



COURT OF APPEAL FOR ONTARIO

CITATION: Kerzner v. American Iron & Metal Company Inc.,
    2018 ONCA 989

DATE: 20181207

DOCKET: C64238

Simmons, Huscroft and Miller JJ.A.

BETWEEN

Steven Kerzner

Plaintiff
    (Appellant/

Respondent by way of cross-appeal)

and

American Iron & Metal Company Inc.

Defendant (Respondent/

Appellant by way of cross-appeal)

Alan Riddell and Kyle Van Schie, for the
    appellant/respondent by way of cross-appeal

Peter MacTavish and Brittany Hinds, for the
    respondent/appellant by way of cross-appeal

Heard: June 21, 2018

On appeal from the order of Justice
    Graeme Mew of the Superior Court of Justice, dated July 17, 2017, with reasons
    reported at 2017 ONSC 4352, 41 C.C.E.L. (4th) 142.

Huscroft J.A.:

OVERVIEW

[1]

This is an appeal from an order granting summary judgment in favour of
    the appellant in his wrongful dismissal action against the respondent, American
    Iron & Metal Company Inc. (AIM).

[2]

The appellant, who was awarded six months pay in lieu of notice
    pursuant to the termination clause in his 2014 Executive Employment Agreement
    with AIM (the 2014 Agreement), submits that he is entitled to additional
    damages. The respondent cross-appeals from an order dismissing its counterclaim
    for breach of restrictive covenants and breach of fiduciary duties.

[3]

The wrongful dismissal action arose in the context of the sale of
    Bakermet Inc. (Bakermet) in 2008 to ArcelorMittal Montréal Inc. (ArcelorMittal).
    The appellant was a co-owner and employee of Bakermet at the time of the sale.

[4]

The motion judge concluded that the sale agreement and its accompanying
    release had the effect of releasing AIM from all claims relating to the
    appellants employment prior to the sale in 2008. Further, he interpreted the
    employment agreements following the sale  between the appellant and AIMs
    predecessor, ArcelorMittal Ottawa Inc. (ArcelorMittal Ottawa)  as a series
    of fixed-term contracts rather than a period of continuous service. Thus, he
    held that the appellants right to termination and severance pay under the
Employment
    Standards Act
,
S.O. 2000, c. 41 (ESA), was to be calculated only
    from 2008 forward. The motion judge found that the termination clause provided
    for notice that exceeded the minimum notice requirements under the ESA and was
    enforceable.

[5]

The motion judge rejected AIMs counterclaim, concluding that the
    restrictive covenants contained in the 2014 Agreement were temporally and
    geographically unreasonable. He concluded that the record was insufficient to
    demonstrate that the appellant had breached any ongoing fiduciary obligations
    he may have owed to AIM.

[6]

The appellant says that the motion judge erred in concluding:

(1)

that he validly
    waived his ESA entitlement to accrued termination and severance pay;

(2)

that the termination
    clause complied with the ESA

and was therefore valid and enforceable;
    and

(3)

that his employment
    relationship with the respondent and its predecessor was structured as a series
    of fixed-term contracts rather than as continuous service.

[7]

AIM cross-appeals, submitting that the motion judge erred by:

(1)

concluding that the
    restrictive covenants were unreasonable, and therefore unenforceable;

(2)

failing to assess
    whether the appellant had breached the restrictive covenants;

(3)

concluding that the
    appellant did not breach fiduciary duties owed to AIM; and

(4)

failing to assess
    whether the appellant was entitled to contractual termination payments in light
    of his post-termination conduct.

[8]

I have concluded that although the motion judge properly found
    that the appellant waived his entitlement to common law notice for service
    prior to 2008, he erred in concluding that the appellant released his pre-2008
    employment for the purposes of determining his ESA entitlements. The motion
    judge erred, further, in concluding that the termination clause was
    enforceable. In addition, the motion judge erred in concluding that the
    appellant entered into fixed-term employment in 2011 and 2014.

