, the appellant's total ESA entitlements exceed his common law damages. As a result, he is entitled only to statutory termination and severance pay and any benefits payable under the ESA.

10For the reasons that follow, I would allow the appeal and dismiss the cross-appeal.

Background

11The appellant was hired in 1980 by Bakermet, a buyer and seller of various types of metals and steel products. He went on to become a one-third owner of Bakermet and president of the company.

12In 2008, ArcelorMittal purchased Bakermet for $45 million. The appellant received $17,162,637 in consideration for the sale of his one-third share of the company.

13The 2008 Share Purchase Agreement ("the SPA") provided that no "Key Employee" – a term defined to include the appellant – had given notice of "an intention to cease being employed with the [c]orporation" and that "the [c]orporation does not currently intend to terminate the employment of any officer, Key Employee or group of Key Employees."

14A release in favour of Bakermet and its successors ("the Release") was executed concurrently with the SPA. It provided that the appellant released Bakermet and its successors in accordance with the terms of the Release. "Released Claims" was defined as meaning:

[a]ny and all Claims which any of the undersigned has now, or may have in the future, against any Released Person, for any fact, act or omission up to and including the date hereof, including without limitation by reason of, or in connection with, any Released Person's position as a shareholder, director, officer, employee or creditor of Bakermet Inc….at any time up to and including the date hereof….

The 2008 Agreement

15The 2008 Executive Employment Agreement between the appellant and Bakermet ("the 2008 Agreement") recognized in its recitals that the appellant's employment would continue following the share sale. The following are the key features of the agreement:

• the appellant was to be employed as General Manager at a base salary of $250,000 per year with annual bonuses of $200,000 in the first three years;
• the appellant agreed to work for Bakermet for a minimum period of three years;
• the agreement was for an indeterminate period of time unless terminated;
• Bakermet could terminate the appellant's employment at any time, without cause, on written notice;
• if the appellant was terminated without cause on written notice, he was entitled to 12 months of annual base salary, inclusive of ESA entitlements, as well as defined "basic payments" and continued protection under group insurance benefits for 12 months;
• the agreement included non-competition and non-solicitation clauses; and
• the terms of the agreement replaced and superseded all the terms in previous arrangements and agreements and the appellant released any and all "claims" relating to same.

16Two subsequent employment agreements were made between the appellant and ArcelorMittal Ottawa, the validity of which was not challenged in these proceedings.

The 2011 Agreement

17The 2011 Executive Employment Agreement ("the 2011 Agreement") was virtually identical to the previous 2008 Agreement, except that it purported to create a fixed-term contract and reduced the appellant's compensation (base salary and bonuses). The 2011 Agreement took effect on August 6, 2011 and would terminate on August 6, 2014 unless earlier terminated. It also included a clause requiring ArcelorMittal Ottawa to advise the appellant in writing at least six months before August 6, 2014 if it intended not to renew the agreement. The 2011 Agreement continued to permit termination without cause, provided that notice was given to the appellant. It reduced the amount payable following termination without cause to an amount equal to six months of annual base salary inclusive of ESA entitlements, along with basic payments and continued protection under group insurance benefits for six months.

The 2014 Agreement

18The key change from the 2011 Agreement was that the 2014 Agreement established a two-year fixed term subject to early termination. The 2014 Agreement also reduced the appellant's annual base salary to $185,000 and reduced his annual bonus to $46,250. The 2014 Agreement continued to require ArcelorMittal Ottawa to advise the appellant in writing of its intent not to renew the agreement at the end of the term, but the length of required notice was reduced to three months. Early termination on a without-cause basis continued to be permitted and in such a case the appellant remained entitled to an amount equal to six months of annual base salary inclusive of ESA entitlements, along with basic payments and continued protection under group insurance benefits for six months.

The Appellant's Termination

19In 2015, ArcelorMittal Ottawa was acquired by AIM in an asset sale. The appellant's employment contract was assigned to AIM. Six months later, on September 11, 2015, AIM terminated his employment with one week's working notice. In accordance with the 2014 Agreement, the appellant was offered six months' salary ($92,500) and continuation of benefits for six months, amounts that AIM asserted were "inclusive of [his] entitlements under the Employment Standards Act". He was, at that time, 58 years old.

