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The Second Opinion: Restrictive Covenants and the Sale of a Business

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

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Since the seminal judgment in Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 S.C.R. 916, Canadian courts have applied the rules for determining the validity of a restrictive covenant more strictly in the employment context than where the covenant accompanies the sale of a business.  However, it can frequently be difficult to identify which category a covenant falls into where a business is sold as part of a hybrid agreement that contemplates the vendor will also become the purchaser’s employee.  In Payette v. Guay inc., 2013 SCC 45, the Supreme Court of Canada weighed in on … Continue Reading