[9]

Consequently, the appellant is entitled to ESA termination and
    severance pay based on the whole period of his employment, and to common law
    notice for the 2008-2015 period. As I will explain, in the unusual
    circumstances of this case, the appellants total ESA entitlements exceed his
    common law damages. As a result, he is entitled only to statutory termination
    and severance pay and any benefits payable under the ESA.

[10]

For the reasons that follow, I would allow the appeal and dismiss
    the cross-appeal.

BACKGROUND

[11]

The
    appellant was hired in 1980 by Bakermet, a buyer and seller of various types of
    metals and steel products. He went on to become a one-third owner of Bakermet
    and president of the company.

[12]

In
    2008, ArcelorMittal purchased Bakermet for $45 million. The appellant received
    $17,162,637 in consideration for the sale of his one-third share of the
    company.

[13]

The
    2008 Share Purchase Agreement (the SPA) provided that no Key Employee  a
    term defined to include the appellant  had given notice of an intention to
    cease being employed with the [c]orporation and that the [c]orporation does
    not currently intend to terminate the employment of any officer, Key Employee
    or group of Key Employees.

[14]

A
    release in favour of Bakermet and its successors (the Release) was executed
    concurrently with the SPA. It provided that the appellant released Bakermet and
    its successors in accordance with the terms of the Release. Released Claims
    was defined as meaning:

[a]ny and all Claims which any of
    the undersigned has now, or may have in the future, against any Released
    Person, for any fact, act or omission up to and including the date hereof,
    including without limitation by reason of, or in connection with, any Released
    Persons position as a shareholder, director, officer, employee or creditor of
    Bakermet Inc.at any time up to and including the date hereof.

The 2008 Agreement

[15]

The
    2008 Executive Employment Agreement between the appellant and Bakermet (the
    2008 Agreement) recognized in its recitals that the appellants employment
    would continue following the share sale. The following are the key features of
    the agreement:

·

the appellant was to be employed as General Manager at a base
    salary of $250,000 per year with annual bonuses of $200,000 in the first three
    years;

·

the appellant agreed to work for Bakermet for a minimum period of
    three years;

·

the agreement was for an indeterminate period of time unless
    terminated;

·

Bakermet could terminate the appellants employment at any time,
    without cause, on written notice;

·

if the appellant was terminated without cause on written notice,
    he was entitled to 12 months of annual base salary, inclusive of ESA
    entitlements, as well as defined basic payments and continued protection
    under group insurance benefits for 12 months;

·

the agreement included non-competition and non-solicitation
    clauses; and

·

the terms of the agreement replaced and superseded all the terms
    in previous arrangements and agreements and the appellant released any and all
    claims relating to same.

[16]

Two
    subsequent employment agreements were made between the appellant and ArcelorMittal
    Ottawa, the validity of which was not challenged in these proceedings.

The 2011 Agreement

[17]

The
    2011 Executive Employment Agreement (the 2011 Agreement) was virtually
    identical to the previous 2008 Agreement, except that it purported to create a
    fixed-term contract and reduced the appellants compensation (base salary and
    bonuses). The 2011 Agreement took effect on August 6, 2011 and would terminate
    on August 6, 2014 unless earlier terminated. It also included a clause
    requiring ArcelorMittal Ottawa to advise the appellant in writing at least six
    months before August 6, 2014 if it intended not to renew the agreement. The
    2011 Agreement continued to permit termination without cause, provided that
    notice was given to the appellant. It reduced the amount payable following
    termination without cause to an amount equal to six months of annual base
    salary inclusive of ESA entitlements, along with basic payments and continued
    protection under group insurance benefits for six months.

The 2014 Agreement

[18]

The
    key change from the 2011 Agreement was that the 2014 Agreement established a
    two-year fixed term subject to early termination. The 2014 Agreement also
    reduced the appellants annual base salary to $185,000 and reduced his annual
    bonus to $46,250. The 2014 Agreement continued to require ArcelorMittal Ottawa to
    advise the appellant in writing of its intent not to renew the agreement at the
    end of the term, but the length of required notice was reduced to three months.
    Early termination on a without-cause basis continued to be permitted and in
    such a case the appellant remained entitled to an amount equal to six months of
    annual base salary inclusive of ESA entitlements, along with basic payments and
    continued protection under group insurance benefits for six months.