20The appellant brought a wrongful dismissal action seeking 24 to 30 months' pay in lieu of notice, based on 35 years of continuous employment with AIM and its predecessors. AIM argued that the appellant's entitlement to compensation was limited by the terms of the 2014 Agreement.

21Within two months of his termination, the appellant commenced employment with Palmer Recycling Inc., an Ottawa-based competitor of AIM. Subsequently, the appellant became president of Palmer and purchased the company. AIM counterclaimed for damages based on the appellant's alleged breach of the restrictive covenants in the 2014 Agreement, as well as his alleged breach of fiduciary duty.

22Given the appellant's alleged breaches, AIM invoked its right under the 2014 Agreement to suspend or terminate remaining payments and benefits protection and refused to pay the appellant pursuant to the termination clause.

The Motion Judge's Decision

23The motion judge reviewed the requirements of the ESA governing written termination notice and severance pay and the decision of this court in Covenoho v. Pendylum Ltd., 2017 ONCA 284, 43 C.C.E.L. (4th) 99. He concluded that, if the release in the 2008 Agreement re-set the clock, the termination provision in the 2014 Agreement would violate the ESA only if the appellant's combined notice and severance entitlements exceeded 27 weeks (i.e. one week of working notice plus six months' notice or pay in lieu as provided for in the 2014 Agreement). This would not occur until 2035, when the appellant would be 78 years old. Given the context of the three successive employment agreements between 2008 and 2015, the motion judge found that the potential for the termination provision to violate the ESA was too remote. He concluded that the termination provision of the 2014 Agreement would violate the ESA only if the appellant had not released AIM from including his pre-2008 service with Bakermet in the calculation of his statutory entitlements.

24The motion judge found that appellant was employed pursuant to a fixed-term contract rather than a contract of indefinite hire. This was not a case involving a series of virtually identical contracts renewed year after year, as in Ceccol v. Ontario Gymnastic Federation, 55 O.R. (3d) 614 (C.A.). The motion judge noted that the appellant's employment had to be considered in the context of the transactions involving the purchase and sale of the business.

25The motion judge found that the appellant sold his shares to ArcelorMittal in 2008 on terms that included generous compensation and a release of all claims relating to his previous employment with Bakermet. The Release, he said, was intended to "wipe the slate clean". There was no issue of inequality of bargaining position between the appellant and the companies (ArcelorMittal and Bakermet), each of whom was represented by counsel. Accordingly, the motion judge concluded that any claims the appellant had under the ESA or at common law ran from the date of the 2008 Agreement.

26The six months' notice entitlement in the 2014 Agreement was more generous than the appellant's entitlements under the ESA. Thus, the motion judge ordered that the appellant be paid $92,500 – in accordance with the notice entitlement in the 2014 Agreement – and compensation for employee benefits unpaid over the notice period.

The Counterclaim

27The motion judge found that the reasonableness of the non-competition and non-solicitation provisions in the 2014 Agreement should be assessed having regard to the agreement itself, not to the longer-term relationship between the appellant and the respondent's predecessors – including the appellant's sale of his shares in Bakermet. He concluded that, having regard to the two-year fixed term of the agreement, the restrictive covenants of 18 months and two years, respectively, were temporally unreasonable. He concluded, further, that the restrictive covenants were geographically unreasonable – they prevented the appellant from working in Quebec, Ontario, and the Atlantic Provinces in the only industry in which he had ever worked.

28The motion judge found that the record was insufficient to demonstrate that the appellant had breached any ongoing fiduciary obligations he may have owed to AIM by commencing employment with a competitor. He rejected the appellant's claim that AIM's failure to pay him his six months' notice amounted to a repudiation of the agreement. Finally, he concluded that the appellant was not under a duty to mitigate damages arising from the respondent's breach of the fixed-term contract.

Discussion

The Appeal

Issue 1: The Appellant's ESA Entitlements Could Not Be Waived

29I set out the relevant provisions of the ESA below:

5(1) Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.

(2) If one or more provisions in an employment contract or in another Act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions in the contract or Act apply and the employment standard does not apply.

9(1) If an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee's length or period of employment.

