BC ASSOCIATION OF CLINICAL COUNSELLORS
Legal Commentary
*
RESTRICTIVE COVENANTS IN SHARED OFFICE
CONTRACTS
What Counsellors Need to Know About the Law Before
They Agree to a Restrictive Covenantin a Shared Office
Contract
Prepared by George K. Bryce, BCACC Legal Counsel
July 8, 2011
* This legal commentary (and the other legal commentaries posted at the BCACC website) are intended tohelp clinical
counsellors gain a better understanding of legal issues relevant to their practice. It is notintended to be a substitute for legal
advice. If a counsellor has a particular concern about an issue that he orshe is facing in practice, the counsellor should seek
independent legal advice from a lawyer. Neither Mr.Bryce nor the BCACC can provide individual counsellors with legal
advice.
Table of Contents
1) INTRODUCTION.......................................................................................................... 2
1.1) Types of shared office arrangements....................................................................... 2
1.2) Terminology ............................................................................................................ 2
2) TYPES OF SHARED OFFICE ARRANGEMENTS .................................................... 4
2.1) Working as an employee of a public agency........................................................... 4
2.2) Working as an employee of a principal counsellor or a private company .............. 4
2.3) Working as a contractor........................................................................................... 4
2.4) Working in a partnership ......................................................................................... 5
2.5) Working independently ........................................................................................... 5
2.6) Summary.................................................................................................................. 6
3) PROBLEMS THAT CAN ARISE ................................................................................. 7
3.1) Conflicts over ownership of clients......................................................................... 7
3.2) Conflicts over ownership of clinical records........................................................... 7
3.3) Referral disputes...................................................................................................... 8
3.4) Summary.................................................................................................................. 8
4) COMMON RESTRICTIVE COVENANTS.................................................................. 9
4.1) What is a restrictive covenant?................................................................................ 9
4.2) Non-competition clauses ......................................................................................... 9
4.3) Non-solicitation clauses......................................................................................... 11
4.4) Exclusive service and other restrictive covenants ................................................. 12
4.5) Restrictions on ownership of client files ............................................................... 13
5) LEGAL ISSUES........................................................................................................... 14
5.1) Ownership of client information............................................................................ 14
5.2) Counsellor privacy policies ................................................................................... 21
5.3) The enforceability of non-competition clauses ..................................................... 24
5.4) The practical limits of enforcing non-competition clauses ................................... 29
5.5) The enforceability of non-solicitation clauses....................................................... 30
5.6) The doctrine of severance...................................................................................... 31
6) RECOMMENDATIONS ............................................................................................. 33
6.1) Document the shared office arrangement.............................................................. 33
6.2) Refer to privacy policies........................................................................................ 33
6.3) Avoid non-competition clauses ............................................................................. 34
6.4) Use non-solicitation clauses carefully ................................................................... 34
6.5) Other recommendations......................................................................................... 35
7) SOURCES AND ACKNOWLEDGEMENT ............................................................... 36
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
1) INTRODUCTION
The BCACC sometimes receives inquiries from clinical counsellors about leaving shared
office arrangements. Disputes can arise between the counsellors or other practitioners who shared the
office, because of terms in their agreement that impose certain limits or restrictions on the departing
practitioner. These terms are known generally as “restrictive covenants”.
This Legal Commentary sets out the legal issues in different types of restrictive covenants.
It addresses the contentious use of what are commonly referred to as “noncompetition” provisions.
Finally, this Commentary offers suggestions for when, if ever, counsellors should use restrictive
covenants in their shared office agreements.
1.1) Types of shared office arrangements
Counsellors work in many types of shared office arrangements. This Legal Commentary
distinguishes types of arrangement according to the status of the counsellor:
•
employees, whether of a public or a private employer, or
•
self-employed independent contractors, whether contracted to provide temporary services in
the absence of another counsellor, or working in partnership with other counsellors, or working
independently in an informal collective with other counsellors.
