CITATION: Ceridian Dayforce Corporation v. Daniel Wright, 2017 ONSC 6763

COURT FILE NO.: CV-16-562057

DATE: 20171120

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CERIDIAN DAYFORCE CORPORATION

Plaintiff (Moving Party)

– and –

DANIEL WRIGHT, THE ULTIMATE SOFTWARE GROUP OF CANADA, INC. and THE ULTIMATE SOFTWARE GROUP INC.

Defendants (Responding Parties)

Timothy Gilbert and Matthew Diskin, for the Plaintiff (Moving Party)

Daniel Chodos, for the Defendant, Daniel Wright

Sunil Kapur, and Ben Aberant for the Defendants, The Ultimate Software Group of Canada, Inc. and The Ultimate Software Group Inc.

HEARD: June 13, 2017

REASONS FOR JUDGMENT

kristjanson J.

OVERVIEW

[1] This is a partial summary judgment motion brought by Ceridian Dayforce Inc. ("Ceridian") seeking to enforce a non-compete clause. Ceridian provides a cloud-based software as a service (“SaaS”) application that provides human capital management solutions to companies. Ceridian's flagship product is Dayforce HCM ("Dayforce HCM").

[2] The defendant Daniel Wright was originally hired by Dayforce in August, 2011 as a “software developer”. His job as a software developer consisted of designing, building and testing components of Dayforce software. He did not perform managerial functions.

[3] On September 6, 2011, Mr. Wright’s first day of work, he executed an employment agreement with Dayforce which contained a non-compete clause which is the focus of this summary judgment motion.

[4] In April 2012, Ceridian HCM Holding Inc. acquired all of the issued and outstanding shares of Dayforce. Dayforce changed its name to Ceridian Dayforce Inc., the present plaintiff. Mr. Wright’s employment continued on the same terms.

[5] The defendant, Ultimate Software Group, Inc. ("Ultimate US"), also provides human capital management SaaS services. The defendant, the Ultimate Software Group of Canada ("Ultimate Canada"), is a wholly owned subsidiary of Ultimate US and operates Ultimate US's Canadian operations (collectively, "Ultimate"). Ultimate and Ceridian are competitors in the human capital management SaaS industry.

[6] Ceridian as plaintiff seeks partial summary judgment for a declaration that the non-compete clause in the employment agreement with Mr. Wright is binding and enforceable. Ultimate seeks partial summary judgment against the plaintiff, a declaration that the non-compete clause is unreasonable, unenforceable and void ab initio, and a direction pursuant to Rule 20.05 that the action proceed to trial on the basis that the non-compete clause is unenforceable and the sole remaining issue for trial as against Ultimate is whether Ultimate induced Mr. Wright to commit breach of contract against the plaintiff with respect to any enforceable contractual provision. Mr. Wright seeks partial summary judgment for a declaration that the non-compete clause is unreasonable, unenforceable and void ab initio, and that the action proceed to trial on the other claims.

ISSUES

[7] The issues in this case are as follows:

(1) Is this a suitable case for partial summary judgment?

(2) Is the non-compete clause reasonable and therefore enforceable?

FACTUAL BACKGROUND

Mr. Wright’ Employment at Ceridian

[8] Mr. Wright's employment agreement contained the non-competition clause set out at Schedule “A”.

[9] Mr. Wright was initially employed by Dayforce in 2011. Ceridian HCM Inc., a corporate affiliate of the plaintiff, then owned a twenty percent (20%) stake in Dayforce's parent company, Dayforce Corporation, and was therefore a corporate affiliate of Dayforce. Ceridian HCM Inc. and its affiliates had separate lines of business including gas, fleet, pay and gift cards and payroll processing. There were a "number" of other parent companies and affiliates of Dayforce. Dayforce operated only in Canada and the U.S. In January 2012, Ceridian's current parent company began a series of transactions that resulted in the acquisition of Dayforce, which changed its name to Ceridian Dayforce Inc. on April 19, 2012.