65(8) Only the following set-offs and deductions may be made in calculating severance pay under this section:

1. Supplementary unemployment benefits the employee receives after his or her employment is severed and before the severance pay becomes payable to the employee.

2. An amount paid to an employee for loss of employment under a provision of the employment contract if it is based upon length of employment, length of service or seniority.

3. Severance pay that was previously paid to the employee under this Act, a predecessor of this Act or a contractual provision described in paragraph 2.

30The appellant argues that s. 9 of the ESA provides for continuity of accrued service in the event that an employer sells a business and the purchaser of the business employs an employee of the seller. Accordingly, the appellant's employment continued without interruption following the sale of Bakermet in 2008 and AIM was required to include his pre-2008 years of service when computing his ESA entitlements. He also argues that s. 5(1) of the ESA invalidates any provision purporting to contract out of ESA entitlements, and that the exception in s. 5(2) does not apply. Further, s. 65 of the ESA prohibits setoff of an employee's statutory entitlement to be paid severance pay, except in limited circumstances, none of which is applicable here. In any event, there was no evidence that the 2008 Release was ever intended to effect a waiver. The evidence proffered demonstrated that the Release related to the sale of the appellant's shares rather than to any pending termination of his employment, and the 2008 Agreement contemplated his employment continuing indefinitely.

31AIM argues that the appellant waived his pre-2008 common law and statutory termination entitlements by signing the Release in exchange for substantial consideration as part of the SPA. It describes the Release as an all-encompassing settlement agreement – a "package deal" the parties were free to enter into in the context of a share sale, citing this court's decisions in Biancaniello v. DMCT LLP, 2017 ONCA 386, 138 O.R. (3d) 210 and Cosentino v. Sherwood Dash Inc., 2014 ONCA 843. AIM adds that the motion judge's interpretation of the Release is entitled to deference, following Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

32The respondent's position as it relates to the ESA must be rejected.

33Although, in general, contractual interpretation involves questions of mixed fact and law and so mandates a deferential standard of review, the interpretation of the ESA is an extricable question of law to which the correctness standard applies: Sattva, at para. 53.

34Regardless of whether the Release is a stand-alone agreement or part of a "package deal", it must comply with the ESA. The relevant provisions of the ESA are neither ambiguous nor vague. Section 9(1) is mandatory: employment is deemed not to have been terminated or severed by the sale of the employer's business in whole or in part, and employment with the seller is deemed to be employment with the purchaser for the purpose of calculating the employee's length or period of employment. Moreover, s. 5(1) prohibits contracting out of or waiving any statutory obligations and voids any agreement purporting to do so.

35In short, the ESA is designed to preclude the very thing that AIM argues occurred in this case. There could be no valid waiver of the appellant's ESA entitlements.

36This court's decision in Biancaniello is of no assistance to AIM. It speaks to the scope of a release that was otherwise permissible. Nor is this court's decision in Cosentino applicable. That case was concerned primarily with whether the appellant had resigned his employment. It is not authority for the proposition that ESA obligations may be waived in the context of a larger settlement agreement. At para. 9 of its decision, this court specifically stated that its reasons were "not to be considered an endorsement of the motion judge's comments with respect to the Employment Standards Act."

37In summary, the appellant's pre-2008 service could not be waived or released for the purposes of calculating his ESA entitlements. AIM, as successor to ArcelorMittal Ottawa, was required to count the appellant's pre-2008 service in calculating his ESA entitlements upon termination.

38However, this conclusion does not deprive the Release of all effect. Although the Release did not address the appellant's ESA entitlements and should not have been read as purporting to do something it could not lawfully have done, it specifically addressed the release of all of the appellant's claims in connection with his position as an employee. Given the context in which the Release was executed and the wording of the Release, it was open to the motion judge to find that the appellant had waived his claim to common law notice based on his pre-2008 employment. His finding is entitled to deference.

Issue 2: The Termination Clause Is Not Valid and Enforceable

39The motion judge held that the termination provision of the 2014 Agreement would violate the ESA only if the appellant had not released his pre-August 2008 service. Because the appellant could not waive his pre-August 2008 service for ESA purposes, it follows that the termination provision, which limits the appellant to six months' notice on termination, violates the ESA because it provides a lesser benefit than the 34 weeks' termination and severance pay to which he is entitled under the ESA. Accordingly, the termination provision in the 2014 Agreement, which purports to limit the appellant's entitlements to six months' salary and benefits, is void.

