What a Recent Alberta Court Decision Teaches About Employer Obligations, Non-Compete Clauses, and Injunctions
A recent Alberta Court of King’s Bench decision offers a useful illustration of what can happen when a senior employee breaches his obligations to his employer. The case involves a software CEO who sold his company, stayed on as its chief executive under a new owner, and spent years developing a competing product while on salary. After the CEO left and started a competing business, the employer eventually discovered what had been happening and applied for an injunction.
This post looks at the employee’s conduct, the legal framework the court applied, and the practical lessons for both employees and employers dealing with non-compete agreements and restrictive covenants in Alberta. If you have questions about your situation, a Calgary employment lawyer can help you understand your rights and obligations.
Table of Contents
The Conduct That Led to the Injunction
The employee in this case was the founder and CEO of an Alberta software company that built a product called Dossier, used by school districts to manage and analyze student data. In 2020, he sold the business to a new owner for over five million dollars. As part of that deal, he agreed to stay on as CEO of the acquiring company under a three-year employment agreement. He acknowledged in writing that he was a fiduciary, meaning someone occupying the highest position of trust an employee can hold.
Three days before the deal closed, he incorporated a new company to pursue artificial intelligence opportunities in the K-12 education sector. He did not disclose this to his employer.
Over the following years, the court found the CEO engaged in the following conduct during his employment:
- Using the employer’s bookkeeper to administer invoices for his side project.
- Retaining one of the employer’s long-standing contractors to build marketing materials for his new company, some of which were initially produced with the employer’s branding.
- Hiring university graduate students to research AI for his new venture, apparently giving at least one of them access to the very software he had just sold.
- Attending an internal presentation by the employer’s chief operating officer about plans to incorporate AI into Dossier, without disclosing what he had already been building on the side.
- Giving a public presentation under his new company’s branding describing active development work and a six-month timeline to a testable algorithm, while privately assuring his employer that his side project was not competitive.
- Posting on LinkedIn as CEO of his new company rather than the employer, describing the same K-12 AI opportunity he was being paid to pursue for his employer.
This pattern of conduct, taken together, is what the court relied on in finding a strong case for breach of fiduciary duty and breach of the non-compete clause in the asset purchase agreement.
The practical message for employees is straightforward. If you are in a senior role, the obligations that come with it are real and enforceable. You cannot build a competing business using your employer’s resources, conceal the conflict, and expect a court to look the other way because you never received a direct order not to do it. The court found that the opportunity to develop AI-enhanced education software belonged to the employer to pursue, and that the employee’s failure to advance it on the employer’s behalf, while actively advancing it for himself, was itself the breach.
Fiduciary duties do not disappear because no one is watching. Courts will examine the full picture of what was done and what was not disclosed, and the consequences of getting it wrong can include an injunction that shuts down years of work.
Two Legal Points Worth Knowing
Beyond the facts, this decision contains a couple of legal points that are worth flagging for anyone dealing with employment contracts or restrictive covenants.
The Standard for Granting an Injunction Was a High One, and That Matters
Not all injunction applications are judged by the same standard. In most cases, an applicant only needs to show there is a serious issue to be tried, which is a relatively low bar. But where the claim involves a fiduciary employee, or where enforcing a restrictive covenant would effectively amount to a restraint of trade, Alberta courts apply a stricter test: a strong prima facie case. That means the applicant must show the claim is very likely to succeed at trial.
The employer in this case cleared that higher bar, but it is worth appreciating how much harder that made the application. Many injunction applications in employment disputes fail precisely because the applicant underestimates which standard will apply and how much evidence is needed to meet it. If you are an employer considering whether to seek an injunction against a departing employee, getting early legal advice on which standard applies and whether your evidence meets it is essential. The Smith Business Insight overview of non-compete agreements offers useful context on why these clauses matter and how courts approach them.
The Non-Compete Held Up. The Non-Solicitation Clause Did Not.
