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SCC to hear Quebec case on impact of sale of business, wrongful dismissal on enforceability of non-compete

Jurisdiction: - Quebec

The Supreme Court of Canada announced today that it will hear the appeal in Yannick Payette, Mammoet Canada Eastern Ltd., successor to Mammoet Crane Inc. v. Guay inc. (Que. C.A., Dec. 12, 2011) (34662).

As set out in the Court's summary, the key issue on appeal is whether the Quebec Court of Appeal erred in applying a non-competition clause despite the broad scope of the clause and the wrongful termination of employment relationship in light of the Civil Code regime.

By way of background, the Court's summary states:

The assets of companies controlled by the applicant Mr. Payette were purchased by the respondent Guay inc. in October 2004. All of those companies worked in the same field, namely crane rental. The contract of sale provided that Mr. Payette would remain employed by Guay and be bound by a non competition clause and companion non solicitation clause for a period of five years after the termination of the employment relationship. The company dismissed Mr. Payette in August 2009; in March 2010, he began working for the applicant Mammoet, a competitor. Guay applied for an injunction; pending the trial, Guay was granted a provisional injunction and a safeguard order. The Superior Court found that the dismissal was wrongful and refused to apply the non competition clause, which it also found too broad to be valid. That decision was reversed by a majority of the Court of Appeal.

The Quebec Court of Appeal's decision can be found here: Guay inc. v Payette, 2011 QCCA 2282.

A summary of the Quebec Court of Appeal's decision by Bogdan Catanu at Wood LLP can be found here: "Permitted scope of non-competition covenants in an agreement for the sale of a business versus in an employment agreement - some important distinctions" (December 11, 2011).