1.2) Terminology
The following defined words or phrases will be used throughout this Legal
Commentary (alphabetical order):
•
“clinical records” is any method used to record or store the personal or other information of a
client or third party collected by a counsellor, and includes a clinical file, counselling session notes,
and audio or visual recordings;
•
“contract” (or agreement) means any written document signed by the parties that sets out the
terms of their particular shared office arrangement, and it may include a contract for services, an
office rental agreement, or a partnership
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
agreement;
•
“principal counsellor” means the counsellor who owns a private counselling clinic or is
primarily responsible for the operations of a shared office, and would include a counsellor who
employs another counsellor;
•
• “private company” means any organization or corporation in the private sector that is
and includes
(a) a non-profit society registered under the BC Society Act or Part II of the Canada
•
Corporations Act , and
•
(b) a for-profit company registered under the BC Business Corporations Act or Part I
of Canada Corporations Act.
subject to the Personal Information Protection Act,
1
2
3
4
“public agency” means a government organization or any publicly funded agency that
operates under a government mandate, and which is subject to the Freedom of Information and
5
Protection of Privacy Act;
•
“secondary counsellor” means the counsellor who is an
employee, subcontractor or tenant of a principal counsellor, or an employee of a private
•
company or public agency;
•
“shared office arrangement” refers to any formal or informal arrangement whereby two or
more counsellors work in the same clinic or office, regardless of the nature of their business,
employment or clinical relationship.
S.B.C. 2003, c. 63. R.S.B.C. 1996, c. 433. R.S.C. 1970, c.
C-32. S.B.C. 2002, c. 57. R.S.B.C. 1996, c. 165.
1
2
4
3
5
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
2) TYPES OF SHARED OFFICE ARRANGEMENTS
The Introduction noted that there are several ways that counsellors may provide services to
the public while working in a shared office or clinic arrangement. These different arrangements are
outlined in this chapter. Chapter 3 will discuss the most common types of problems that can arise
when a shared office arrangement ends.
2.1) Working as an employee of a public agency
A counsellor may work in a group practice operated by a public agency or government
organization, where each counsellor in the group is an employee of that public agency. In this case,
the counsellors are salaried employees of that public agency for the purposes of the federal Income
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Tax Act, not independent contractors.
2.2) Working as an employee of a principal counsellor or a
private company
A counsellor may also work in a group practice as an employee of either a principal
counsellor or a private company. As was the case with public agencies, the counsellor is a salaried
employee for the purposes of the federal Income Tax Act, not an independent contractor.
2.3) Working as a contractor
A counsellor may also work in an office or clinic for a principal counsellor under a temporary
service contract. This is typically a fixed-term arrangement to provide counselling services while the
principal counsellor is on leave or on holiday. Such arrangements are usually not employment for the
purposes of the Income Tax Act. Instead, the contracted counsellor is an independent, self-employed
contractor.
Whether a counsellor is an employee or a self-employed
contractor in any particular situation is beyond the scope of this
6
Legal Commentary. For guidance, the Canada Revenue Agency
has produced a helpful booklet summarizing the applicable legal
tests; see http://www.cra-arc.gc.ca/E/pub/tg/rc4110/.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
2.4) Working in a partnership
Two or more counsellors may also work together in a shared office or clinic in partnership
with each other, or they may work with other health care practitioners in a partnership.
There are some general criteria for partnerships. Each counsellor works in cooperation
with other counsellors (or practitioners) to advance their mutual interests. The counselling
partners combine their abilities and resources, and share in the profits (and losses) of their
common enterprise.
A partnership may be either a general partnership or a limited partnership. In a general
partnership each partner has the same degree of responsibility and liability, while in a limited
partnership at least one partner bears only limited liability. A general partnership might be implied by
the actions of the persons involved, while a limited partnership is usually set out in writing, allocating
individual partner liability.
A general partner could be liable to third parties who are injured or owed money by the
or jointly and severally
liable, for the errors and omissions of the other partners. On the
other hand, the liability of limited partners is normally limited to
the amount of their financial investment in the partnership.
Limited partners usually play no role in the partnership
operations.
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partnership. In turn, each general partner could be jointly liable
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Partnerships in BC can be registered under the Partnership Act, which allows the partners
(general or limited, or both) to register a business name for their partnership.
2.5) Working independently
Finally, counsellors may also work separately from each other and simply share the costs of
an office or clinic, perhaps by renting space. Counsellors working independently as sole practitioners
would be doing so outside of any form of employment
Joint liability is where each partner is liable for all the risks,
errors or omissions of the partnership. So, if one partner dies –
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for example – the remaining partner(s) remain fully liable for the
debts of the partnership. Joint and several liability arises where
a claimant against the partnership could sue any particular
partner and, if the claim succeeds, that partner could then pursue
the other joint partners to pay their proportionate share of the
liability.
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G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
or partnership arrangement with other counsellors.
In some cases, a group of independent counsellors might be deemed to be a partnership,
which triggers the deemed partnership rules under the federal Income Tax Act and perhaps the
common law rules of liability that apply to partnerships. Therefore, counsellors who are working
independently but sharing office space should document their shared office arrangement in a written
contract, to protect themselves from being treated as partners at law.
