So once in a while, we get a case where the court is asked to decide on whether a non-solicitation clause is valid and enforceable. And we dental lawyers need to be on top of these cases because a lot of what we draft includes non-compete and non-solicitation clauses (purchase and sale agreements, associate agreement, staff contracts, etc.).
So in July of this year, the Ontario Superior Court of Justice released its decision in the case of MD PHYSICIAN SERVICES INC. et al. v. DUANE WISNIEWSKI et al. , ONSC 2772. The facts of that case are as follows: MD Management Limited and a bunch of other companies owned by it (“MDM“) offered products and services primarily to Canadian physicians. We have 2 individuals, Duane Wisniewski and Joy Sleeth, who were employees of MDM until they left in 2013 to join a competitor firm, RBC Dominion Securities. MDM alleged that these individuals breached the non-solicitation terms of their employment contracts.
Now, the individuals claimed that those terms were unenforceable because they were too vague, too unreasonable, and there was a lack of consideration (required to make a bargain) that was given to these individuals in exchange for including the non-solicit clauses. Alternatively, these individuals claimed that they never breached the non-solicit because it was reasonable for them to notify clients of their new employment and that it was contrary to public policy to enforce these types of clauses anyways (so clients can have a more fully informed decision about the future direction of their investments).
The Ontario Superior Court of Justice didn’t buy it. First off, Joy Sleeth had signed / acknowledged non-solicitation clauses as part of her employment with MDM over many years and promotions. For his part, Duane Wisniewski had done the same. So the court ruled out that these individuals didn’t know what they were signing and sufficient consideration (namely continued employment) had been given.
With respect to the use of non-solicit, the Court stated the following:
Then the Court moved on to the issue of whether the specific non-solicit clause was enforceable. Did MDM have a proprietary interest entitled to protection? Yes. Because the individuals are paid based on a percentage of fees generated by that business, with no base salary. The book of business hence became a capital asset for them. But the client lists were provided to the individuals and created based on the efforts of MDM. MDM should have its list protected because it has a genuine interest in ensuring that it is not used simply as an opportunity for financial planners to make contact with physician investors within the relatively protected environment of the firm and then attempt to utilize those contacts to take customers away from it.
Was the restrictive covenant reasonable in terms of the public interest? Yes. It was only for a 2 year time limit after the relationship ended. It wasn’t a drastic non-compete clause. And there were lots of other Ontario cases that enforced a 2 year non-solicit: Syntax Systems Ltd. v. Mid Range Computer Group Inc.  O.J. No. 3684 (Ont. S.C.J.), Smilecorp Inc. v. Pesin  O.J. No. 5734 (Ont. S.C.J.). Based on this, the non-solicit was neither ambiguous nor unreasonable.
Was the restrictive covenant ambiguous with respect to length of time, geographic scope or scope of proscribed activities? No. The individuals were limited in who they could contact based on the terms of the agreement and the Oxford definition of “solicit”. But they could still, for example, freely solicit clients of MDM whom they had not serviced and anyone else, including physicians, who had never been a client of MDM whom they had served as an investment advisor or had encouraged to become an investor with MDM.
Now, importantly, the geographic restriction which was included in the non-solicit agreement appeared to be unhelpful: the non-solicit said that the individuals were not to solicit “within the geographic area within which s/he provided services to the employer”. Well, this is pretty vague and without precision. So would the court throw out the whole non-solicitation clause on this basis? NO. Instead the court held that the geographic description neither adds to nor detracts from the non-solicitation provision. The reason being that the individuals could have serviced or solicited clients of MDM from wherever they were (financial advice can and is provided over both long and short distances). The geographic restriction was so trivial and not part of the main purports of the restrictive covenant that it was simply severed and did not form part of the Court’s assessment as to whether the non-solicitation agreement is enforceable!
For these reasons, the Court found that the individuals had breached the non-solicitation clauses and RBC Dominion Securities was vicariously liable because it instructed them to contact former clients and coached them on how to do it. Costs were to be decided at a later point.
Will a Corporation Shield a Dentist from Personal Liability?