Issue 3: The Appellant Was Employed on an Indefinite Basis

40In light of these conclusions, it is necessary to determine whether the appellant was employed on an indefinite or a fixed-term contract basis.

41The motion judge's interpretation of the 2011 and 2014 Agreements as fixed-term contracts is entitled to deference in the absence of an extricable error of law. In its decision in Sattva, the Supreme Court identified three extricable errors that may be made in the course of contractual interpretation: "the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor": at para. 53 (citing King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 270 Man. R. (2d) 63, at para. 21).

42In my view, the motion judge erred in law by failing to consider all of the relevant factors in concluding that the appellant was employed for a fixed term rather than on an indefinite basis. There was significant evidence indicating that, despite fixed-term language in the 2011 and 2014 Agreements, the appellant was employed on an indefinite basis.

43Plainly, the 2008 Agreement contemplated indefinite employment. But so too did the 2011 and 2014 Agreements: despite their fixed terms, both agreements specifically required the employer to provide written notice if it intended not to renew or continue the agreements. The 2011 Agreement included recitals specifically recognizing the appellant's continued employment, and in particular stated that the parties desired to enter into the agreement "for the continuation of the employment of the [appellant]". The 2014 Agreement recognized the appellant's current employment.

44Although the motion judge acknowledged the renewal notice provision, he failed to analyze its effect and it did not factor into his analysis. Nor did the motion judge advert to the recitals.

45As this court explained in Ceccol, at para. 26:

Employers should not be able to evade the traditional protections of the ESA and the common law by resorting to the label of 'fixed term contract' when the underlying reality of the employment relationship is something quite different, namely, continuous service by the employee for many years coupled with verbal representations and conduct on the part of the employer that clearly signal an indefinite term relationship.

46That is in essence what we have in this case. Although the motion judge found that the appellant had waived his right to any claims arising from his pre-2008 employment, his prior employment remained a fact and formed part of the context for the subsequent agreements governing his continued employment. At the time of his termination in 2015, the appellant had been employed continuously since 1980, and was employed pursuant to an ostensibly fixed-term agreement that required the employer to provide written notice if it intended not to renew or continue the agreement. Although the motion judge acknowledged that unequivocal and explicit language is required to establish a fixed-term contract and that any ambiguities will be strictly construed against the employer (citing Ceccol, at paras. 25 and 27), his focus on the transactions involving the purchase and sale of the business resulted in a failure to recognize the indefinite nature of the appellant's employment.

47I conclude that the appellant was employed for an indefinite term from 2008 onwards and, as a result, was entitled to common law notice for the period of August 2008 to September 2015.

How Much Notice Was Required?

48Fixing a period of notice requires an assessment of the character of the employee's employment, length of service, age and the availability of similar employment, having regard to his or her experience, training and qualifications: Bardal v. The Globe & Mail Ltd., 24 D.L.R. (2d) 140 (Ont. H. Ct. J.), at p. 145.

49In my view, given that the appellant was 58 years of age at the time of dismissal, held a senior position with the respondent, and obtained similar employment within a very short time following termination, seven months is a reasonable notice period.

50This court was not provided with complete submissions concerning the quantum of the appellant's compensation for the purposes of calculating damages, and in particular whether the appellant's damages should include his bonus and benefits package. Nor was this court's decision in Paquette v. TeraGo Networks Inc., 2016 ONCA 618, 34 C.C.E.L. (4th) 26, addressed. Nevertheless, in the circumstances of this case it is possible to resolve the matter.

51The appellant's entitlement to seven months' pay in lieu of notice is subject to his duty to mitigate his damages, which he did by commencing employment at Palmer Recycling within two months of his dismissal by the respondent. The entitlement to seven months' pay in lieu of notice must be reduced by all amounts received in mitigation of loss during the notice period: Sylvester v. British Columbia, [1997] 2 S.C.R. 315, at paras. 14-17.