The appellants termination

[19]

In
    2015, ArcelorMittal Ottawa was acquired by AIM in an asset sale. The
    appellants employment contract was assigned to AIM. Six months later, on
    September 11, 2015, AIM terminated his employment with one weeks working
    notice. In accordance with the 2014 Agreement, the appellant was offered six
    months salary ($92,500) and continuation of benefits for six months, amounts
    that AIM asserted were inclusive of [his] entitlements under the
Employment
    Standards Act
. He was, at that time, 58 years old.

[20]

The
    appellant brought a wrongful dismissal action seeking 24 to 30 months pay in
    lieu of notice, based on 35 years of continuous employment with AIM and its
    predecessors. AIM argued that the appellants entitlement to compensation was
    limited by the terms of the 2014 Agreement.

[21]

Within
    two months of his termination, the appellant commenced employment with Palmer
    Recycling Inc., an Ottawa-based competitor of AIM. Subsequently, the appellant
    became president of Palmer and purchased the company. AIM counterclaimed for
    damages based on the appellants alleged breach of the restrictive covenants in
    the 2014 Agreement, as well as his alleged breach of fiduciary duty.

[22]

Given
    the appellants alleged breaches, AIM invoked its right under the 2014
    Agreement to suspend or terminate remaining payments and benefits protection
    and refused to pay the appellant pursuant to the termination clause.

THE MOTION JUDGES DECISION

[23]

The
    motion judge reviewed the requirements of the ESA governing written termination
    notice and severance pay and the decision of this court in
Covenoho v.
    Pendylum Ltd.
, 2017 ONCA 284, 43 C.C.E.L. (4th) 99. He concluded that, if
    the release in the 2008 Agreement re-set the clock, the termination provision
    in the 2014 Agreement would violate the ESA only if the appellants combined
    notice and severance entitlements exceeded 27 weeks (i.e. one week of working
    notice plus six months notice or pay in lieu as provided for in the 2014
    Agreement). This would not occur until 2035, when the appellant would be 78
    years old. Given the context of the three successive employment agreements
    between 2008 and 2015, the motion judge found that the potential for the
    termination provision to violate the ESA was too remote. He concluded that the
    termination provision of the 2014 Agreement would violate the ESA only if the
    appellant had not released AIM from including his pre-2008 service with
    Bakermet in the calculation of his statutory entitlements.

[24]

The
    motion judge found that appellant was employed pursuant to a fixed-term
    contract rather than a contract of indefinite hire. This was not a case
    involving a series of virtually identical contracts renewed year after year, as
    in
Ceccol v. Ontario Gymnastic Federation
(2001), 55 O.R. (3d) 614
    (C.A.). The motion judge noted that the appellants employment had to be
    considered in the context of the transactions involving the purchase and sale
    of the business.

[25]

The
    motion judge found that the appellant sold his shares to ArcelorMittal in 2008
    on terms that included generous compensation and a release of all claims
    relating to his previous employment with Bakermet. The Release, he said, was
    intended to wipe the slate clean. There was no issue of inequality of
    bargaining position between the appellant and the companies (ArcelorMittal and
    Bakermet), each of whom was represented by counsel. Accordingly, the motion
    judge concluded that any claims the appellant had under the ESA or at common
    law ran from the date of the 2008 Agreement.

[26]

The
    six months notice entitlement in the 2014 Agreement was more generous than the
    appellants entitlements under the ESA. Thus, the motion judge ordered that the
    appellant be paid $92,500  in accordance with the notice entitlement in the
    2014 Agreement  and compensation for employee benefits unpaid over the notice
    period.

The counterclaim

[27]

The
    motion judge found that the reasonableness of the non-competition and
    non-solicitation provisions in the 2014 Agreement should be assessed having
    regard to the agreement itself, not to the longer-term relationship between the
    appellant and the respondents predecessors  including the appellants sale of
    his shares in Bakermet. He concluded that, having regard to the two-year fixed
    term of the agreement, the restrictive covenants of 18 months and two years,
    respectively, were temporally unreasonable. He concluded, further, that the
    restrictive covenants were geographically unreasonable  they prevented the
    appellant from working in Quebec, Ontario, and the Atlantic Provinces in the
    only industry in which he had ever worked.