If you are have a professional corporation, are you PERSONALLY shielded from negligence claims based on failing to adhere to infection prevention and control protocols and standards? NOPE. Why not? Because Section 3.4(1) of Ontario’s Business Corporations Act says that there no limits on the professional liability of a shareholder of a professional corporation (i.e. the principal dentist) with respect to the acts of that shareholder or the acts of employees or agents of that corporation. Indeed, section 3.4(3) says that the professional liability of a dentist is not affected by the fact that they’re practicing through a professional corporation.
Will a Dentist be Liable for the Actions / Omissions of their Staff?
Vicarious liability is a common law (judge made law) doctrine that says that an employer is liable for the negligent acts and omissions of their employee. Courts have held that employers are vicariously liable for both employee acts AUTHORIZED by the employer AND UNAUTHORIZED acts so connected with authorized acts that they may be regarded as modes of doing authorized acts. What matters is whether the alleged negligence involves the element of control and whether the person committing the tort was at all material times under the supervision and control of the employer. It won’t matter if the person is an employee or independent contractor for the employer / client to be found vicariously liable. Where the person is an employee, then the employer may be liable in negligence for inadequately supervising them or substandard hiring or training practices.
Furthermore, section 3.4(2) of the Business Corporations Act says that, for the purposes of professional liability, the acts of a professional corporation shall be deemed to be the acts of the shareholders, employees or agents of the corporation. On top of that, Section 3.4(4) says that a person will be jointly and severally liable with a professional corporation for all professional liability claims made against the corporation if that person was a shareholder of that corporation when the errors and omissions were made / occurred.
What About PLP?
Dentists’ Professional Liability Program will cover a member who runs into issues with infection control as it is part of the practice of dentistry. It would be considered part of each member’s $2-million protection. An example of this would be if a patient sued, alleging they caught an infection as a result of the dentist / practice failing to adhere to proper infection prevention and control protocols and standards.
PLP will even cover vicarious liability. Per their website, “Dentists and their health professions corporations are also entitled to assistance when they are sued for vicarious liability, i.e. for acts and omissions of their employees in rendering professional services on or behalf of members or their HPCs.”
So this blog is all about how cases that show HOW dentists could land in hot water when it comes to cords and the obligation to report incidents.
CORDS as TRIPPING HAZARDS and REPORTING TO AN OHSA INSPECTOR
If you’re using a laser (like a biolase) in your office and that machine has electrical power cords running to the wall, guess what – you might have a tripping hazard! In the case of R. v. Grey Bruce Health Services, 2003 CarswellOnt 10494, Mary Wilson, an experienced registered nurse (EMPLOYEE) tripped and fell in CAT scan room at a hospital in Owen Sound (EMPLOYER). The only people in the room when Ms. Wilson fell were the patient and a radiologist. This all happened back in 1999. Basically, Ms. Wilson Wilson had moved a portable blood pressure monitor to the other side of the patient at the request of the radiologist. The monitor was now in high traffic area. At some point, Ms. Wilson tripped (although it’s unclear why; she assumes it was because of the cord) and suffered a 3 part fracture to her arm. Ms. Wilson contacted the hospital’s employee health department, which reported the incident to the Ministry of Labour a week later.
After a few days at trial, the Justice of the Peace overseeing the case wasn’t convinced about the cause of Ms. Wilson’s fall. That said, the Justice found that the hospital was an employer had failed to ensure that a work surface was kept free of obstructions and hazards and was fined $15k for that. The Justice also fined the employer $5k for not immediately reporting the incident. On appeal, these convictions were upheld.
Things to remember:
In June, a Burlington dental office (Dr. Vick Handa’s Upper Middle Dental) was temporarily shut down and 9,000 patients notified that instruments had not been properly cleaned before being used. According to this CBC article, patients were warned to go to a physician to test for hepatitis B and C and HIV. The RCDSO suspended Dr. Handa’s license from June 12 to June 14. On June 14, that practice was inspected and confirmed to have met infection control standards.
Now, as I write this, a Guelph dental practice is about to get sued in a class action by patients. By way of background, Guelph Dental Associates (which also operate under the name “Growing Smiles”) was shut down by public health inspectors and its 3,600 patients were urged to get tested for hepatitis B and C and HIV as a result of improper sterilization. This all started after the parents of a young patient complained about developing a bacterial infection after a trip to the dentist in June, which triggered an inspection and the shutdown. Weeks later, with the practice still not open, Gary Will of Will Davidson LLP says he signed up a few patients in a class action lawsuit (which could theoretically include all 3,600 patients) and is seeking millions of dollars in damages.