2.6) Summary
There are various ways that counsellors may work with other counsellors or health care
practitioners in a shared office or common clinic. The nature of the relationship, and the rights and
liabilities of the counsellors or practitioners, will depend on whether they are employees or
self-employed independent contractors, or – if self-employed – whether they have formed a
partnership.
The next chapter illustrates disputes that can arise when any one of these shared office
arrangements breaks down. Some problems are common to all of these shared office relationships,
while others are unique to just one.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
3) PROBLEMS THAT CAN ARISE
The breakdown of shared office arrangements can result in significant difficulties for the
counsellors involved. Although some problems are unique to particular types of shared office
arrangements, others arise more generally, so this chapter looks at the problems according to their
subject matter and not the underlying office arrangement. Following this chapter, Chapter 4 will
consider the ways that counsellors have tried to resolve these problems in the past.
3.1) Conflicts over ownership of clients
When a shared office arrangement breaks down, disputes can arise in relation to who
“owns” a client: the office, or the counsellor? For example, if a counsellor leaves a shared office
and opens a new office, that counsellor might want to invite clients of the former shared office to
come to the new office. The former shared office might claim a proprietary interest over clients
who came there, regardless of the counsellor they saw, and might take these or other steps:
•
prohibit the departing counsellor from contacting such clients;
•
demand that the departing counsellor disclose when a client follows that counsellor to a new
location (so the shared office can contact those clients to try to win them back); or
•
try to prevent the departing counsellor from opening an office nearby.
Sometimes an employer insists that a counsellor who leaves its employment cannot provide
counselling services to any of the employer’s clients even long after the employment relationship
ended.
3.2) Conflicts over ownership of clinical records
Most counsellors working in a shared office or clinic arrangement as an employee would say
that their employer owns the clinical records of the clients who have attended
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
However, when counsellors leave such a situation, they
might believe they have a right to the records of clients they
saw. Sometimes departing counsellors might just want the
client names and contact information.
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that clinic.
Conflict over clinical records arises more often following the breakup of a partnership or an
independent contracting arrangement. The departing counsellor might insist on keeping copies of
client records, while the remaining partners or the principal counsellor might assert absolute
ownership over those records and also the client list. These sorts of disputes have resulted in
complaints being filed with the BCACC.
3.3) Referral disputes
Internal quarrels can also result if two or more counsellors working in any type of shared
office arrangement see each other’s clients, but have failed to agree as to the consequences. One
counsellor might refer a client to another counsellor in their shared office, or one counsellor might be
temporarily unavailable, so another counsellor steps in to counsel the client. Disputes can arise as to
who “owns” the “shared” client.
These disputes can become nasty, especially if there is an expectation that some sort of
referral fee is payable.
3.4) Summary
Most of the disputes that the BCACC sees involve conflict over who “owns” the clients that
were seen in the shared office arrangement, or who owns their clinical records. These disputes can
be compounded if one counsellor saw or was providing services to one or more clients of the other
counsellor, be this on a referral basis or not.
Chapter 4 discusses the various ways that counsellors have tried to either prevent or resolve
these problems by using restrictive covenants in their written agreements.
For example, in a report prepared by the Information and
Privacy Commissioner of Ontario, Order HO003, December 2006 (available at
9
www.ipc.on.ca/images/findings/up-ho_003.pdf), the Commissionerfound that numerous physicians who had worked in a
private health clinic understood that they were notresponsible for the security of the health records of the patients they saw
in that clinic. However, theclinic’s responsibilities had not been set out in any contract between the physicians and the
clinic or owner.When the clinic closed, numerous records were simply abandoned in the closed office by the clinic owner.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
4) COMMON RESTRICTIVE COVENANTS
Counsellors use a variety of restrictive covenants in their shared office agreements.
These covenants are intended to prevent problems from arising, but if a problem does arise,
these covenants can provide a solution.
This chapter describes a series of commonly employed restrictive covenants used in contracts
for shared office arrangements. In Chapter 5, the legal strengths and weaknesses of each type of
restrictive covenant will be considered in detail. For now, it is useful to simply describe these
different approaches to the problems that were outlined in Chapter 3.
4.1) What is a restrictive covenant?
In general terms, a restrictive covenant is a term or condition set out in a contract that
restrains at least one party to the contract from doing something that the party is normally allowed or
able to do freely and legally.
In employment situations or in shared office arrangements, the most common forms of
restrictive covenant are non-competition clauses and non-solicitation clauses, but there are also
exclusive service restrictions and other types of restrictive covenants.