[28]

The
    motion judge found that the record was insufficient to demonstrate that the
    appellant had breached any ongoing fiduciary obligations he may have owed to
    AIM by commencing employment with a competitor. He rejected the appellants
    claim that AIMs failure to pay him his six months notice amounted to a
    repudiation of the agreement. Finally, he concluded that the appellant was not
    under a duty to mitigate damages arising from the respondents breach of the
    fixed-term contract.

DISCUSSION

The Appeal

Issue 1:       The appellants ESA
    entitlements could not be waived

[29]

I
    set out the relevant provisions of the ESA below:

5(1) Subject to subsection (2), no employer or agent
    of an employer and no employee or agent of an employee shall contract out of or
    waive an employment standard and any such contracting out or waiver is void.

(2) If one or more provisions in an employment
    contract or in another Act that directly relate to the same subject matter as
    an employment standard provide a greater benefit to an employee than the
    employment standard, the provision or provisions in the contract or Act apply
    and the employment standard does not apply.



9(1) If an employer sells a business or a part of a
    business and the purchaser employs an employee of the seller, the employment of
    the employee shall be deemed not to have been terminated or severed for the
    purposes of this Act and his or her employment with the seller shall be deemed
    to have been employment with the purchaser for the purpose of any subsequent
    calculation of the employees length or period of employment.



65(8) Only the following set-offs and deductions may
    be made in calculating severance pay under this section:

1. Supplementary
    unemployment benefits the employee receives after his or her employment is
    severed and before the severance pay becomes payable to the employee.

2. An amount paid to an
    employee for loss of employment under a provision of the employment contract if
    it is based upon length of employment, length of service or seniority.

3. Severance pay that was previously paid to the
    employee under this Act, a predecessor of this Act or a contractual provision
    described in paragraph 2.

[30]

The
    appellant argues that s. 9 of the ESA provides for continuity of accrued
    service in the event that an employer sells a business and the purchaser of the
    business employs an employee of the seller. Accordingly, the appellants
    employment continued without interruption following the sale of Bakermet in
    2008 and AIM was required to include his pre-2008 years of service when
    computing his ESA entitlements. He also argues that s. 5(1) of the ESA

invalidates
    any provision purporting to contract out of ESA

entitlements, and that
    the exception in s. 5(2) does not apply. Further, s. 65 of the ESA

prohibits
    setoff of an employees statutory entitlement to be paid severance pay, except
    in limited circumstances, none of which is applicable here. In any event, there
    was no evidence that the 2008 Release was ever intended to effect a waiver. The
    evidence proffered demonstrated that the Release related to the sale of the
    appellants shares rather than to any pending termination of his employment,
    and the 2008 Agreement contemplated his employment continuing indefinitely.

[31]

AIM
    argues that the appellant waived his pre-2008 common law and statutory
    termination entitlements by signing the Release in exchange for substantial
    consideration as part of the SPA. It describes the Release as an
    all-encompassing settlement agreement  a package deal the parties were free
    to enter into in the context of a share sale, citing this courts decisions in
Biancaniello
    v. DMCT LLP
, 2017 ONCA 386, 138 O.R. (3d) 210 and
Cosentino v.
    Sherwood Dash Inc.
, 2014 ONCA 843. AIM adds that the motion judges
    interpretation of the Release is entitled to deference, following
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633.

[32]

The
    respondents position as it relates to the ESA must be rejected.

[33]

Although,
    in general, contractual interpretation involves questions of mixed fact and law
    and so mandates a deferential standard of review, the interpretation of the ESA
    is an extricable question of law to which the correctness standard applies:
Sattva
,
    at para. 53.