All of a sudden, infection control became the two key words of the summer for dentists. In August, for example, both Henry Schein and K-Dental are educating dentists about their obligations when it comes to infection control. And if you go on the RCDSO’s website, infection control is right there, at the top, with a link to a page that talks about:
So with that said, let’s take a look at some of the legal implications of infection control, shall we?
In the next blog, I’ll get into a dentist’s obligation under the Occupational Health and Safety Act.
Since taking office, the Trudeau Government has introduced higher tax rates for those earning the most (i.e. those who’ve worked hard to build their business).
The Trudeau Government has eliminated the previous government’s income splitting among family members tax benefit, which was designed to help one-earner families where the other spouse stays home to take care of children. They’ve now taking aim at the use of professional corporations to split income among family members by paying dividends (details coming in the next few months about this one!).
There’s also been historical talk / rumour about changing the rules for corporations to qualify for the 15% small business tax rate (you would need to have a certain minimum number of employees) AND increasing the inclusion rate for the lifetime capital gains (from 50% to 75%).
The Trudeau Government doesn’t seem to care if you have a pension built up in your professional corporation; they want to force you to spend your hard-earned money hiring people you may / may not need and NOT keeping money in your bank account for rainy days and retirement. They want you to pay more taxes to help pay for their infrastructure plan – which by the way, we have NO IDEA how much it will end up costing!
They are unfairly casting a wide and destructive net across all of Canada’s small business owners – which employ 80% of Canadians! Taking away these tax benefits makes wanting to do business in Canada LESS ATTRACTIVE. They are contributing to another brain drain (like in the past, when smart doctors and professionals threatened to leave unless they had certain tax benefits put into place).
We need dentists, doctors, and other small business owners to WANT to come and stay in Canada, hire employees, and be able to save for their own retirement. They feed entire industries and by unfairly targeting them, we make Canada look way too socialist. Why should the government strip away tax benefits for those who took risks to start their own business; who have to think about their businesses day and night; who need to worry about regulations / insurance / taxes / dealing with professionals. Everyday employees don’t have these burdens. They shut off at 5:00 p.m. and don’t worry on weekends. If they lose their jobs, they can find another. If a small business owner like a dentist goes bankrupt, they lose it all and have a social stigma. There’s more risk to having your own business; so the rewards should be greater. That’s how capitalism works!
The Trudeau government should stop picking on those who risk more and add such great value to our wonderful country. And stop trying to tell us what we should be doing with our money by punishing us if we don’t toe the Liberal Party’s line!
Just some thoughts…
David Mayzel is your legal risk manager. He is a trained courtroom lawyer and has spent many years resolving disputes both in and out of court. He knows how to prepare documents and execute transactions in a way that avoids or mitigates legal risks. He can be reached at 416.528.5280. or email@example.com.
Michael Carabash is your business law adviser. He is an entrepreneur at heart who helps you see the big legal picture. He drafts clear and effective agreements that protect your rights while promoting your interests. He can be reached at 647.680.9530. or firstname.lastname@example.org.
Ljubica Durlovska is your transition lawyer. She helps you with staff and associates, maintaining your corporation, and other business matters. She can be reached at 416.443.9280, extension 206 or email@example.com.
Jonathan Borrelli is your employment lawyer. He helps you with staff and associates matters, including hirings, terminations, switching staff to written contracts and resolving disputes. He can be reached at 416.443.9280, extension 204 or firstname.lastname@example.org.
Benjamin Kong is an experienced business law clerk. He assists David and Michael with corporate matters and purchase / sale transactions. He can be reached at 416.443.9280, extension 207 or email@example.com.
Julie Whitehouse is an experienced business law clerk. She assists David and Michael with corporate matters and purchase / sale transactions. She can be reached at 416.443.9280, extension 203 or firstname.lastname@example.org.
David, Michael, Ljubica, Jonathan, Ben and Julie are a truly dynamic team. Their diverse knowledge, skills, and experiences will help you get the best deal possible while promoting your interests and protecting your rights. You can read dentist testimonials here.