4.2) Non-competition clauses
In response to the concern that a counsellor who is working as either an employee or
independent contractor might leave a shared office arrangement and set up a competing counselling
business, some contracts contain what are known as “noncompetition clauses” (or “non-compete
clauses”). These clauses attempt to prohibit the departing counsellor from practicing for a defined
period of time, or from setting up an office within a prescribed geographic area, or both.
A non-competition clause typically sets out a number of years (after leaving the shared
office arrangement) during which the departing counsellor must not practice.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
These time limits can range from one to five years, although some clauses have a continuous
practice prohibition that has no end date.
Most geographic limits in a non-competition clause focus on preventing the departing
counsellor from setting up a practice, opening an office or even working for another counsellor within
a specific distance from the former shared office or clinic. Geographic limits can range from one to
five kilometers, or might use a municipal or political boundary (such as within the boundaries of a
named city or regional district). Some clauses try to prevent the departing counsellor from practicing
anywhere within an entire province.
As will be discussed in more detail in Chapter 5, some non-competition clauses create a series
of increasing (sometimes called “cascading”) time limits or geographic limits. This form of a
non-competition clause is drafted so that if a court strikes down one of the greater limits, a lesser one
would remain in place. For example, the non-competition clause might say it is effective for five
years from when the counsellor’s services are terminated at the shared office or clinic, but say that if
that term were struck down, then a three-year limit would apply, and if that were struck down, a one
year limit would apply.
Often a non-competition clause is set out in the contract that the counsellor is required to
sign before joining the particular shared office arrangement. If the counsellor did not sign a contract
at the start of the shared office arrangement that included a non-competition clause, the departing
counsellor may be asked to voluntarily sign such an agreement upon departure, but clearly has no
incentive to do so.
Here are two examples of basic non-competition clauses without cascading limits, both of
which have been used in pre-employment contracts for counsellors entering shared office
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arrangements:
10
In response to a broadcast email sent to the membership in
early 2011, the BCACC received a series of anonymous
examples of non-competition clauses. Those examples have been
modified in this Commentary to ensure that that the original
parties cannot be identified, and to also remove redundant or
unnecessary wording used in those earlier examples.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
#1 -I agree that in the event my provision of counselling and/ortherapeutic services is
terminated for any cause or reason, I will not thereafter, either directly or indirectly,
either as a partner or as an officer,director, shareholder, employee, agent, or servant
of any corporation orpartnership, provide services to any client of [Name of Business],
[Name of Principal Counsellor], or to whom I provided service under the auspices of
[Name of Business], for (a) for a period of two (2) years after leavingthe said
professional relationship, and (b) within the Province of British Columbia.
#2 -The Employee shall not, for a period of twelve (12) months following the
termination of his or her employment for any reason including resignation, without the
prior written consent of the Company, carry on, or be engaged in, or be concerned
with, or interested in, or employed by,any person engaged in or concerned with or
interested in a businesswhich is the same as, or substantially similar to, or in
competition with, theCompany's business at the time of any such termination and
within aradius of seventy-five (75) kilometers from the Companyʼs office where the
Employee was employed.
4.3) Non-solicitation clauses
Non-solicitation clauses, unlike non-competition clauses, do not try to prevent the
departing counsellor from setting up what might be a competing counselling practice.
Instead, non-solicitation clauses focus on preventing the departing counsellor from
approaching the clients of the former shared office or clinic and encouraging them to
attend the counsellor’s new office. Some non-solicitation clauses try to prevent the
departing counsellor from advertising the new office, at least for a defined period of time.
This same type of clause might prohibit the departing counsellor from taking a client list,
or from phoning or sending notices to clients of the former shared office.
This is an example of a non-solicitation clause (emphasis added):
#3 -I agree that in the event my provision of counselling and/or therapeutic services is
terminated for any cause or reason, I will notthereafter, either directly or indirectly,
either as a partner or as an officer,director, shareholder, employee, agent, or servant
of any corporation orpartnership, solicit business from any client of [Name of
Business], [Name of Principal Counsellor] or from any client to whom I provided
servicesunder the auspices of [Name of Business], (a) for a period of two (2) years
after leaving the said professional relationship, (b) within the province of British
Columbia.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
4.4) Exclusive service and other restrictive covenants
Non-competition, non-solicitation, and exclusive services clauses are not the only types of
restrictive covenants that a counselling business might put into a counsellor’s contract. Rather than
focus on time limits, geographic range, or what a departing counsellor may not do to attract clients,
other types of covenants set up different ways to restrict the departing counsellor from taking away
business.
