ONTARIO – Responding to a Request for Proposals is not solicitation. Leave to appeal of arbitral award pursuant to section 45 (1) of the Arbitration Act, 1991 (“Act”) denied. The arbitrator correctly applied the test for assessing the reasonableness of a restrictive covenant in an employment contract and made no errors in law.
PureFacts Financial Solutions et al. v Cheung et al.
2022 ONSC 961, February 10, 2022
SCJ (Newton J. )
An arbitrator dismissed PureFacts’ (“PF”) claims against the defendants who were PF employees. PF sought leave to appeal the arbitral award pursuant to section 45 of the Arbitration Act, 1991, on the basis that the arbitrator erred on questions of law.
Section 45 (1) of the Act states that the court shall grant leave to appeal if it is satisfied that:
- “the importance to the parties of the matters at stake in the arbitration justify an appeal: and
- the determination of the question of law at issue will significantly affect the rights of the parties” (para.2 )
The employment contracts between the parties included “non-solicitation clauses.” After resigning from PF, the defendants were approached by a PF client and invited to respond to a “request for proposals” (“RFP”). PF was also approached by the client and invited to respond to the RFP. PF alleged that the defendants breached the non-solicitation clause and employment contracts by responding to the RFP and using PF’s confidential and proprietary information. (para.5)
The arbitrator concluded that responding to the RFP in itself did not breach the employment contract. The arbitrator held that there was no evidence of contact between the client and the defendants before the invitation to respond to the RFP was received and no evidence that PF would have made the short list or been successful if the defendants had not responded to the RFP. (para. 6)
Further, the arbitrator held that there was no evidence that the defendants used PF’s confidential information by offering a lower hourly rate than PF or by incorporating limited material from their PF work.(para.7)
Newton J. reviewed the alleged “ errors of law” made by the arbitrator as follows:
- There was no error of law in the arbitrator’s finding that there was no use of confidential information as the defendants used “very limited material from other PF work”. (para.11)
- The arbitrator made no error in law in deciding that providing information of other work the defendants worked on while employed by PF was not a breach of confidence. The judge noted that determination if information falls within the breach of confidence category is a question of mixed fact and law. (para.16)
- There was no error in law on the arbitrator’s part when he did not find that the defendants breached confidence by offering a lower hourly rate than charged by PF which was a question of mixed fact and law. The arbitrator noted that the list of those invited to respond to the RFP was confidential and the defendants did not know PF also responded to the RFP.
- There was no error in law on the arbitrator’s part by finding that responding to an RFP was not solicitation. Newton J. referred to case law establishing that responding to a tender is not solicitation. In particular, the court referred to Veolia ES Industrial Services 2012 ONCA 173 at para.
- There was no error in law on the arbitrator’s part in relation to assessing the reasonableness of a restrictive covenant. Newton J. found that the arbitrator correctly applied the test set out in Elsley v J.G. Collins Inc. Agencies 1978 CanLII 7 (SCC). The framework as set out in Elsley being 1) does party have a proprietary interest entitled to protection? 2) were the temporal or spatial features of the clause too broad? 3) is the covenant unenforceable as being against competition generally and not limited to proscribing clients of the former employer?
The main consideration for the court was the reasonableness of the covenant and whether a covenant is overly broad or is it only that which is reasonably required for the employer’s protections as set out by the ONCA in H.L. Staebler Company Ltd v Allan et al. 2008 ONCA 576 CanLII at para. 36.
As a result, the Court denied leave to appeal under s. 45(1) of the Arbitration Act, 1991.