We regularly advise dentists that a 3 month probation period is the standard. But recently, the Ontario Court of Appeal upheld terminating an employee during a 6 month probation period.
Filed under Blog, Staff · Tagged with 3 month probation, 6 month probation, dental practice, dental practice law lawyers, dental practice lawyers, DMC LLP, employment law, ESA, Jonathan Borrelli, notice, ontario dental law, ontario dental lawyer, probation period, probationary employee, suitability, termination, termination notice
A dentist was brought in front of the Ontario Labour Relations Board by a probationary employee this summer, and the case was just released publicly (Elliott A. Schwartz Dentistry Professional Corp. v. Lee, 2016 CarswellOnt 9360). I thought I would review the important parts of it as a cautionary tale for dentists managing probationary employees. Read more
Filed under Blog, Dental Hygienists, Staff · Tagged with dental law, dental law and lawyers, dental law lawyers, dental lawyers, dental office, dental practice law lawyers, dentist lawyers, DMC LLP, employees, Employment Standards Act, Jonathan Borrelli, ontario dental lawyer, probation, probationary employee, staff, team members
You’ve probably read Michael Carabash’s blog about employee liability. If not, here it is. If you ARE looking to present new contracts to your existing staff, HOW MUCH notice are they entitled to? Well, the answer, as is usually the case with the law, is: IT DEPENDS. And the first “it depends” is this: do you already have a contract with your employees and what does that contract say about notice requirements?
If you already have a written contract with your employees, then the main thing to look for in the contract is the “termination” provisions. In other words, you need to find out what the contract says about how you can end the employee / employer relationship. If the contract says that the employee is entitled to termination notice or pay in lieu of notice in accordance with the Employment Standards Act, 2000 (often referred to as the “ESA“), then, in order to present a new contract, you must give the employee either notice or pay in lieu of notice in accordance with the ESA which is as follows:
|Employment Period||Notice / Pay In Lieu Owed|
|1 year or less||1 week|
|1 – 3 years||2 weeks|
|3 – 4 years||3 weeks|
|4 – 5 years||4 weeks|
|5 – 6 years||5 weeks|
|6 – 7 years||6 weeks|
|7 – 8 years||7 weeks|
|8 years or more||8 weeks|
If you do not already have a written contract with your employees, then the courts in Ontario have said that depending on certain criteria, each employer may owe much more than the minimum standards laid out in the ESA.
Some of the criteria include: the age of the employee, the position of the employee, the likelihood that they will find comparable work in a reasonable amount of time, the economic climate at the time, etc.
Despite all these criteria, there is a general trend that has appeared in the case law surrounding the issue of notice: Generally speaking, employers will owe their employees 1 month of notice up to a maximum of up to 26 months, depending on the circumstances.
Lets presume that you have decided to present your staff with new employee contracts. You have one employee who has worked with you for 20 years and has a contract that limits your liability to the ESA (lets call her Lisa) and one employee who has worked with you for the same amount of time but has no written contract (lets call her Mary).
In order to present Lisa with a new contract, you will have to give her 8 weeks of notice or pay in lieu of notice.
By contrast, Mary will require 20 months of notice if you want to present her with a written contract.
That’s a huge difference, right? That’s why we always recommend that dentist employers protect themselves by ensuring they have proper written contracts with each of their staff.
NOTE: Independent contractors are not employees and are not entitled to the same minimum/maximum standards as employees.
If you would like to read our tips and tricks when it comes to presenting staff with notice, click here to read more.
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, contact me (Ljubica Durlovska), David Mayzel or Michael Carabash. We are your legal dental team.
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, contact me (Michael Carabash) or David Mayzel.
So we’re still on the topic of associate agreements. In the first blog, I talked about how they play a role in virtually every dental practice – regardless of how it is legally structured. In my second blog, I talked about some of the differences between having the associate as an “employee” vs. an “independent contractor”. In this blog, I’ll be discussing restrictive covenants in associate agreements.
