Is a restrictive covenant in an employment contract more restrictive than in a contract for sale and purchase of a business?

British Columbia, Canada


The following excerpt is from Telus Communications Inc. v Golberg, 2018 BCSC 1825 (CanLII):

Generally, courts scrutinize restrictive covenants in employment contracts more closely than restrictive covenants in contracts for sale and purchase of a business for two reasons. First, the inequality of bargaining power between an employer and employee is greater than that between other contracting parties. Second, a purchaser of a business generally pays for the business’s goodwill whereas an employee is not paid for this: Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6 at paras. 21‑22. However, the appropriate degree of scrutiny must reflect the reality both of the parties' relative bargaining power and of the bargain struck.

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