[34]

Regardless
    of whether the Release is a stand-alone agreement or part of a package deal,
    it must comply with the ESA. The relevant provisions of the ESA are neither
    ambiguous nor vague. Section 9(1) is mandatory: employment is deemed not to
    have been terminated or severed by the sale of the employers business in whole
    or in part, and employment with the seller is deemed to be employment with the
    purchaser for the purpose of calculating the employees length or period of
    employment. Moreover, s. 5(1) prohibits contracting out of or waiving any
    statutory obligations and voids any agreement purporting to do so.

[35]

In
    short, the ESA is designed to preclude the very thing that AIM argues occurred
    in this case. There could be no valid waiver of the appellants ESA entitlements.

[36]

This
    courts decision in
Biancaniello
is of no assistance to AIM. It speaks
    to the scope of a release that was otherwise permissible. Nor is this courts
    decision in
Cosentino
applicable. That case was concerned primarily
    with whether the appellant had resigned his employment. It is not authority for
    the proposition that ESA obligations may be waived in the context of a larger
    settlement agreement. At para. 9 of its decision, this court specifically
    stated that its reasons were not to be considered an endorsement of the motion
    judges comments with respect to the
Employment Standards Act
.


[37]

In
    summary, the appellants pre-2008 service could not be waived or released for
    the purposes of calculating his ESA entitlements. AIM, as successor to
    ArcelorMittal Ottawa, was required to count the appellants pre-2008 service in
    calculating his ESA entitlements upon termination.

[38]

However,
    this conclusion does not deprive the Release of all effect. Although the
    Release did not address the appellants ESA entitlements and should not have
    been read as purporting to do something it could not lawfully have done, it
    specifically addressed the release of all of the appellants claims in
    connection with his position as an employee. Given the context in which the
    Release was executed and the wording of the Release, it was open to the motion
    judge to find that the appellant had waived his claim to common law notice
    based on his pre-2008 employment. His finding is entitled to deference.

Issue 2:       The termination clause is
    not valid and enforceable

[39]

The
    motion judge held that the termination provision of the 2014 Agreement would
    violate the ESA only if the appellant had not released his pre-August 2008
    service. Because the appellant could not waive his pre-August 2008 service for
    ESA purposes, it follows that the termination provision, which limits the
    appellant to six months notice on termination, violates the ESA because it
    provides a lesser benefit than the 34 weeks termination and severance pay to
    which he is entitled under the ESA. Accordingly, the termination provision in
    the 2014 Agreement, which purports to limit the appellants entitlements to six
    months salary and benefits, is void.

Issue 3:       The appellant was employed on an indefinite
    basis

[40]

In
    light of these conclusions, it is necessary to determine whether the appellant
    was employed on an indefinite or a fixed-term contract basis.

[41]

The motion judges interpretation of the 2011
    and 2014 Agreements as fixed-term contracts
is entitled to deference in
    the absence of an extricable error of law.
In its decision in
Sattva
,
the Supreme Court identified three extricable errors that may be made in the
    course of contractual interpretation: the application of an incorrect
    principle, the failure to consider a required element of a legal test, or the
    failure to consider a relevant factor: at para. 53 (citing
King v.
    Operating Engineers Training Institute of Manitoba Inc.
, 2011 MBCA 80, 270
    Man. R. (2d) 63, at para. 21).

[42]

In
    my view, the motion judge erred in law by failing to consider all of the
    relevant factors in concluding that the appellant was employed for a fixed term
    rather than on an indefinite basis.
There was significant
    evidence indicating that, despite fixed-term language in the 2011 and 2014
    Agreements, the appellant was employed on an indefinite basis.

[43]

Plainly,
    the 2008 Agreement contemplated indefinite employment.  But so too did the 2011
    and 2014 Agreements: despite their fixed terms, both agreements specifically
    required the employer to provide written notice if it intended not to renew or
    continue the agreements. The 2011 Agreement included recitals specifically
    recognizing the appellants continued employment, and in particular stated that
    the parties desired to enter into the agreement for the continuation of the
    employment of the [appellant]. The 2014 Agreement recognized the appellants
    current employment.

