Law Times

Page 9 Law Times ��� February 25, 2013 Focus On Labour & Employment Law Smilecorp sets new benchmark for non-solicitation agreements BY MICHAEL McKIERNAN Law Times E mployers��� counsel have a new model for nonsolicitation agreements after the province���s appeal court upheld an injunction granted to a dental centre against one of its former dentists. A Superior Court judge granted the injunction last March to Smilecorp Inc., the operators of a Whitby, Ont., dental centre, to prevent dentist Daniel Pesin from ���soliciting, contacting, inviting or encouraging��� his former patients at the centre to continue treatment with him at his new location. The dispute related to a non-solicitation covenant the dentist signed while he worked at Smilecorp���s clinic. In its November decision in Smilecorp Inc. v. Pesin, a threejudge panel of the Court of Appeal for Ontario unanimously dismissed Pesin���s appeal of the Superior Court decision. ���In terms of getting a nonsolicitation clause enforced, Smilecorp will be the new benchmark for drafters. It speaks to where the court will go in allowing them,��� says Sean Bawden, an employment lawyer with Ottawa firm Kelly Santini LLP. Pesin had been practising out of Smilecorp���s location since the summer of 2009 when he took over care for patients already treated by other dentists at the centre. He also treated new patients attracted to the clinic by Smilecorp���s advertising push. At the outset, the dentist signed a confidentiality agreement with Smilecorp, as well as a management agreement, that included the key non-solicitation covenant: ���Upon the expiry or termination of this agreement or any renewal thereof, for a period of twenty-four (24) months thereafter, the dentist covenants: (1) not to solicit, contact, invite or encourage either directly or indirectly, in any manner whatsoever, any patients of the dental practice to seek dental treatment . . . at any location other than at the premises (2) not to send any announcement, advertising flyer, notice or any communication directly or indirectly to his patients announcing the change in location of the dental practice to another location.��� But when he left in the fall of 2011, Pesin took with him a copy of the clinic���s patient lists. He had copied them without permission just before receiving Smilecorp���s notice of termination, according to the appeal court decision that noted he also intended to let patients know about his new location five kilometres away from Smilecorp���s clinic. That���s when Smilecorp applied for and got its permanent injunction. Oshawa, Ont., lawyer Laurie Aitchison, who acted for Smilecorp on the appeal, says her clients were happy the court held Pesin to the agreement and that Smilecorp was able to protect the goodwill it had built up in what the court described as a ���turnkey dental practice.��� ���When he came in, he stepped into the footsteps of the dentist that had just left and he had all these patients. The reason the centre was able to attract dentists was because they knew they were getting this huge clientele,��� says Aitchison. ���The goodwill stays with the location.��� According to Bawden, nonsolicitation clauses are particularly popular in agreements with professionals such as dentists, doctors, and engineers, as well as with employees in sales positions. They���re common in ���any business where the employer provides access to confidential information and there���s a risk the employee will take it, go off, and sell it on behalf of someone else,��� says Bawden. However, he says many agreements fall down when it comes to the reasonableness of the clause. In the Smilecorp case, Bawden says the centre struck the right balance. ���If you���re expected to drum up your own clients and leads, that���s one thing. But where the employer provides all the clients and some hot leads, they���re doing something for you. If in return they ask you not to take clients away from them, I think that���s going to speak to reasonableness,��� says Bawden. Appeal Court Justice Eleanore Cronk highlighted aspects of the management agreement that she said, when ���read as a whole, undercut��� Pesin���s claim that the non-solicitation clause was unreasonable. As part of the agreement, Pesin acknowledged the reasonableness of the non-solicitation covenant and promised not to remove patient lists or records on termination. At the same time, Smilecorp committed to informing any patients who asked about Pesin���s ���In terms of getting a non-solicitation clause enforced, Smilecorp will be the new benchmark for drafters,��� says Sean Bawden. new location and forwarding copies of records for those who wished to go with him. ���Moreover, the ambit of the non-solicitation covenant is itself constrained,��� wrote Cronk. ���As Smilecorp emphasized during oral argument, nothing under the management agreement prevents Dr. Pesin from advertising generally concerning the relocation of his practice. Put another way, the nonsolicitation covenant does not prohibit Dr. Pesin from soliciting patients generally. Instead, the covenant merely prevents Dr. Pesin from communicating with those patients treated by him at the centre, except in the manner agreed.��� In addition, the agreement placed no restrictions on Pesin���s new location, a fact that prompted Cronk to find the scope of the proscription on solicitation to be ���very limited.��� Julian Binavince, counsel to Toronto firm Levy Zavet LLP who represented Pesin on the appeal, says he hoped the Court of Appeal would place less emphasis on the private law contractual issue and focus instead on his points about the regulatory questions the Smilecorp agreement raised. Binavince argued on behalf of Pesin that the management agreement infringed on the patients��� right to choose their dentist since the clinic automatically transferred files to another Smilecorp dentist when Pesin departed. ���From a public policy perspective, it is the patients who should be able to decide where their records go. In this case, it wasn���t the patients that chose. Smilecorp got to choose,��� says Binavince. However, the appeal court panel found the agreement contained enough safeguards to ensure it honoured patients��� choice of dentist and that access to their own records was unrestricted. ���The agreement preserves, indeed emphasizes, a patient���s ability to choose his or her dental provider,��� wrote Cronk. LT Let us open the right door for you We specialize in Employment and Labour Law in Canada Kuretzky Vassos Henderson is a leading employment and labour law firm situated in the heart of Toronto. We are comprised of eleven lawyers, all of whom specialize in the area of employment and labour law. We act for many prominent public and private sector employers as well as for individuals. Kuretzky Vassos Henderson LLP Our work includes extensive experience in the areas of: Wrongful dismissal ��� Human rights ��� Labour relations/Labour law/Collective barganing ��� Workplace health and safety ��� Sexual harassment ��� Employment standards ��� Employment contracts ��� Canada Labour Code ��� Class actions ��� Mediation/arbitration/ADR www.kuretzkyvassos.com ��� 416.865.0504 www.lawtimesnews.com Kuretzky_LT_July11_11.indd 1 7/5/11 3:32:01 PM

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