Mr. Wright's Work at Ceridian

[10] Mr. Wright was a member of the Ceridian software development team. Mr. Wright worked in the workforce management software group for Dayforce. Wright designed, programmed, and tested parts of the computer software at the heart of Ceridian's human capital management SaaS business. He also reviewed the work of his peers to ensure code quality and made technical decisions.

[11] At the time of his resignation in July, 2016, he was one member of a team of two software developers working on a major update to the RT Engine for the Dayforce software.

Ceridian’s Evidence re Proprietary Technology and Mr. Wright’s Role

[12] Ceridian argues that one of the Dayforce software’s key features is that it includes a technology that performs real time calculations (the "RT Engine"). The RT Engine allows an employer to change to an input (e.g. the number of hours worked), and a corresponding output (e.g. gross pay) is calculated instantly taking into account numerous other inputs, laws and rules (such as laws regulating pay for overtime). Ceridian argues that the means by which these real time calculations are accomplished is one of a number of Ceridian’s trade secrets known to Mr. Wright.

[13] Ceridian argues that Ultimate has not implemented this technological innovation of the RT Engine because it cannot do so “without overburdening the client,” and thus may suffer Internet latency. Ultimate, on the other hand, has called evidence that Ultimate has no desire to implement technology like Ceridian's RT engine because Ultimate's software yields better performance and easier maintenance. Ultimate says it has no interest in changing its HCM SaaS software solutions to run like Ceridian’s.

[14] The Dayforce software originally used Microsoft's Silverlight Plug-in ("Silverlight"). In 2012, Microsoft announced that it would discontinue Silverlight. In response to Microsoft's announcement, Ceridian determined that it would migrate the RT Engine to another technology platform in order to maintain its competitive advantage.

[15] Wright was in charge of Ceridian's research and development effort to replace Silverlight as it relates to the RT Engine. Ceridian argues that the solution Ceridian ultimately adopted at Wright's recommendation is a trade secret, of value to its competitors, and it is the knowledge gained by Mr. Wright due to his role in managing the change and providing a key technological solution that Ceridian seeks to protect through enforcement of the non-compete clause. Ceridian also argues that common technology, used in a unique and inventive way, may be protected as a trade secret. Ceridian’s argument is that this case is unique because the trade secret is kept in Mr. Wright’s head - the technological solution - and this is what necessitates the non-compete protection.

Mr. Wright Finds New Employment

[16] In late February 2015, Ultimate approached Mr. Wright and tried to hire him, but Mr. Wright declined.

[17] In 2016 Mr. Wright became dissatisfied with his work at Ceridian and the direction the company had taken. He and his wife had a new child. He began to look for work, and attended interviews with other companies. He was approached by Ultimate again and on June 23, 2016, Mr. Wright was offered a position as a software developer in the workforce management group for Ultimate with base pay approximately $10,000 higher than his Ceridian position. Mr. Wright felt that Ultimate could offer him opportunities for career advancement that were not available at Ceridian.

[18] On June 24, 2016, Mr. Wright resigned from Ceridian. His resignation letter originally stated that his last day would be July 8, 2016. Ceridian asked him to stay on an additional week to educate other software developers about his work at Ceridian and train the software developers who would take on certain of Mr. Wright's roles. Mr. Wright stayed on the additional week and informed Ultimate that his start date would be pushed back to July 18, 2016.

[19] On June 27, 2016, Mr. Wright told Thomas Whittaker, the Vice President of Research and Development for Dayforce at Ceridian, that he was contemplating an offer of employment at Ultimate. Mr. Whittaker’s evidence is that that during this conversation, he told Mr. Wright that Ceridian would invoke its rights under the non-competition clause in Mr. Wright's employment agreement. Mr. Wright’s evidence is that Whittaker threatened him, telling Wright that Ceridian would “put the fear of God in (him)” if he persisted in accepting employment with Ultimate. Mr. Wright’s evidence is that he was surprised about Ceridian’s aggressive stance, since he knew several software developers that had left Ceridian for Ultimate, and was aware of one executive-level employee who did so.