[44]

Although
    the motion judge acknowledged the renewal notice provision, he failed to
    analyze its effect and it did not factor into his analysis. Nor did the motion
    judge advert to the recitals.

[45]

As
    this court explained in
Ceccol
, at para. 26:

Employers should
    not be able to evade the traditional protections of the
ESA
and
    the common law by resorting to the label of fixed term contract when the
    underlying reality of the employment relationship is something quite different,
    namely, continuous service by the employee for many years coupled with verbal
    representations and conduct on the part of the employer that clearly signal an
    indefinite term relationship.

[46]

That
    is in essence what we have in this case. Although the motion judge found that
    the appellant had waived his right to any claims arising from his pre-2008
    employment, his prior employment remained a fact and formed part of the context
    for the subsequent agreements governing his continued employment. At the time
    of his termination in 2015, the appellant had been employed continuously since
    1980, and was employed pursuant to an ostensibly fixed-term agreement that
    required the employer to provide written notice if it intended not to renew or
    continue the agreement. Although the motion judge acknowledged that unequivocal
    and explicit language is required to establish a fixed-term contract and that
    any ambiguities will be strictly construed against the employer (citing
Ceccol
,
at paras. 25 and 27), his focus on the transactions involving the purchase and
    sale of the business resulted in a failure to recognize the indefinite nature
    of the appellants employment.

[47]

I
    conclude that the appellant was employed for an indefinite term from 2008
    onwards and, as a result, was entitled to common law notice for the period of
    August 2008 to September 2015.

How much notice was required?

[48]

Fixing
    a period of notice requires an assessment of the character of the employees
    employment, length of service, age and the availability of similar employment,
    having regard to his or her experience, training and qualifications:
Bardal
    v. The Globe & Mail Ltd.
(1960), 24 D.L.R. (2d) 140 (Ont. H. Ct. J.),
    at p. 145.

[49]

In
    my view, given that the appellant was 58 years of age at the time of dismissal,
    held a senior position with the respondent, and obtained similar employment
    within a very short time following termination, seven months is a reasonable
    notice period.

[50]

This
    court was not provided with complete submissions concerning the quantum of the
    appellants compensation for the purposes of calculating damages, and in
    particular whether the appellants damages should include his bonus and benefits
    package. Nor was this courts decision in
Paquette v. TeraGo Networks Inc.
,
    2016 ONCA 618, 34 C.C.E.L. (4th) 26, addressed. Nevertheless, in the
    circumstances of this case it is possible to resolve the matter.

[51]

The
    appellants entitlement to seven months pay in lieu of notice is subject to
    his duty to mitigate his damages, which he did by commencing employment at
    Palmer Recycling within two months of his dismissal by the respondent. The
    entitlement to seven months pay in lieu of notice must be reduced by all
    amounts received in mitigation of loss during the notice period:
Sylvester
    v. British Columbia
, [1997] 2 S.C.R. 315, at paras. 14-17.

[52]

The
    appellant is entitled to the maximum termination and severance pay permitted
    under the ESA  8 weeks termination and 26 weeks severance pay. The
    appellants ESA entitlements, including the value of unpaid benefits, normally
    would be deducted from his common law damages:
Stevens v. Globe and Mail
(1996), 28 O.R. (3d) 481 (C.A.), at p. 493;
Brake v. PJ-M2R Restaurant Inc.
,
    2017 ONCA 402, 135 O.R. (3d) 561, at para. 110. In this case, however, the
    appellants ESA entitlements exceed his common law damages, even assuming that
    common law pay in lieu of notice would include payment of a prorated share of
    the appellants annual bonus and benefits package. As a result, the appellant
    is entitled only to his ESA termination and severance pay, in addition to any
    amounts that may be owing in respect of unpaid benefits.
[1]

The Cross-Appeal

Issue 1:
The
    restrictive covenants are unenforceable

[53]