For example, a restrictive covenant might say that the departing counsellor cannot accept the
clients of the former shared office at all, or for some specific period of time. Or a restrictive covenant
might require the counsellor who has left the shared office and taken a client to then advise the former
shared office or clinic that the client is changing offices. Obviously, this type of provision is intended
to give the former office or clinic owner an opportunity to try to convince the client to stay.
This following is an example of an exclusive service clause:
#4 – The parties agree that the Employee shall at all times devote his or her entire
working time, attention, energies, efforts and skills to the business of the Employer,
and shall not, directly or indirectly, engage in any other business activity, whether or
not for profit, gain or other pecuniary advantages, without the express written
permission of the Employer. The Employee shall not, without prior written permission
of the Employer, directly or indirectly, either as an officer, director, employee,agent,
adviser, consultant, principal, stockholder, partner, owner or in any other capacity, on
his own behalf or otherwise, in any way engage in, represent, be connected with or
have a financial interest in, any business which is, or to the best of his knowledge, is
about to become, engaged inthe same or substantially similar business as the
Employer or whichotherwise competes with or is about to compete with the Employer.
And without limiting the generality of the above, the Employee will not provideany of
the services that are described in the Employeeʼs job description to either another
employer or to any individual or company, either directly orindirectly, anywhere or at
anytime during the term of employment.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
4.5) Restrictions on ownership of client files
Some contracts contain provisions saying that all clinical files of any client who was seen in
the shared office by any counsellor remain the exclusive property of the shared office. Others say that
the counsellor who provided the most recent service to the client may be deemed to be the “owner” of
the client file. Sometimes the counsellors might agree as to ownership amongst themselves. They
might agree that the counsellor who saw the client most often owns that client’s file, or that the last
counsellor to see that client owns the file.
These attempts to clarify the issue of ownership of client files can affect the ability of a
departing counsellor to take the clinical records of particular clients to the new office or obtain a
copy of those files should the client later come to the new office.
Heated disputes can arise in trying to define who owns the clinical records, or whether the
departing counsellor may have a copy of these records. These conflicts are often based upon an
incorrect understanding of the nature of the ownership rights over the clinical records and the
clients’ rights to control who may access their personal information. This issue will be discussed in
more detail in Chapter 5.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
5) LEGAL ISSUES
This chapter considers the legal issues in using contractual provisions intended to try to
prevent or resolve the problems that can arise when a shared office arrangement ends. First, some
basic legal concepts are set out. With an understanding of these concepts, counsellors should be able
to make more informed decisions as to what provisions their shared office contract should and should
not contain.
5.1) Ownership of client information
In order to understand the scope and importance of ownership of client information, it is
useful to look at this issue from both the common law and statutory perspectives:
(a) Separation of ownership rights at common law
in the 1992 case of McInerney v.
MacDonald, the Supreme Court of Canada drew a distinction
between a client’s personal information and the way that a
health-care practitioner might record or store that information.
The Court said that, while a practitioner might own the means of
storing or recording a client’s personal information, such as a
paper or electronic clinical record, the client “owns” his or her
personal information. Therefore, in order to allow clients to act
on their ownership rights over their own personal information,
practitioners must allow clients to have reasonable access to the
records, or a copy of the records, regardless of the way that the
practitioner recorded or stored the client’s information. This legal principle has been
further developed in BC legislation.
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As an earlier Legal Commentary explained,
12
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(b) The statutory duties re: collection, use, disclosure, etc. of client information By now, all
counsellors in private practice should be complying with the Personal
Bryce, G., A Client’s Right to Access Clinical Records: 2004 Update; available to members at the BCACC
website. McInerney v. MacDonald [1992] 2 S.C.R. 138, 137 N.R. 35, 7 C.P.C. (3d) 269, 12
C.C.L.T. (2d) 255, [1992] S.C.J. No. 57 (S.C.C.). As I also noted in the 2004 Update,
after making this decision, the Court went on to comment that a
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12
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practitioner can only deny a client access to his or her information in particular and very narrow circumstances. (These
legal principles are reflected in the BCACC Code of Ethical Conduct, although the Code uses somewhat different language
than that found in the SCC decision.)
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
This act regulates how personal
information is collected, used, disclosed or disposed of in BC’s
private sector. The earlier Freedom of Information and Protection of Privacy Act
applies to the BC public sector, and will not be considered in
this Commentary.
Information Protection Act (PIPA).