Ceridian Triggers the Non-Compete Clause

[20] On July 15, 2016, Mr. Wright's last day of employment at Ceridian, Ceridian sent Mr. Wright a letter reminding him of his post-employment obligations and informed Mr. Wright that Ceridian was enforcing the full 12 month restricted period (the "Notice") under the non-compete provisions of the employment agreement. Following July 15, 2016 (Mr. Wright's last day at Ceridian), in accordance with the non-competition clause and Notice, Ceridian remitted base salary payments to Mr. Wright pursuant to the non-compete.

[21] Mr. Wright did not believe that his employment with Ultimate would require him to disclose any confidential or proprietary information belonging to Ceridian. However, since he was 27 years old with a young family, and Whittaker’s threat made him fearful of being named in a lawsuit, Wright asked Ultimate to arrange employment unrelated to his Ceridian work in the Workforce Management/human capital management sphere. Ultimate and Wright agreed in September, 2016 that he would work for Ultimate’s “mobile” group for 12 months, so that he would not be required to perform tasks related to the “business logic” or core functionality of Ultimate’s human capital management SaaS, which is the type of software development he’d been doing at Ceridian.

[22] On July 27, 2016, Mr. Wright spoke to Scott Kitching, Ceridian's general counsel, to discuss the Notice and Mr. Wright's post-employment obligations. From this conversation, Mr. Kitching in his answer to undertaking states that he understood that Mr. Wright was not at that time working at Ultimate and that he did not intend to do so (at least during the restricted period), and should that change, Mr. Wright, or his counsel, would advise Ceridian of same. Mr. Wright’s evidence is that he did not begin working at Ultimate until he had finalized the plans mentioned above, to work in Ultimate’s mobile group. His evidence is that when this was finalized, he sent an e-mail dated September 22, 2016 to Mr. Kitching informing him of the steps. His evidence is that Mr. Kitching did not ask for details, and had no follow-up questions.

[23] On Thursday, September 22, 2016, Mr. Wright informed Ceridian that he had accepted employment at Ultimate and would be commencing employment at Ultimate the following Monday (September 24, 2016). He asked that Ceridian stop making the non-compete salary payments, effective the following Monday (his first day of work at Ultimate).

[24] In December 2016, after the summary judgment motion was commenced, Wright attempted to return the funds Ceridian paid him between July 15, 2016 and September 24, 2016.

ISSUE #1: Is this a suitable case for partial summary judgment?

[25] Is there a genuine issue requiring trial on the following question: is the non-competition clause contained in Mr. Wright's employment agreement with Ceridian reasonable and therefore enforceable? Since this is partial summary judgment, the Court must also consider the special issues raised by partial summary judgments.

[26] Rule 20.04(2)(b) provides that the court shall grant summary judgment if “the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment”. All of the parties agreed that the motion should be determined by way of summary judgment as the extensive evidentiary record would enable the motions judge to decide all issues in dispute. I must determine that the case is appropriate for summary judgment notwithstanding the agreement of the parties: Anjum v. John Doe, 2016 ONSC 7784, 2016 CarswellOnt 19599, at para. 21.

[27] The record on this motion is substantial. It includes affidavits from five fact witnesses and two software development experts. All but one were cross-examined. Ceridian's affiants are: Thomas Whittaker ("Whittaker"), the Vice-President of Research and Development for Dayforce HCM Workforce Management at the Plaintiff; Scott Kitching ("Kitching") the Executive Vice President, General Counsel and Assistant Secretary of Ceridian HCM Inc., which is one of the Plaintiff's parent companies; Garry Kitchen ("Kitchen"), a software developer retained by the Plaintiff to provide opinion evidence on the existence of Ceridian’s alleged trade secrets; and Lawrence Gagnon from Duff & Phelps Canada Ltd., who was not cross-examined.