52The appellant is entitled to the maximum termination and severance pay permitted under the ESA – 8 weeks' termination and 26 weeks' severance pay. The appellant's ESA entitlements, including the value of unpaid benefits, normally would be deducted from his common law damages: Stevens v. Globe and Mail, 28 O.R. (3d) 481 (C.A.), at p. 493; Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402, 135 O.R. (3d) 561, at para. 110. In this case, however, the appellant's ESA entitlements exceed his common law damages, even assuming that common law pay in lieu of notice would include payment of a prorated share of the appellant's annual bonus and benefits package. As a result, the appellant is entitled only to his ESA termination and severance pay, in addition to any amounts that may be owing in respect of unpaid benefits.[1]

The Cross-Appeal

Issue 1: The Restrictive Covenants Are Unenforceable

53AIM argues that the motion judge erred in failing to assess the enforceability of the restrictive covenants in the context of the sale of Bakermet, citing Payette v. Guay inc., 2013 SCC 45, [2013] 3 S.C.R. 95. The restrictive covenants were fundamental conditions without which the buyer would not have completed the transaction. It argues that the motion judge erred, further, in declaring that the temporal restriction was overbroad, as he incorrectly based his decision on the term of the 2014 Agreement alone. The motion judge also erred in assessing the reasonableness of the geographic scope of the covenants by comparing it to the area in which the appellant conducted business on behalf of AIM, instead of comparing it to the area in which AIM actually conducts business. Non-solicitation clauses in particular no longer require geographic limitations at all where they apply to all or some of a vendor's customers: Payette, at para. 73. Finally, AIM submits that the motion judge erred in failing to consider severing any unreasonable portion of the restrictive covenants, pursuant to the severability clause in the 2014 Agreement.

54I would reject these submissions.

The Non-Compete Obligation

55The motion judge's conclusion that both restrictive covenants were temporally disproportionate to the length of the appellant's contract was based on the erroneous conclusion that the appellant was employed pursuant to a fixed-term employment contract. However, it is not necessary to determine whether the temporal restrictions were reasonable in the context of the contract of indefinite hire that was created, because the motion judge also found that the covenants were unreasonable because of the broad geographic limitations they imposed.

56The core of the non-competition clause at issue was negotiated in the context of the SPA and the accompanying 2008 Agreement. The reasonableness of restrictive covenants is tested on a more lenient standard in the context of a sale of a business as compared to a pure employment contract: MEDIchair LP v. DME Medequip Inc., 2016 ONCA 168, 129 O.R. (3d) 161, at para. 33; Payette, at paras. 35, 39. However, the 2011 and 2014 Agreements contemplated similar but expanded restrictive covenants, in particular expanding the area in which the obligations applied to the Atlantic Provinces as well as Ontario and Quebec. The appellant submits that because these expanded obligations were introduced several years following the SPA, their reasonableness should be subject to the more onerous employer/employee test: Elsley v J.G. Collins Ins. Agencies, [1978] 2 S.C.R. 916.

57I agree. Although the 2011 and 2014 Agreements can be considered as maintaining an indefinite period of employment for the purpose of common law notice entitlements, the motion judge properly reasoned that the restrictive covenants in the 2014 Agreement should be subject to the more exacting reasonableness test from the employment context. The covenants expanded considerably in scope over the course of the successive employment contracts; they were distinct provisions, part of stand-alone contracts within an ongoing employment relationship.

58The clauses allegedly breached following the appellant's termination are contained in the 2014 Agreement, which was negotiated and entered into with the appellant qua employee rather than qua seller. This is analogous to the situation in Elsley, and as such the restrictive covenants in the governing 2014 Agreement must be interpreted without regard to the SPA. Payette does not apply where a subsequent, stand-alone employment contract contains its own covenants, particularly where it expressly "replace[s] and supersede[s] all the terms which were set forth under any previous arrangement and/or agreement".

59The motion judge's conclusion that the non-compete obligation was unreasonably broad was amply supported by the record and is entitled to deference. The appellant was 58 years of age at the time of termination and the scrap metal industry is essentially the only industry in which he has ever worked. Furthermore, as the appellant notes, the restrictions extend into territories in which the appellant did not himself do any business when the clause was negotiated and agreed to. The restrictions prohibit him from engaging in business operations in which he was not involved, and of which he had no knowledge, at the time of the 2014 Agreement.