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15
Because ownership of personal information is distinct from ownership of the clinical
record, as articulated by the SCC in the McInerney case, the statutory duties that are now imposed
on counsellors in private practice concerning the collection, use, disclosure and disposal of their
client’s personal information give clients significant control over their personal information.
i. The duty to ensure accuracy and completeness of recorded information
Counsellors are required under PIPA to exercise care in relation to the personal information
they collect from their clients. For example, under section 33 the counsellor must “make a
reasonable effort to ensure that personal information collected by or on behalf of [the counsellor] is
accurate and complete,” in particular if that information is “likely to be used by [the counsellor] to
make a decision that affects the individual to whom the personal information relates” or if that
information “is likely to be disclosed by [the counsellor] to another [counsellor or] organization.”
This duty, however, does not require the counsellor to apply the collected information in furtherance
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of an objective different than the original, even if it was one that was important to the client.
This duty to ensure that client information is accurate and
complete also does not mean that the counsellor’s record of a
client’s personal information must reflect only the client’s
view of the correctness of the recorded information. Section 24
of PIPA allows a
For a detailed discussion about PIPA in private practice, see
(a) Bryce, G. “Personal Information Protection in the Private Sector: B.C.’s New Personal Information
Protection Act,” chapter 15, Legal Handbook for Helping Professionals (3 ed., 2006), Victoria,
BC: Sedgewick Society for Consumer and Public Education,
and (b) Bryce, G., BC’s New Personal Information Protection Act: Entrenching Common Practice or Adding New
14
rd
Complexities, part 1 @ 15:3 Insights at 14 (Winter 2004) and part 2 @ 16:1 Insights at 13 (Summer 2004), available at
the BCACC website.
In addition, BC’s Privacy Commissioner has produced tools and information to help physicians meet their duties
under PIPA, tools that can be adopted by counsellors for use in their clinical practices. See the information posted at
http://www.oipc.bc.ca, then follow these links: Private Sector, to Businesses & Organizations, then down the page to
R.S.B.C. 1996, c. 165. Tsatsu Shores
Homeowners Corp. OIPC Order P06-06 (Dec. 21, 2006) at para. 35.
Resources for Physicians.
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G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
client ask the counsellor to correct personal information, but it does not require the counsellor to
make a change the counsellor does not think is reasonable or correct. . Subsection 24(3) allows the
counsellor to instead “annotate the personal information under [his or her] control with the
correction that was requested but not made.”
In summary, a counsellor has a legal duty to a client to ensure that the personal
information the counsellor records about that client is accurate and thorough. In turn, the client
has the legal right to request changes to their personal information to ensure that it is accurate and
complete, although this right to correct information is not absolute.
ii. The duty to protect client information
Section 34 of PIPA states that a counsellor must “protect personal information in [the
counsellor’s] custody or under [the counsellor’s] control by making reasonable security
arrangements to prevent unauthorized access, collection, use, disclosure, copying, modification or
disposal or similar risks.” The Privacy Commissioner has commented on what “reasonable”
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means in this section:
What does “reasonable” mean?
[49] By imposing a reasonableness standard in s. 30, the Legislatureintended the adequacy
of personal information security to be measuredon an objective basis, not according to
subjective preferences or opinions. Reasonableness is not measured by doing oneʼs
personal best. The reasonableness of security measures and their implementation is
measured by whether they are objectively diligent and prudent in all of thecircumstances. To
acknowledge the obvious, “reasonable” does not meanperfect. Depending on the situation,
however, what is “reasonable” may signify a very high level of rigour.
[50] The reasonableness standard in s. 30 is also not technically oroperationally
prescriptive. It does not specify particular technologies or procedures that must be
used to protect personal information. The reasonableness standard recognizes
that, because situations vary, the measures needed to protect personal information
vary. It also accommodates technological changes and the challenges and
solutionsthat they bring to bear on, and offer for, personal information security.
The duty to protect a client’s personal information set out in section 34 can be met
Sale of Provincial Government Computer Tapes Containing
Personal Information, OIPC Investigation Report F06-01, [2006] B.C.I.P.C.D. No. 7 (Mar. 31,
17
2006).
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
if the counsellor employs a variety of physical, technological and administrative safeguards. These
can include ensuring that client files are not left on desks for anyone to see, and always returning
client files to a locked filing cabinet accessible only by authorized people. Another important part
of security is having a process in place to destroy client files after a reasonable period of time
when there is no further need for the information.
18
While the client information is retained, clients have the
right to ensure that their
personal information is secure, and will not be accessed, used by, or disclosed to
19
unauthorized third parties.
They also have qualified rights under PIPA
to direct who
may access or use their personal information, or to whom the counsellor may or may not
disclose their personal information.
iii. Clients’ rights to access their information The duties of counsellors in sections 33 and 34 are intended to
protect the personal privacy interests of the client, not the business interests of the counsellor. This
theme is repeated in other provisions of PIPA, in particular those that speak to the client’s right to
access his or her personal information and to make decisions on the distribution or disposal of that
information.