[28] Ultimate's affiants are: Octavian Tarcea ("Tarcea"), Ultimate Canada's Director of Software Engineering; and Michael Mayfield ("Mayfield") a software developer and engineer retained by Ultimate to provide opinion evidence on the existence of Ceridian’s alleged trade secrets.

[29] Mr. Wright filed an affidavit and was cross-examined.

[30] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if: "the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence." In Mayers v. Khan, 2017 ONSC 200, 2017 CarswellOnt 253, Justice Glustein summarized the Hryniak principles as follows at para. 18:

(i) Summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims. It is no longer merely a means to weed out unmeritorious claims but rather a “legitimate alternative means for adjudicating and resolving legal disputes” (Hryniak, at paras. 5 and 36)

(ii) An issue should be resolved on a motion for summary judgment if the motion affords a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial (Hryniak, at paras. 4 and 49);

(iii) On a motion for summary judgment, the judge must first determine if there is a genuine issue requiring a trial based only on the evidence before the judge and without using the judge’s fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under Rules 20.04(2.1) and (2.2) (Hryniak, at para. 66); and

(iv) The standard for determining whether summary judgment will provide a fair and just adjudication is not whether the procedure is as exhaustive as a trial, but rather “whether it gives the judge confidence that [the judge] can find the necessary facts and apply the relevant legal principles so as to resolve the dispute” (Hryniak, at para. 50). A judge must be confident that he or she can fairly resolve the dispute (Hryniak, at para. 57).

[31] The court has before it a very full evidentiary record, including 7 affidavits, two from experts, and transcripts of six cross-examinations. A court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 (ONSC) at paras. 26-27; aff'd 2014 ONCA 878 (Ont. C.A.).

[32] I also consider that this is partial summary judgment. Partial summary judgment may not be appropriate where it risks duplicative or inconsistent findings: Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2016 ONCA 922, [2016] O.J. No. 6319 (Ont. C.A.), at paras. 37 and 38. I am also mindful of the caution expressed by Justice Pepall in Butera v. Chown, Cairns LLP, 2017 ONCA 783 at para. 34 that:

A motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner. Such an approach is consistent with the objectives described by the Supreme Court in Hryniak and with the direction that the Rules be liberally construed to secure the just, most expeditious, and least expensive determination of every civil proceeding on its merits.

[33] I am satisfied that the issue of the enforceability of the non-compete clause can be readily bifurcated from the issues in the main action, and dealt with expeditiously and cost-effectively on this partial summary judgment motion. I am satisfied that the record provides me with the necessary evidence in order to adjudicate the dispute in a timely, affordable and proportional manner under rule 20.04(2). I have determined that there is no genuine issue requiring trial, and I am satisfied that I can find the necessary facts and apply the relevant legal principles so as to resolve the motions and cross-motions.

[34] The issue of the enforceability of the non-compete clause on this summary judgment motion will resolve those issues now, and significantly narrow the scope of issues at trial. From a review of the pleadings, there is a fiduciary duty claim against Mr. Wright that may proceed, and possibly a verbal agreement breach claim. There is a claim against Ultimate for interfering with Ceridian’s business by unlawful means.

[35] For the reasons set out below I grant partial summary judgment to Ultimate and Mr. Wright, as there is sufficient evidence to fairly and justly adjudicate the disputes, and summary judgment is a timely, affordable and proportionate procedure. I dismiss Ceridian’s partial summary judgment motion.

Issue #2: Is the non-compete clause reasonable and therefore enforceable?

[36] In this case, the employer argues that the knowledge held by the employee is unique such that a non-solicitation or confidentiality provision is insufficient to protect its legitimate proprietary interests, and in particular, trade secrets relating to the human capital management, SaaS area in which Mr. Wright worked as a software engineer. It argues that the information to be protected is in Mr. Wright’s “head”. I review the general issues relating to non-compete clauses below, and apply them to the specific clause here in the context of the case.

