Date Issued: November 05, 2019

File: SC-2019-002767

Type: Small Claims

Civil Resolution Tribunal

Indexed as: In A Wink Beautique (2013) Inc. v. Banich, 2019 BCCRT 1257

Between:

IN A WINK BEAUTIQUE (2013) INC.

Applicant

And:

MICHELLE BANICH

Respondent

INTRODUCTION

1.      This is an employment dispute.

2.      The applicant, In A Wink Beautique (2013) Inc., seeks $5,000 in damages from the respondent, Michelle Banich, for allegedly breaching the non-competition and non-solicitation clauses in the parties’ employment contract. The respondent says the clauses are not enforceable. She also denies soliciting the applicant’s clients.

3.      The applicant is represented by its principal, Kristy Brunner. The respondent is self-represented.

JURISDICTION AND PROCEDURE

4.      These are the formal written reasons of the Civil Resolution Tribunal (tribunal). The tribunal has jurisdiction over small claims brought under section 118 of the Civil Resolution Tribunal Act (CRTA). The tribunal’s mandate is to provide dispute resolution services accessibly, quickly, economically, informally, and flexibly. In resolving disputes, the tribunal must apply principles of law and fairness, and recognize any relationships between parties to a dispute that will likely continue after the dispute resolution process has ended.

5.      The tribunal has discretion to decide the format of the hearing, including by writing, telephone, videoconferencing, email, or a combination of these. I decided to hear this dispute through written submissions, because I find that there are no significant issues of credibility or other reasons that might require an oral hearing.

6.      The tribunal may accept as evidence information that it considers relevant, necessary and appropriate, whether or not the information would be admissible in a court of law. The tribunal may also ask questions of the parties and witnesses and inform itself in any other way it considers appropriate.

7.      In the Dispute Notice, the applicant asked for an order that the respondent stop working within a 5 km radius of its salon. Under section 10 of the CRTA, the tribunal must refuse to resolve a claim that it considers to be outside the tribunal’s jurisdiction. A dispute that involves some issues that are outside the tribunal’s jurisdiction may be amended to remove those issues.

8.      I found, on a preliminary basis, that the applicant had not established that the tribunal’s jurisdiction under section 118 of the CRTA applies to the enforcement of the non-compete clause. Even if the tribunal is permitted under section 118(1)(c) to order the respondent to stop working within 5 km, I found the tribunal does not have jurisdiction to make an order that exceeds its monetary limit of $5,000.  I found the value of the order for the respondent to stop working for 2 years would likely be greater than $5,000. Based on the monetary limit and other jurisdictional concerns, I found the tribunal did not have jurisdiction to make the stop work order that the applicant sought.

9.      However, the tribunal does have jurisdiction to order damages under section 118 (1)(a) of the CRTA. Since it seemed the stop work order was what the applicant most wanted, I invited the parties’ submission on whether I should refuse to resolve the dispute, or if they wished to proceed, to provide submissions on whether and to what extent, the applicant is entitled to damages for the alleged breach of contract. The applicant abandoned its request for the stop work order and instead, claims damages up to the tribunal’s monetary jurisdiction of $5,000.

10.   Under section 61 of the CRTA, the tribunal may make any order or give any direction in relation to a tribunal proceeding it thinks necessary to achieve the objects of the tribunal in accordance with its mandate. Accordingly, I have exercised my discretion under section 61, to amend the applicant’s claim to a claim in damages for $5,000 and to proceed to hear the dispute.

11.   Under tribunal rule 9.3(2), in resolving this dispute the tribunal may make one or more of the following orders, where permitted under section 118 of the CRTA:

a.    order a party to do or stop doing something;

b.    order a party to pay money;

c.    order any other terms or conditions the tribunal considers appropriate.

ISSUES

12.   The issues in this dispute are:

a.    whether the non-competition and non-solicitation clauses in the parties’ employment contract are enforceable, and

b.    whether the respondent breached the contract, and if so, to what extent, if any, the applicant is entitled to damages.

EVIDENCE AND ANALYSIS

13.   In a civil claim such as this, the applicant bears the burden of proving its claims on a balance of probabilities. I have only addressed the evidence and arguments to the extent necessary to explain my decision.

14.   The respondent worked at the applicant’s hair salon and spa for a period of about 7 months, though the exact dates are not in evidence. The applicant says that in July 2018, it hired the respondent as an “esthetician and lash technician”. In about February 2018, the respondent resigned with two weeks’ notice and took a job at a lash salon where she currently works as a lash technician. This evidence is not contested.

15.   The applicant argues that the respondent breached the non-compete clause in their written employment agreement when she went to work for a competing salon located 0.1km away. The applicant says that the respondent also breached their non-solicitation clause by contacting the applicant’s clients at the time she was leaving, though the applicant does not provide details. The respondent denies soliciting clients though admits working in a neighbouring salon.