AIM
    argues that the motion judge erred in failing to assess the enforceability of
    the restrictive covenants in the context of the sale of Bakermet, citing
Payette
    v. Guay inc.,
2013 SCC 45, [2013] 3 S.C.R. 95. The restrictive covenants
    were

fundamental conditions without which the buyer would not have
    completed the transaction. It argues that the motion judge erred, further, in
    declaring that the temporal restriction was overbroad, as he incorrectly based
    his decision on the term of the 2014 Agreement alone. The motion judge also
    erred in assessing the reasonableness of the geographic scope of the covenants
    by comparing it to the area in which the appellant conducted business on behalf
    of AIM, instead of comparing it to the area in which AIM actually conducts
    business. Non-solicitation clauses in particular no longer require geographic
    limitations at all where they apply to all or some of a vendors customers:
Payette
,
at para. 73. Finally, AIM submits that the motion judge erred in failing to
    consider severing any unreasonable portion of the restrictive covenants,
    pursuant to the severability clause in the 2014 Agreement.

[54]

I
    would reject these submissions.

The non-compete obligation

[55]

The
    motion judges conclusion that both restrictive covenants were temporally
    disproportionate to the length of the appellants contract was based on the
    erroneous conclusion that the appellant was employed pursuant to a fixed-term
    employment contract. However, it is not necessary to determine whether the
    temporal restrictions were reasonable in the context of the contract of
    indefinite hire that was created, because the motion judge also found that the
    covenants were unreasonable because of the broad geographic limitations they
    imposed.

[56]

The
    core of the non-competition clause at issue was negotiated in the context of
    the SPA and the accompanying 2008 Agreement. The reasonableness of restrictive
    covenants is tested on a more lenient standard in the context of a sale of a
    business as compared to a pure employment contract:
MEDIchair LP v. DME
    Medequip Inc.
, 2016 ONCA 168, 129 O.R. (3d) 161, at para. 33;
Payette
,
at paras. 35, 39. However, the 2011 and 2014 Agreements contemplated similar
    but expanded restrictive covenants, in particular expanding the area in which
    the obligations applied to the Atlantic Provinces as well as Ontario and
    Quebec. The appellant submits that because these expanded obligations were
    introduced several years following the SPA, their reasonableness should be
    subject to the more onerous employer/employee test:
Elsley v J.G. Collins
    Ins. Agencies
, [1978] 2 S.C.R. 916.

[57]

I
    agree. Although the 2011 and 2014 Agreements can be considered as maintaining
    an indefinite period of employment for the purpose of common law notice
    entitlements, the motion judge properly reasoned that the restrictive covenants
    in the 2014 Agreement should be subject to the more exacting reasonableness
    test from the employment context. The covenants expanded considerably in scope
    over the course of the successive employment contracts; they were distinct
    provisions, part of stand-alone contracts within an ongoing employment relationship.

[58]

The
    clauses allegedly breached following the appellants termination are contained
    in the 2014 Agreement, which was negotiated and entered into with the appellant
qua
employee rather than
qua
seller. This is analogous to the
    situation in
Elsley
, and as such the restrictive covenants in the
    governing 2014 Agreement must be interpreted without regard to the SPA.
Payette

does not apply where a subsequent, stand-alone employment contract contains
    its own covenants, particularly where it expressly replace[s] and supersede[s]
    all the terms which were set forth under any previous arrangement and/or
    agreement.

[59]

The
    motion judges conclusion that the non-compete obligation was unreasonably
    broad was amply supported by the record and is entitled to deference. The
    appellant was 58 years of age at the time of termination and the scrap metal
    industry is essentially the only industry in which he has ever worked.
    Furthermore, as the appellant notes, the restrictions extend into territories
    in which the appellant did not himself do any business when the clause was
    negotiated and agreed to. The restrictions prohibit him from engaging in
    business operations in which he was not involved, and of which he had no
    knowledge, at the time of the 2014 Agreement.

Severance

[60]

Although
    the parties contemplated severance in the 2014 Agreement, this is not a case in
    which any aspect of the non-compete obligation should be severed. Traditional,
    blue-pencil severance is to be resorted to rarely, and only when the words
    being severed are clearly severable, trivial and not part of the main purport
    of the restrictive covenant:
Shafron v. KRG Insurance Brokers (Western)
    Inc.
, 2009 SCC 6, [2009] 1 S.C.R. 157, at para. 36. Using blue-pencil
    severance to cross out the geographic restrictions in this case would
    interfere with the main purport of the non-competition clause, and in any event
    would be counterproductive without accompanying amendment.