Subject to certain prescribed limits, section 23(1)(a) of PIPA requires a counsellor
to provide clients with access to their personal information that is under the counsellor’s
The client’s request for access should be in writing and
provide sufficient
20
control.
21
details to allow the counsellor to determine the specific information the client wants to
The failure of a clinic owner to establish polices and
procedures to properly store and later dispose of patient
records is dramatically illustrated in a 2006 report from the
Information and Privacy Commissioner of Ontario, Order
18
HO-003, December 2006 (available at
www.ipc.on.ca/images/findings/up-ho_003.pdf). There are
some exceptions to this right, as provided in PIPA. Herein I
will refer to a counsellor alone, but this should be understood
to apply also to a counselling agency in the private sector.
Sections 5 to 7 of the Electronic Transaction Act provide that a requirement for a document to be
19
20
21
“inwriting” includes an electronic form of that document, such as delivery of a notice by email. See: OIPCBCMediation
Summary “City Responds in Time, but Reasoning for Refusing Access Shaky” OIPC F07-14MS (2007).
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
22
see or to copy.
Under section 29(1) of PIPA, the counsellor is required to
respond to a client’s
access request within 30 working days, unless the counsellor has initiated an extension.
Section 32(2) allows a counsellor to charge a nominal fee for arranging access or for
making copies of the requested records to send to the client.
23
Aside from the 30-day deadline and the option to charge a fee,
PIPA does not
specify how a counsellor should provide clients with their personal information, so the
24
general principles of access to personal information as set out by the courts apply.
Depending on the circumstances, this may require the counsellor
to make arrangements
to allow the client to read the file in the shared office or to simply provide the client
with a copy of the file at a reasonable cost. In either case, the counsellor should
advise
the client in advance as to the cost for access or copying, and whether the counsellor
25
26
27
28
will require pre-payment before providing access or copies.
This Legal Commentary does not address the scope of client
access requests or
the grounds for refusing them. The point is that PIPA provides clients with the primary if
In addition, section 23(1)(b) of PIPA requires a counsellor, in
response to request from a client, to explain to the client how
that client’s personal information the counsellor has collected
has been used or will be used by the counsellor. Further, section
23(1)(c) of the Act requires a counsellor to disclose to the client,
when requested, the names of others to whom the client’s
personal information has been disclosed by the counsellor. The
counsellor can request pre-payment of the fee for copying the
file, etc. and can deny access if that (reasonable) fee is not prepaid; see section 32(3) PIPA. On the other
22
23
24
hand, PIPA has entrenched some of the common law exceptions
to a client’s right of access and – to a certain extent – recast
some of the guidance that was originally provided by the SCC in
the McInerney case. I will not explore those refinements in this Commentary. A counsellor may be
present during the client’s viewing of the file to ensure the
integrity of the information and the record itself. If the
counsellor does not directly oversee the client’s viewing of the
record, the counsellor may appoint someone to play that role. A
reasonable but minimum fee may be charged for this service in
either case.
The fee itself should be reasonable in the circumstances, and
cover the actual business costs of makingthe copy of the file,
but not generate revenue for providing that service. A fee
should not include a chargefor professional time reviewing the
records for the purpose of providing access. But professional
time orstaff time necessary to ensure all relevant documents
were in the requested file and no irrelevant or third-party
information would be copied could be included. If the volume
of records is small, the fee should be, too. A minimal fee will
not always cover all of the costs associated with responding to an access request.See: Ironwood
25
26
Chiropractic and Massage Therapy Clinic; OIPC Order P08-03 (Dec. 5, 2008).
Applying, for example, the fee schedule as set out in the
counsellor’s Privacy Policy.
General information on how clients can request access to their
personal information in a counsellor’s file can be found at the
BC Privacy Commissioner’s website: http://www.oipc.bc.ca.
Follow the links to Private Sector, then Members of the Public.
27
28
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
Generally, clients’ rights
to control their information supersede a counsellor’s claim
over the physical record.
29
not ultimate control over their own personal information.
(c) Recognizing clients’ rights over their personal information
Separating a client’s rights to control personal information from a counsellor’s ownership
rights over the physical records has consequences for drafting a shared office contract. Specifically,
while counsellors can assert their ownership over the physical record, in most situations counsellors
cannot extend that right to prevent clients from directing how their recorded information is to be used
Therefore, any
provision in a shared office contract that has the effect of
preventing clients from exercising their rights to control their
personal information and, in particular, to make decisions as to
who may access or have copies of that information, would
conflict with BC’s privacy legislation, if not the common law.
