Authors
Partner, Employment and Labour, Toronto
Associate, Employment and Labour, Vancouver
Key Takeaways
- The British Columbia Court of Appeal found a three-year fixed-term employment clause in an asset purchase agreement prevailed over an early termination provision in a related employment agreement.
- Applying Ontario’s mitigation framework due to a governing law clause, the employer was liable for the balance of the unexpired term.
- Employers must ensure consistency across interrelated agreements and carefully consider how “superseding” clauses may nullify otherwise enforceable termination provisions.
A recent case from the British Columbia Court of Appeal, Facility Condition Assessment Portfolio Experts Ontario Ltd. v. Bouchard,[1] involved an engineer, Mr. Bouchard, who sold his consulting business to Facility Condition Assessment Portfolio Experts Ontario Ltd. (FCAPX). The parties executed three interrelated agreements: an asset purchase agreement (APA), a non-solicitation and confidentiality agreement and an employment contract.
The APA provided that FCAPX would employ Mr. Bouchard “for no less than 3 years” and imposed a three-year non-compete within a 100-kilometre radius. The employment contract included a standard termination provision permitting dismissal without cause on payment of minimum Employment Standards Act entitlements. Critically, Schedule A to the contract stated that APA conditions would “supersede any related/relevant clause” in the employment contract.
Twenty-one months in, FCAPX terminated Mr. Bouchard’s employment without cause and paid only two weeks’ pay in lieu of notice, relying on the employment contract. Mr. Bouchard sued for the balance of the three-year term that he said applied pursuant to the APA. FCAPX counterclaimed, alleging that Mr. Bouchard breached the non-compete by performing engineering work for former clients after his termination.
The decisions below and on appeal
The trial judge found the parties had entered a three-year fixed-term employment arrangement, reasoning that the APA’s “superseding” clause rendered the employment contract’s early termination provision inoperative. The judge also found that Mr. Bouchard breached the non-compete and awarded FCAPX damages. Both parties appealed, and the B.C. Court of Appeal dismissed both appeals.
Fixed-term finding upheld
Reading the interrelated contracts together, the Court found the APA’s commitment to “no less than 3 years” of employment, combined with the superseding clause, clearly overrode the employment contract’s without-cause termination provision. This aligned with the parties’ intent: Mr. Bouchard would not have agreed to a three-year non-compete without a corresponding employment guarantee.
No duty to mitigate
Ontario law governed the contracts. Applying Howard v. Benson Group Inc.,[2] the Court held that where a fixed-term contract lacks an enforceable early termination provision, the employee is entitled to the balance of the term without any obligation to mitigate. This diverges from British Columbia’s approach under Neilson v. Vancouver Hockey Club Ltd.,[3] and more recently considered in Quach v. Mitrux Services Ltd.,[4] where an employee’s obligation to mitigate their damages applies unless the agreement provides “otherwise.”
The Court observed that even under B.C. law, the outcome may not have differed. It would be “incongruous” for FCAPX to argue for a mitigation deduction while enforcing a non-compete that prevented Mr. Bouchard from earning income during the same period.
Non-compete upheld
The Court affirmed that the non-compete covenant was enforceable as a commercial restraint connected to the sale of a business, not merely an employment-related restriction. FCAPX was awarded damages for lost profits from three clients Mr. Bouchard serviced in breach of the covenant.
Practical advice for employers
- Interrelated agreements will be read together. Where an employment contract is executed as part of a broader commercial transaction, courts will interpret the documents harmoniously. Provisions in ancillary agreements can define the parameters of an employment relationship, even where those terms are absent from (or inconsistent with) the employment contract itself.
- “Superseding” clauses carry significant risk. The clause giving the APA priority over the employment contract effectively nullified the early termination provision that would otherwise have limited the employer’s exposure. Employers should consider whether superseding language in commercial agreements inadvertently undermines their ability to terminate employment on commercially reasonable terms. In our experience, the APA provision dealing with employment was superfluous and the “business deal” with respect to the employment arrangement should have been fully and accurately codified in the employment contract.
- Choice of law matters. The divergence between Ontario (Howard) and British Columbia (Neilson) on whether mitigation applies to fixed-term contracts was determinative in this case. Ontario’s rule may have produced a worse outcome for the employer. Engaging experienced employment counsel with a sophisticated understanding of divergent rules between provinces is important on transactional mandates involving different jurisdictions.
- Non-competes in commercial agreements receive more deference. The Court’s enforcement of the non-compete as a commercial covenant contrasts with the heightened scrutiny applied to post-employment non-competes in the employment context. This is consistent with established case law, but is nevertheless reassuring on that point.
- Ensure internal consistency across deal documents. This case underscores the importance of engaging employment counsel early in commercial transactions to ensure that employment-related terms across multiple agreements are consistent and achieve intended objectives.
[1] 2026 BCCA 89.
[2] 2016 ONCA 256.
[3] 1988 CanLII 3051 (BCCA).
[4] 2020 BCCA 25.