What the heck are restrictive covenants? These are provisions found in the associate agreement that restrict or prohibit the dentist from either competing with or soliciting employees or clients of the dental practice for a set period of time and within a specific geography after leaving or being terminated. Those provisions that deal with not competing in the same business as the dental practice as called non-compete agreements. Those provisions that deal with not soliciting the clients and employees of the dental practice are called non-solicitation agreements.
A big question that often comes up is: are these clauses enforceable. The answer is, as it usually is: it depends. It depends on whether they are reasonable. It must be reasonable as between the parties themselves and in light of the public interest. What is reasonable will depend on the circumstances.
For starters, courts will look at the reasonableness of the duration of the non-compete. This will depend on the facts of the case, but the cases suggest that courts are more willing to uphold longer non-competes in the non-employment context (e.g. buying and selling a business) than in the employment context.
Courts will look at the reasonable expectation of the parties when they enter into the agreement. What is reasonable will depend on the circumstances AT THAT TIME. Geographic limits that are excessive may not be enforceable (e.g. province or country-wide). In Carnaghan Insurance Ltd. v. Lundy, (1974) 9 N.B.R. (2d) 651 (Q.B.), the court found that a non-compete which restricted competition for a 3 year period following termination of employment within the province of New Brunswick was unenforceable because the employer’s business was concentrated around Saint John. Here’s what the court wrote:
19 However the plaintiff has not satisfied me that the area covered by the agreement, i.e. the Province of New Brunswick, was reasonable. The business of the plaintiff was concentrated in the Saint John area. While there was no evidence adduced I think I can note that in a geographical sense the Saint John area is a minimal fraction of the province while from the point of view of population it represents about one-sixth of the province. In view of the fact that the plaintiff does not do any substantial amount of business in the rest of the province the agreement was, as regards area, unreasonable and excessive.
Furthermore, in an old Manitoba Court of Appeal case (New Method Cleaners & Launderers Ltd. v. Hartley,  1 D.L.R. 711 (Man C.A.), an employee agreed to a restrictive covenant which prevented him from soliciting dry cleaning or laundry business within Manitoba for a period of 1 year. But the employer’s business was primarily located in the City of Winnipeg, not the entire province. As such, the Court ruled the restrictive covenant was not reasonable in its geographic scope:
11 The plaintiff’s business, it has been seen, is in the city of Winnipeg and neighbourhood. The protection they were entitled to was with respect to route No. 1, and possibly the area within which they do business. A covenant in the circumstances which extends to the whole province necessarily is bad in toto. It is also invalid because within its scope are customers the defendant did not have business with, and persons with respect to whom he might or could have no knowledge that they were customers of the plaintiff, including customers obtained by the plaintiff after the termination of his service.
Finally, in Steele v. Ingram  O.J. No. 3665, Steele sold his 50% interest in an insurance brokerage and, as part of that transaction, entered into an employment agreement which contained a non-compete clause. That non-compete clause required Steele to continue working for the insurance brokerage for 2 years after the sale and then not compete with the brokerage for a period of 5 years in Canada and the U.S. after the termination of his employment. When he was terminated, he went to work with another insurance company in Cambridge, Ontario. The brokerage refused to pay the outstanding purchase price on the basis that Steele breached the non-compete; the matter ultimately went to court.
The Ontario Superior Court of Justice held that it was not reasonable for the parties to assume or expect that the business sold by Steele would expand into all of Ontario, into all provinces of the country and into the United States of America. In short, the reasonable expectations of the parties as to the future scope of the business did not support a geographic restriction as wide as that contained in the Non-Competition Agreement. Now, worth mentioning is that the purchasers of Steele’s interest tried arguing that the advent of the Internet defined the parties expectations about being able to expand throughout all of Canada and the United States. The Superior Court rejected that argument on the basis that that company was regionally based in Guelph, Kitchener and Waterloo, and sold products identical or similar to those available to the public all over the world through countless other brokers. Besides, any business with a product to sell could theoretically purport to have a worldwide market because of the Internet; as such, the Internet could not as a general rule inform reasonableness for purposes of determining the validity of a non-competition agreement.