General Issues Regarding Non-Compete Clauses

[37] Void as a General Rule: Non-competition clauses in employment agreements are void as a general rule, and will only be enforced in exceptional cases, where a non-solicitation or non-disclosure provision will not be sufficient to protect the employer’s interest legitimate proprietary interest. Even then, the clause must be carefully drafted. The Supreme Court has held that rigorous scrutiny must be applied to non-compete clauses in the employment context, “where an imbalance of bargaining power may lead to oppression and a denial of the right of the employee to exploit, following termination of employment, in the public interest and in his own interest, knowledge and skills obtained during employment:” J.G. Collins Insurance Agencies Ltd. v. Elsley, 1978 CanLII 7 (SCC), [1978] 2 S.C.R. 916, [1978] S.C.J. No. 47 at para. 16. A non-compete clause in an employment context may be enforceable if it is reasonable between the parties and with reference to the public interest.

[38] No Blue Penciling: Restrictive covenants must be interpreted and enforced in their entirety: they cannot be read down, and only trivial parts of such covenants may be removed unilaterally: Shafron v KRG Insurance Brokers (Western) Inc., 2009 SCC 6 at paras 2, 36, 49. Thus, Ceridian must establish the reasonableness of the non-compete clause as drafted. All parties agree that blue penciling is not appropriate with respect to the restrictive covenant in issue here.

[39] Onus: The company seeking to enforce a non-compete bears the onus of establishing on a balance of probabilities “that it has a proprietary interest entitled to protection, that the temporal and spatial features of the clause are not too broad, that its terms are clear and certain, not vague and ambiguous, and that, in all circumstances, the restriction is reasonably required for the respondent’s protection:” Martin v. ConCreate USL Ltd. Partnership, 2013 ONCA 72 at para. 49; IT/NET Inc. v. Cameron, 2006 CarswellOnt 201 (CA) at para. 13.

[40] Reasonableness to be Assessed at Time the Agreement is Made: Reasonableness is determined in the light of circumstances existing at the time the contract is made which, of course, includes the parties' expectations of what "might possibly happen in the future": Tank Lining Corp. v. Dunlop Industries Ltd., 1982 CanLII 2023 (ON CA), [1982] O.J. No. 3602, 140 D.L.R. (3d) 659 (C.A.), at para. 18. Otherwise, the employee could not know at the time of contracting what he or she would be precluded from doing.

Key Provisions of the Non-Compete Clause in Issue

[41] The key provisions of the non-compete clause are:

(1) The non-competition period, defined as the “Restricted Period” means the period up to 12 months from the date the employee cease to be employed by the Company as determined by the Company in its sole unfettered discretion, provided that the Company informs the Employee of the length of the period within 5 business days of the Employee ceasing to be employed by the Company.

(2) The Employee shall not, “directly or indirectly provide services, in any capacity, whether as an employee, consultant, independent contractor, owner, or otherwise, to any person or entity that provides products or services or is otherwise engaged in any business competitive with the business carried on by the Company or any of its subsidiaries or affiliates at the time of his termination (a “Competitive Business”) within North America”;

(3) The Employee shall not “be concerned with or interested in or lend money to, guarantee the debts or obligations of or permit his name to be used by any person or persons, firm, association, syndicate, company or corporation engaged in or concerned with or interested in any Competitive Business within North America,”

(4) Nothing restricts the Employee from holding less than 1% of the issued and outstanding shares of any publicly traded corporation.

(5) During the Restricted Period, the Company is to pay the Employee his or her base salary, less applicable deductions

Is the Non-Compete Overbroad Regarding Scope of Prohibited Activities?