16.   According to the parties’ written and signed employment contract in evidence, the applicant hired the respondent to provide “lash & spa services”. The contractual terms include non-solicitation and non-compete clauses, often referred to in law as restrictive covenants. Clause 14.4 of the contract states that if the parties’ agreement is terminated for any reason, the employee agrees not to do the following, for a period of 2 years:

 14.4(a) Solicit any of the Employer’s Clients;

[…]

14.4(c) Will not, directly or indirectly, whether as…employee, consultant, independent contractor or in any other capacity whatsoever…;

                              i.        Compete with, or engage in, or be financially concerned or interested in, or advise, lend money to, guarantee the debts or obligations of or permit its name to be used or employed by any person engaged in or concerned with or interested in the Business within 5 km (five kilometers), commencing on the date of this Agreement (the “Effective Date”); or

                            ii.        provide any goods or services of the nature provided by Employer to any customers or clients of the business, or solicit any customers of the business for the provision of such goods or services, within 5 km (five kilometers), commencing on the Effective Date.

17.   The respondent says the contract is unenforceable because she signed the contract without an opportunity to review it and take it home for advice from a friend. However, the respondent acknowledges that she took photographs of the contract and there is some evidence that she later discussed the copy with a friend. Therefore, I find she did have a copy of the contract. There is also no evidence that the respondent, who is an adult, was under any duress or otherwise was prevented from seeking advice before she signed the contract. The signed contract in evidence shows that the respondent signed the contract and initialed the bottom of each page, including the page containing the above clauses. I find that by initialing each page, the respondent acknowledged that she reviewed and agreed to its terms.

18.   However, even where an employee expressly agrees to the restrictive covenants in an employment contract, the law presumptively treats such covenants as unenforceable. This is because the law considers the imbalance of power that generally occurs in an employer-employee relationship and the public interest in protecting employees while not restraining the parties’ freedom to enter into contracts (see for example IRIS The Visual Group Western Canada Inc. v. Park, 2016 BCSC 2059, affirmed in 2017 BCCA 301 (IRIS).  

Non-Compete Clause

19.   To be enforceable, an employer must prove on a balance of probabilities that the non-compete clause in an employment contract is reasonable.

20.   The applicant submits that the non-compete clause (14.4(c) above) is reasonable because it is “lenient in both proximity and duration” as compared to other contracts in the industry. However, reasonableness is not decided on a comparison between industry contracts. A non-compete clause must be “reasonable between the parties and with reference to the public interest,” (IRIS at 22). The clause can be no wider or broader than reasonably required to adequately protect the employer. The clause must also be clear as to what activity, time and geographic location are prohibited. If the clause is ambiguous, then it is not possible to demonstrate that it is reasonable (Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, at 43).

21.   The applicant submits that the non-compete clauses clearly describe the prohibited services. It says the respondent is only prohibited from working in the capacity of an esthetician and lash technician in the competition areas. The applicant further submits, “If she worked down the street doing hair or in any other industry we would have no problem with it.”

22.   However, the parties’ non-compete clause restricts the respondent from more than just esthetician and lash services. Subclause 14.4(c)(i) is a general prohibition not to compete with the applicant or “engage in” another business within 5km. I find the type of business the respondent is prohibited from engaging in is poorly defined. According to the preamble in the parties’ contract the applicant’s services are not just esthetics and lashes but also include, haircuts, extensions, perms, colours, nails, massages, and other spa and esthetician services. Therefore, a prohibited competing business might equally be a hair salon or spa. Additionally, subclause 14.4(c)(ii) restricts the employee from providing the same services as the employer, which again are more than just esthetics and lashes.

23.   On the applicant’s own submission, I find the restrictions in the parties’ employment contract are much broader than the applicant intended. I find therefore, that the restrictions are not needed to protect the employer. I also find the clause not entirely clear as to whether the 2-year time frame was to commence from the date the employee resigned or from July 20, 2018, which is the “Effective Date” in the schedule. A non-complete clause that is both ambiguous and excessive cannot be reasonable. Accordingly, I find the applicant has failed to establish on a balance of probabilities that the non-compete clause is reasonable and enforceable.

24.   I dismiss the applicant’s claim in damages for breach of the non-compete clause.  

Non-Solicitation Clause

25.   In support of its solicitation claim, the applicant submitted a statement from its manager who says the respondent “contacted all her clients verbally and through social media as we didn’t get a call from her previous In A Wink clients.” I find the manager’s conclusion is speculative and does not prove the reason the clients did not call. The respondent says she spoke to only 3 clients when the topic of her departure came up when they wanted to book their next appointment. The respondent says she told the clients she was leaving and gave them “options”.   

26.   The applicant provided no corroborating evidence such the social media posts or statements from its former clients on what the respondent allegedly told them. Without more evidence, I find there is insufficient proof of solicitation.

27.   In any event, courts have required more than an employee merely telling her employer’s clients that she is leaving and giving them options. For example, in Direct Lending v. Blanchette, 2019 BCSC 1068, which is binding on me, the court refused to find a former employee ‘solicitated’ clients, where the employee had phoned the employer’s clients and told them she left the employer, and gave her new services and contact information. There is no evidence that the respondent here provided any more information than the employee in Direct Lending. Rather than solicitation, I find the respondent acted professionally in informing the clients she was leaving so they had notice for future bookings. I find the applicant has not established that the respondent solicited her clients.

28.   For the preceding reasons, I dismiss the applicant’s claim in damages for breach of the non-solicitation clause, and for the non-compete clause. As the applicant is the unsuccessful party in this dispute, I also dismiss the applicant’s claim for tribunal fees. The applicant claimed no dispute-related expenses.

ORDER

29.   I dismiss the applicant’s claims and this dispute.