Assuming that a restrictive covenant is reasonable with respect to duration and geographic scope, there’s still the issue of whether the nature of the activities sought to be restricted are reasonable.
In certain circumstances, a Court may say that a non-solicitation agreement was sufficient and that a non-compete was too onerous and not reasonable. The case of Lyons v. Multari (2000), 3 C.C.E.L. (3d) 34 becomes relevant here. This is a leading case by the Ontario Court of Appeal concerning an employee dentist who was sued for allegedly breaching a non-compete clause in an employment contract. The issue before the court was whether that restrictive covenant was enforceable. The facts of that case are straightforward. One dentist was a principal of the business (i.e. the employer). Another dentist was an associate (i.e. employee). The two dentists signed a short-hand note that limited the associate’s ability to practice dentistry if he chose to leave. The entire non-compete clause said: “Protective Covenant. 3 yrs. – 5 mi.” After 17 months of working, the associate dentist left and opened up his practice – which competed with his employer’s business and was 3.7 miles away. The employer sued for breach of contract. The Ontario Court of Appeal disagreed, holding that the non-compete clause was unenforceable.
So how did the Court of Appeal end up there? Well, it started off by saying that all restrictive covenants go against public policy (free trade, etc.) and are therefore VOID. The only exception to this general rule is if the restraint is reasonable in the interests of the parties and also reasonable in the public interest. So there are a few factors which a court should consider to answer these questions: (1) whether the employer has a proprietary interest entitled to protection, (2) whether the temporal or spatial features of the clause are too broad, and (3) whether the covenant is unenforceable as being against competition generally, and not limited to proscribing solicitation of clients of the former employee. So with this test and factors in hand, the Ontario Court of Appeal held the following:
A non-solicitation clause would have sufficed (a non-compete clause was too drastic).
Overall, based on all of these factors, the Court of Appeal concluded:
48 For all of these reasons, I conclude that Dr. Lyons’ non-competition clause is unenforceable. His legitimate interest in protecting his own referring dentists and patients could have been protected by a non-solicitation clause. An established professional person or firm — be it in the field of dentistry, medicine, engineering, architecture, law or other professions — will constantly seek to recruit entry level associates to the practice. Such recruitment is good for the established person or firm and for the young associate.
In some situations, however, a non-solicitation clause will not suffice. Take the case of Elsey v. J.G. Collins Insurance Agencies Ltd.,  2 S.C.R. 916. There, the Supreme Court of Canada was faced with the issue of whether an insurance agent had violated a non-compete clause in an employment contract with his former employee. The clause provided that the employee would not directly or indirectly engage in the business of a general insurance agent within the defined area for a period of 5 years after any termination of his employment as manager. The employee worked a number of years for the employer. During that time, he dealt with customers, gained knowledge of the insurable assets, financial credit, likes and dislikes and idiosyncrasies of each customer, in a recurring and confidential relationship. Then, one day, the employee left and started his own general insurance agency. He took 3 employees with him. He advertised and his former employer’s clients left to become his clients. The Court found that the non-compete clause was reasonable in duration, geographic scope and in light of the public interest. But would a simple non-solicitation clause have sufficed instead of a general non-compete? The Court didn’t think it would have been enough: where the employee has acquired a close personal acquaintance with the customers of the business, a covenant which prevents the employee from establishing his own business may be justified as opposed to a covenant which merely prohibits the solicitation of former clients by the employee. A non-solicitation covenant would not have been adequate to protect the plaintiff’s proprietary interest in its clients in this case. For these reasons, the Court found the non-compete enforceable and the employee liable for its breach.