[42] There was a great deal of evidence and argument about whether Ceridian is protecting trade secrets, and whether it has proprietary interests to protect. For the purposes of this summary judgment motion I assume, without deciding, that Mr. Wright carries in his head information about a proprietary software solution in the human capital management SaaS space, deployed in a unique and inventive way which constitutes a trade secret, as argued by Ceridian. A non-compete clause can be no broader than necessary to protect Ceridian’s proprietary interest. The question is whether the non-compete clause is overly broad. The non-compete clause prohibits Mr. Wright from providing services “in any capacity” in any business “competitive with the business carried on by the Company or any of its subsidiaries or affiliates at the time of his termination.”

[43] Providing Services in Any Capacity: Ultimate argues that the non-compete is overbroad as Ceridian has not established why its proprietary interests would be threatened if Wright were to, for example:

(a) Work as a Janitor for Ultimate. In Madison Chemical Industries Ltd. v. Walker, 2000 CarswellOnt 1112 (SCJ) at para 12, Langdon J. determined that a Business Development Specialist’s non-competition provision was unreasonable because it would have precluded him, hypothetically, from working as a janitor.

(b) Work for a, or start his own, business providing hardware support and provide hardware support services to Ultimate via this business.

(c) Create his own start-up developing a non-HCM related software product and provide support to Ultimate if it were to become a customer of this product.

(d) Start a band in Mexico and be engaged as an independent contractor by Ultimate to play at a staff retreat in Cancun. In Orlan Karigan & Associates Ltd., 2001 CarswellOnt 357 (SCJ) at para 24, Justice Juriansz considered that a restrictive covenant would, hypothetically, prevent senior technical consultants from providing entertainment at an office party in finding the provision overly broad.

[44] I agree that the non-compete is overly broad and unreasonable in prohibiting Mr. Wright from providing services in any capacity to any business competitive with Ceridian or any of its subsidiaries or affiliates. This is a complete restraint of trade which goes far beyond the proprietary interest argued by Ceridian. The concern by Ceridian was Mr. Wright’s work as a software engineer in the human capital management software SaaS space. The restrictive covenant, however, is a blanket prohibition which unreasonably restricts Mr. Wright’s economic interests and goes beyond that reasonably necessary to protect Ceridian’s claimed proprietary interest: H.L. Staebler Co. v. Allan, 2008 ONCA 576 at paras. 53, 51. On this basis alone, the non-compete is not reasonable and must be declared to be unenforceable.

[45] Definition of Competitive Business Overly Broad: The non-compete clause prohibits Mr. Wright from providing services in any business “competitive with the business carried on by the Company or any of its subsidiaries or affiliates at the time of his termination.” This, too, is overly broad. The evidence as set out above is that in 2011 when Mr. Wright was hired, Ceridian HCM Inc., owned a twenty percent (20%) stake in Dayforce's parent company, Dayforce Corporation, and was therefore a corporate affiliate of Dayforce. Ceridian HCM Inc. and its affiliates had separate lines of business including gas, fleet, pay and gift cards and payroll processing. There was no evidence as to why a prohibition on working for a competing business in gas cards or gift cards, for example, would threaten the proprietary interest the plaintiff was seeking to protect. It is unreasonable in purporting to prevent Mr. Wright from working in areas completely unrelated to his work with Ceridian. On this basis alone, the non-compete is not reasonable and must be declared to be unenforceable.

[46] Other Overbreadth Issues: Ceridian’s evidence focusses on the knowledge in Mr. Wright’s “head” relating to software solutions in the human capital management space and protection of proprietary information. Their solution, however, precludes Mr. Wright from working in any capacity, for any business competitive with any of Ceridian’s non-human capital management lines of business or those of its many subsidiaries/affiliates. This non-compete suffers from the flaw identified by Justice Perell in Sherwood Dash Inc. v. Woodview Products Inc., 2005 CarswellOnt 7191, [2005] O.J. No. 5298 (S.C.J.) at para. 69:

Further, as a solution, the non-competition clause in this case extends beyond the actual problem of the misappropriating of confidential information. Put somewhat differently, it is not that the former employee is competing, it is how the former employee competes. By absolutely foreclosing employment for any competitor anywhere, the covenant in this case precludes the employee from using acquired skills or knowledge that do not encroach on confidential information or the employer's proprietary interests. It is arguable in the immediate case that the restrictive covenant goes too far; colloquially speaking, it is "overkill."