Severance

60Although the parties contemplated severance in the 2014 Agreement, this is not a case in which any aspect of the non-compete obligation should be severed. Traditional"blue-pencil" severance is to be resorted to "rarely", and only when the words being severed are "clearly severable, trivial and not part of the main purport of the restrictive covenant": Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, [2009] 1 S.C.R. 157, at para. 36. Using blue-pencil severance to "cross out" the geographic restrictions in this case would interfere with the main purport of the non-competition clause, and in any event would be counterproductive without accompanying amendment.

61In that vein, using "notional severance" to read down the non-compete obligation unjustifiably would redistribute the risks assumed by the parties in the 2014 Agreement, and would amount to this court imposing a covenant it considers reasonable. It is not appropriate for courts to interfere with contractually allocated risks in an employment relationship in this way: Shafron, at paras. 39-42.

62In all of the circumstances, I would not interfere with the motion judge's conclusion that the non-compete obligation is unreasonable, and so there is no need to determine whether it is ambiguous. I would not use the remedial severance tool provided by the 2014 Agreement.

The Non-Solicit Obligation

63The respondent notes that lack of territorial boundary in a non-solicit obligation is not, of itself, a reason to find that covenant unreasonable: Payette, at para. 73. However, it does not follow from Payette that non-solicitation clauses never can be found unreasonable based on geographic scope. The motion judge's conclusions were based on the specific context of the scrap metal industry, and any parsing of the non-solicitation provisions to disentangle non-geographically bounded obligations only could strengthen his conclusion that the restrictive covenant was untenably broad.

64However, ultimately it is not necessary to determine the reasonableness of the non-solicit obligation, because there was no breach. The motion judge's factual finding – that AIM presented no evidence to counter the appellant's assertion "that he has scrupulously refrained from soliciting any and all customers of AIM" – is entitled to deference.

Issue 2: Did the Motion Judge Err in Failing to Assess Whether the Appellant Had Breached the Restrictive Covenants?

65In light of these conclusions, it is not necessary to determine whether AIM's refusal to pay the appellant his statutory entitlements after termination released him from the non-competition clause, or whether he breached that covenant in any event.

66As noted, there is no reason to interfere with the motion judge's factual finding that there is no evidence of solicitation.

Issue 3: The Appellant Did Not Breach Fiduciary Duties

67The motion judge was prepared to accept that the appellant owed fiduciary duties to AIM, duties that had not ended automatically with the termination of employment. However, he found that the evidentiary record was insufficient to support a finding that the appellant had breached any continuing fiduciary obligations. In essence, the motion judge found that AIM failed to put its best foot forward on the motion; it presented no evidence to counter the appellant's evidence that he refrained from soliciting AIM's customers.

68The motion judge's analysis is a question of mixed fact and law and is entitled to deference, and I see no basis for this court to interfere with the motion judge's findings on appeal.

Issue 4: Was the Appellant Entitled to Contractual Termination Payments in Light of His Post-Termination Conduct?

69In light of the conclusion that the contractual termination clause is void, it is not necessary to determine whether the appellant's post-termination conduct disentitled him from receiving payments under the 2014 Agreement.

Conclusion

70I would allow the appeal and vary the award of damages. The appellant is entitled to 34 weeks' termination and severance pay as set out above. The parties can calculate the quantum of any additional unpaid ESA entitlements that may be owing. I would dismiss the cross-appeal.

71The appellant is entitled to costs on the appeal and the cross-appeal. If the parties cannot agree on costs, they may make brief submissions (3-4 pages) to the Registrar of this court within 30 days of this decision.

Released: December 7, 2018 ("G.H.")

"Grant Huscroft J.A."

"I agree. Janet Simmons J.A."

"I agree. B.W. Miller J.A."

Footnote

1The termination and severance pay entitlements are calculated as follows: $231,250/yr ($185,000 + $46,250 bonus) = $4,447.12/week x 34 weeks. There is insufficient information in the record before this court as to the value of any amount that may be owing in respect of unpaid benefits pursuant to ss. 60 and 61 of the ESA.