Perhaps the most practically instructive aspect of this decision is what happened to the non-solicitation clause. The court found a strong case on both the fiduciary duty claim and the non-compete clause. But the non-solicitation clause was found unenforceable, and the reason is a useful drafting lesson. For a broader discussion of whether non-competes are enforceable in Canada, see our knowledge centre.
The non-solicitation clause prohibited soliciting customers, suppliers, employees, and other business relations of the buyer. The problem was that it used the present tense without limiting those categories to people or businesses that had a connection to the employer during the employee’s time there. That meant the employee could never know, with certainty, whether a particular person had become a customer after he left. The court found this created an ambiguity that made it impossible to know when the clause was being breached, and that it reached an unreasonably broad group of people. It could not be saved by severance.
This is a reminder that restrictive covenants require careful, precise drafting. A clause that feels comprehensive on its face can fail entirely on a technical ground. Non-solicitation provisions should be clearly anchored to customers and relationships that existed during the employee’s tenure, not drafted in open-ended language that could theoretically apply to anyone. Our non-compete agreement lawyers in Calgary can review or draft restrictive covenants that are built to hold up when tested.
Termination for Cause
Although not at issue in this case, the CEO’s conduct could have justified termination for cause. For context on how courts treat serious employee misconduct more generally, see our article on termination with cause examples in Alberta and our overview of termination for cause.
What This Case Means for You
Whether you are an employee navigating a departure or an employer trying to protect your business, this decision is a useful reference point.
Senior roles carry real legal obligations. Acting in your own interest while being paid to act in your employer’s interest, especially while concealing the conflict, is conduct that courts take seriously. The fiduciary duty framework gives employers meaningful legal tools, and courts will use them.
If you have questions for an employment lawyer about injunctions, non-compete agreements, fiduciary duties, or what your obligations are on departure from a senior role, contact Cashion Legal. We act for both employees and employers across Alberta.
Injunction and Non-Compete FAQs
Can an employee work on a competing business while still employed?
Generally, no, especially if you are in a senior or fiduciary role. Employees owe duties of loyalty and good faith to their employer during employment, and those in fiduciary positions face an even higher standard. Working on a competing venture on the side, using company resources to do so, or diverting a business opportunity away from your employer can all give rise to serious legal liability, up to and including an injunction. If you are unsure about your obligations, speaking with a dedicated employment lawyer before you act is strongly advisable.
Are non-compete clauses enforceable in Alberta?
Yes, they can be, but enforceability depends heavily on context and drafting. Courts in Alberta apply different standards depending on whether a non-compete arises out of an employment agreement or the sale of a business. In the employment context, courts scrutinize non-competes closely and require them to be reasonable in scope, duration, and geography. In the sale-of-business context, courts give more weight to the parties’ freedom of contract and are more willing to enforce them. In this case, the non-compete was connected to a business sale and was upheld. For a detailed breakdown, see our article on whether non-competes are enforceable in Canada.
What is the difference between a non-compete clause and a non-solicitation clause?
A non-compete clause restricts a former employee from working in a competing business within a defined geographic area and time period. A non-solicitation clause is narrower: it prevents the former employee from reaching out to the employer’s customers, suppliers, or employees to take that business elsewhere. Courts generally treat non-solicitation clauses as less restrictive than non-competes and are somewhat more willing to enforce them. However, as this case illustrates, a poorly drafted non-solicitation clause can still fail entirely. If your employment contract contains either type of clause, it is worth having it reviewed before you make any moves.
What should I do if a former employee is competing against me in breach of a non-compete?
Act quickly. Injunctions are a time-sensitive remedy and courts will consider whether you moved promptly once you became aware of the breach. You will need evidence of the breach and legal advice on whether your non-compete clause is enforceable before going to court. As this decision shows, the strength of your evidence, the quality of your drafting, and the standard the court applies can all determine whether an injunction is granted. Our non-compete agreement lawyers can assess your situation and advise on the best path forward. You can book a consultation here.