[47] There is a prohibition on holding 1% or more of the issued and outstanding shares of any publicly traded corporation. Nothing in Ceridian’s evidence demonstrates why this is reasonable, or how ownership of 1% or more of shares in publicly traded corporations by Mr. Wright would undermine its proprietary interests.

[48] The twelve month temporal scope is also not reasonable: the evidence did not establish the duration of the software development lifecycle, or tie this to the duration of the proprietary interest. It is arbitrary as it relates to the human capital management/SaaS interest argued for here.

[49] The geographic scope is also overbroad. At the time the non-compete was signed, Dayforce operated in Canada and the U.S. “North America” generally includes Mexico and the Caribbean. While Ceridian may have customers in over 50 countries, it did not establish that the Mexico/Caribbean restrictions are reasonable.

[50] Ambiguity: The definition of competitive business is a business carried on by the Company or any of its subsidiaries or affiliates at the time of Mr. Wright’s termination. The reasonableness is measured at the time of execution. At the time he was hired, it would be impossible for Mr. Wright to know the “unlimited” number and kinds of other businesses his employer Dayforce, which later became Ceridian through a share acquisition, might carry on during his employment: Creditel of Canada Ltd. v. Faultless, 1977 CarswellOnt 52 (HCJ) at para. 24.

[51] Even at the time of execution, it was ambiguous as to what would constitute a competitive business in the gas card or gift card line or payroll processing. The B.C. Court of Appeal has held that “[e]mployees must know, in no uncertain terms, the extent to which their post-employment activities are compromised, which is one reason a rigorous analysis is warranted:” Rhebergen v. Creston Veterinary Clinic Ltd., 2014 BCCA 97 at para. 67. In this case, the identity and number of affiliates and subsidiaries is unclear, much less the type of businesses they engaged in. Even Ceridian’s General Counsel could not answer the question on cross-examination, stating that there were multiple companies which were subsidiaries, probably 25 or 30, the vast majority of which he could not name. There is no evidence as to why the non-compete was necessary for any affiliate, including those with very different lines of business.

[52] Finally, under the non-compete, the time period of the restriction is not set until after employment is terminated, at which time the employer, in its unilateral discretion, sets the time period. At the time the agreement was executed, then, its temporal scope was ambiguous.

[53] When Dayforce was acquired, Mr. Wright executed a new non-compete in a Comfort Letter in 2012 affirming the same non-compete, with the only change being to the company name (Ceridian). All other terms and conditions of employment remained the same. There does not appear to have been consideration for the new agreement. In any event, all the same issues identified above apply, and the Comfort Letter non-compete is similarly unenforceable.

[54] Given the issues I have identified, the non-compete clause in issue here is not reasonable, and is unenforceable and void.

[55] Payments: Ceridian also sought to argue that since Mr. Wright accepted money pursuant to the non-compete agreement, he is nonetheless bound by it. The acceptance of this money by a young software engineer pursuant to an unreasonable and unenforceable non-compete clause which is void ab initio, does not make the non-compete enforceable. In any event, Mr. Wright’s evidence is that his pay deposit was automatic; he specifically instructed Mr. Kitching and Ceridian to stop paying him on a number of occasions, requested his bank to block the payments, and instructed his lawyer to send a cheque to Ceridian’s lawyers, who returned the cheque. In Medtronic of Canada Ltd. v. Armstrong, 1999 CarswellOnt 4155 (SCJ) at paras. 31-32, the Court found an overly broad non-compete clause unenforceable, even though the post-employment restriction provided for “lucrative compensation.”