[61]

In
    that vein, using notional severance to read down the non-compete obligation
    unjustifiably would redistribute the risks assumed by the parties in the 2014
    Agreement, and would amount to this court imposing a covenant it considers
    reasonable. It is not appropriate for courts to interfere with contractually
    allocated risks in an employment relationship in this way:
Shafron
, at
    paras. 39-42.

[62]

In
    all of the circumstances, I would not interfere with the motion judges
    conclusion that the non-compete obligation is unreasonable, and so there is no
    need to determine whether it is ambiguous. I would not use the remedial
    severance tool provided by the 2014 Agreement.

The non-solicit obligation

[63]

The
    respondent notes that lack of territorial boundary in a non-solicit obligation
    is not, of itself, a reason to find that covenant unreasonable:
Payette
,
    at para. 73. However, it does not follow from
Payette
that
    non-solicitation clauses never can be found unreasonable based on geographic
    scope. The motion judges conclusions were based on the specific context of the
    scrap metal industry, and any parsing of the non-solicitation provisions to
    disentangle non-geographically bounded obligations only could strengthen his
    conclusion that the restrictive covenant was untenably broad.

[64]

However,
    ultimately it is not necessary to determine the reasonableness of the
    non-solicit obligation, because there was no breach. The motion judges factual
    finding  that AIM presented no evidence to counter the appellants assertion
    that he has scrupulously refrained from soliciting any and all customers of
    AIM  is entitled to deference.

Issue 2:       Did the motion judge err in failing to assess whether
    the appellant had breached the restrictive covenants?

[65]

In
    light of these conclusions, it is not necessary to determine whether AIMs
    refusal to pay the appellant his statutory entitlements after termination
    released him from the non-competition clause, or whether he breached that
    covenant in any event.

[66]

As
    noted, there is no reason to interfere with the motion judges factual finding
    that there is no evidence of solicitation.

Issue 3:       The appellant did not breach fiduciary
    duties

[67]

The
    motion judge was prepared to accept that the appellant owed fiduciary duties to
    AIM, duties that had not ended automatically with the termination of
    employment. However, he found that the evidentiary record was insufficient to
    support a finding that the appellant had breached any continuing fiduciary
    obligations. In essence, the motion judge found that AIM failed to put its best
    foot forward on the motion; it presented no evidence to counter the appellants
    evidence that he refrained from soliciting AIMs customers.

[68]

The
    motion judges analysis is a question of mixed fact and law and is entitled to
    deference, and I see no basis for this court to interfere with the motion
    judges findings on appeal.

Issue 4:       Was
    the appellant entitled to contractual termination payments in light of his
    post-termination conduct?

[69]

In
    light of the conclusion that the contractual termination clause is void, it is
    not necessary to determine whether the appellants post-termination conduct
    disentitled him from receiving payments under the 2014 Agreement.

CONCLUSION

[70]

I
    would allow the appeal and vary the award of damages. The appellant is entitled
    to 34 weeks termination and severance pay as set out above. The parties can
    calculate the quantum of any additional unpaid ESA entitlements that may be
    owing. I would dismiss the cross-appeal.

[71]

The appellant is entitled to costs on the appeal and the
    cross-appeal. If the parties cannot agree on costs, they may make brief
    submissions (3-4 pages) to the Registrar of this court within 30 days of this decision.

Released: December 7, 2018 (G.H.)

Grant Huscroft J.A.

I agree.  Janet
    Simmons J.A.

I agree.  B.W.
    Miller J.A.





[1]
The termination and severance pay entitlements are calculated as follows:
    $231,250/yr ($185,000 + $46,250 bonus) = $4,447.12/week x 34 weeks. There is
    insufficient information in the record before this court as to the value of any
    amount that may be owing in respect of unpaid benefits pursuant to ss. 60 and
    61 of the ESA.