The final element of reasonableness has to do with the public interest: if there an overriding interest (e.g. free trade, competition, etc.) which would a non-compete or non-solicitation clause unreasonable and therefore unenforceable? If, for example, there was insufficient labour or a shortage of competition in a particular industry, a non-compete or non-solicitation clause may be unreasonable. Using a non-compete clause to systematically eliminate competition will also be unreasonable.
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, contact me (Michael Carabash) or David Mayzel.
Many dentists rent out space for their dental practice (unless you’ve got enough $$$ to buy a place of their own). So what kinds of things should dentists be mindful of when they approach a landlord about renting? Also, when a dentist is thinking about buying a practice from another dentist, what kinds of things should that dentist be mindful of? That’s the purpose of this blog: to give you an overview of the issues that are important to every dental office lease agreement.
Perhaps the most important issue that gets negotiated is the price. The price is generally broken down into basic rent + additional rent. The basic rent is the price per square foot during the term. HST will no doubt be added in that figure. That price gets calculated into an annual fee, then into a monthly fee. The additional rent is all that other stuff that dentists will be responsible for paying (either all or a portion of). This typically includes things like utilities (unless the dentist is going to pay for these things themselves directly to the service providers), the use of common areas and facilities (e.g. parking, hallways, landscaping), HVAC (i.e. heating, ventilation, and air conditioning), and TMI (i.e. taxes, maintenance and insurance). As these things fluctuate on a yearly basis, so too will the amount of the dentist’s additional rent. If the dentist is sharing space with other dentists in the same office or building, then the dentist’s amount of additional rent will generally be proportionate to the amount of space they’re taking up as a whole of the building.
The term of the agreement has a start date and an end date – if it’s a fixed term agreement. If the dentist wants some certainty about pricing and staying in the premises after that initial term, they can negotiate to include an option to renew the term for additional periods. Those periods can be however many years or months the dentist and the landlord can agree upon. It’s really an exercise in gazing into a crystal ball and trying to figure out if the dentist will stay there past the initial term and be willing to pay a slight premium to what they’re already paying in terms of rent.
The landlord will want a very restrictive definition of what the dentist can do in the premises (i.e. carry on a dental practice and that’s it). But what if the dentist wants to set up a dental consulting business in the back? What if they want to sell dental supplies? That’s where the dentist will come back and say that they want the use of the premises to include other things. This may turn into a heated debate because the landlord may not want other business operating from the premises. Indeed, the landlord may have signed an agreement with another party in or around the premises saying that they will have exclusive rights to use their premises as X and that the landlord won’t rent out space to a competitor of theirs.
As just discussed, the dentist may insist on including a provision that requires the landlord to agree not to rent out space in the building, plaza, premises, etc. to another dentist or type of dentist that practice the same thing as the tenant dentist wants to. This will help to eliminate competition in the nearby vicinity.
This is a biggy. Basically, if the dentist ever wants to rent out part of the premises (sublease), then does he or she need the Landlord’s consent to do so? Can the Landlord withhold consent? Can they do so unreasonably? What factors, if any, will dictate whether consent is unreasonable or not? For example, will the Landlord want to see who the sub-tenant is, check their credit, etc.? If the Landlord gives the OK, is the original tenant still on the hook if the sub-tenant defaults?
Now, there’s a difference between subletting a part or all of the premises and ASSIGNING the entire agreement. Assigning it means that they are actually transferring the agreement to another party. Again, is the Landlord’s consent needed? What if the dentist is assigning it to their own dentistry professional corporation? What if the share ownership of the dentistry professional corporation changes? Does that need the Landlord’s consent too? All of these factors come into play when it comes to subletting the premises or assigning the lease. Just be mindful!
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 firstname.lastname@example.org.
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 email@example.com.
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 firstname.lastname@example.org.
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 email@example.com.
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 firstname.lastname@example.org.
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 email@example.com.
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.