Remedy

[56] I dismiss Ceridian’s partial summary judgment motion. I grant summary judgment to Ultimate and Mr. Wright for a declaration that the non-compete clause is not reasonable, is unenforceable, not binding and void. If a motion judge dismissing a motion for summary judgment proposes to exercise the power under rule 20.04(4)[[1]] to make a binding determination of law, the motion judge should specifically invoke the rule, and reference to the rule, as well as the legal determination made, should form part of the formal order: Skunk v. Ketash, 2016 ONCA 841at para. 36.

[57] To ensure that there is no confusion, pursuant to Rule 20.04(4)[1], I make a binding declaration of law that the non-compete clause contained in the Dayforce Employment Agreement with Mr. Wright is not reasonable, and is unenforceable not binding and void. I make a binding declaration of law that the non-compete clause contained in the Comfort Letter, Appendix C, by Ceridian and signed back by Mr. Wright April 2, 2012, is not reasonable, and is unenforceable, not binding and void.

[58] For the purposes of this decision, I assumed without deciding that Ceridian has proprietary interests and trade secrets carried “in the head” of Mr. Wright. These findings do not bind the trial judge. The only findings which bind the trial judge are that the non-compete clause is unreasonable, unenforceable and non-binding.

Next Steps

[59] There is a protective order in place with respect to asserted proprietary interests. For the purposes of this decision, it is not necessary that the protected information become public and I have written the decision to protect the alleged confidential information. This decision will be circulated in draft to the parties, to ensure that it does not intrude on confidentiality. The parties are to advise me within 5 days of any concerns.

[60] If parties cannot agree on costs, then: (1) Ultimate and Mr. Wright to provide costs submissions (3 pages maximum) and costs outlines, with offers to settle if any, to me at Judge’s Administration by November 27; (2) Ceridian’s response (3 pages for each) and costs outline by December 4th, through Judge’s Administration.

[61] I will actively case manage the file, although since I am now on the Family List, I will not hear motions. I would like submissions of counsel on the use which should be made at trial of the extensive affidavit evidence and cross-examinations. Parties are to arrange a 9:00 a.m. appointment with me through my assistant prior to December 21st to discuss this issue and to set a schedule to trial.

Kristjanson J.

Released: November 20, 2017

Schedule “A” – Non Compete Clause

The Non-Competition Clause

6.2 The Employee hereby covenants and agrees with the Company that during the term of this Agreement and during the Restricted period shall not, directly or indirectly provide services, in any capacity, whether as an employee, consultant, independent contractor, owner, or otherwise, to any person or entity that provides products or services or is otherwise engaged in any business competitive with the business carried on by the Company or any of its subsidiaries or affiliates at the time of his termination (a “Competitive Business”) within North America or be concerned with or interested in or lend money to, guarantee the debts or obligations of or permit his name to be used by any person or persons, firm, association, syndicate, company or corporation engaged in or concerned with or interested in any Competitive Business within North America, provided that nothing herein shall restrict the Employee from holding less than 1% of the issued and outstanding shares of any publicly traded corporation. For the purpose of this paragraph, the Restricted Period means the period up to 12 months from the date the employee cease to be employed by the Company as determined by the Company in its sole unfettered discretion, provided within 5 business days of the Employee ceasing to be employed by the Company, the Company shall inform the Employee of the length of the Period. Provided that the Employee is not in breach of this Agreement, the Company shall during the Restricted Period continue (subject to receiving a full credit for other amounts paid to the Employee in accordance with Section 5) to pay the Employee his or her base salary, less applicable deductions. In the event that during the Restricted Period the company ceases to pay the said base salary, the Employee’s only legal or equitable recourse is to terminate his obligations in this paragraph (B) on a go forward basis. (For greater certainty, the Employee will still be liable for all breaches of this paragraph B during the time he received his payments hereunder).