That means that if it were challenged in court, it would not likely
stand up.
30
or distributed to others, including having copies sent to other counsellors.
If there is a dispute between counsellors in a shared office arrangement as to who is
responsible for a particular clinical record, the root problem may be that the counsellors have not
properly understood or complied with PIPA. Further, their failure to correctly understand the
“separation of ownership” issue in applying their respective privacy policies may compromise their
business relationship.
Contractual provisions can help to clarify or highlight existing rules and regulations, in
particular those that flow from the requirements of PIPA. For example, a contract could contain a
provision stating that, regardless of which counsellor saw a particular client at the shared office or
clinic, the client’s clinical record remains the
In a case from Ontario, that province’s Privacy Commissioner
explained that: “Patients must have
29
sufficient notice that their health care practitioners are ceasing or closing their practices in order to seekaccess to, or
request the transfer of, their records, if they so wish.” See Information and PrivacyCommissioner of Ontario, Order
HO-003, December 2006, at pages 10-11 (available at
A client’s right to direct how
personal information is to be used or distributed to others is
subject to certain exceptions, as set out in PIPA. For more
details, see (a) Bryce, G. “Personal Information Protection in the Private Sector: B.C.’s New
Personal Information Protection Act”, chapter 15, Legal Handbook for Helping Professionals (3 ed., 2006),
Victoria, BC: Sedgewick Society for Consumer and Public
Education, and (b) Bryce, G, BC’s New Personal Information Protection Act: Entrenching Common Practice
www.ipc.on.ca/images/findings/up-ho_003.pdf).
30
rd
or Adding New Complexities, part 1 @ 15:3 Insights at 14 (Winter 2004) and part 2 @ 16:1 Insights at 13 (Summer 2004),
available at the BCACC website.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
exclusive property of the clinic (i.e. of the principal counsellor who owns the clinic) and a departing
counsellor may only make a copy of that record with the approval of the clinic owner. That would
make it clear to both parties from the outset who owns the clinical records.
The contract could also contain a provision dealing with who “owns” clients, perhaps stating
that, if a counsellor is leaving the clinic, then that counsellor may notify all the clients that he or she
brought into the clinic (that counsellor’s new clients) as to where the counsellor’s new business will
be. In turn, the principal counsellor or clinic owner would be required to forward a client’s personal
information and clinical records to the departing counsellor upon receipt of an appropriate and written
instruction from the client requesting the transfer. (The contract might even allow the owner to charge
a fee to the departing counsellor for the transfer.) These sorts of contract provisions would recognize
the clients’ ownership over their personal information, and their right to direct how that information
is used by or disclosed to others.
A shared office contract should not prevent clients from directing that their personal
information (as set out in a clinical record) be provided to the departing counsellor.
Counsellors who plan to stop providing services for an extended length of time may have
a duty to notify their clients and advise them how to access or transfer their records. For example,
31
physicians have such a duty, at least according to one Privacy Commissioner:
In our view, physicians should inform their
patients, not only of the fact thatthe physician will
be ceasing to operate or will not be practising for
an extended period of time, but also of the
following:
•
•
•
Who will have possession of their health records;
Where a request for access to their records under the Act can be made;
Where a request to transfer the records to another health care practitioner can be directed.
Information and Privacy Commissioner of Ontario, Order
HO-003, December 2006, at page 12(available at
31
www.ipc.on.ca/images/findings/up-ho_003.pdf).
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
5.2) Counsellor privacy policies
Before a shared office arrangement fails and disputes arise as to what to do with client
records, individual counsellors should take steps to ensure that they comply with PIPA. The better
the compliance, the less likely it is that significant legal issues will arise. Some of the steps that
counsellors should take will depend on the nature of their particular shared practice arrangement,
while others are mandatory under PIPA.
(a) Mandatory PIPA policies and procedures
section 5(a) of PIPA requires that all
counsellors in private practice have their own privacy policies to
explain to their clients what steps the counsellor will take in
terms of collecting, using, disclosing and disposing of a client’s
personal information. Section 5(b) requires a counsellor to
develop a process for dealing with complaints that may arise with respect to the
application of PIPA. If a counsellor in private practice does not have
the required policies and procedures in place, this would be a
breach of the Act, and the absence of such guidance could also
create disputes in a shared office arrangement.
32
As mentioned previously,
33
Counsellors who work as employees of a private company or as employees of a counsellor in
private practice would be expected – as a term of their employment – to follow and apply their
employer’s privacy policy. In turn, that policy should tell both clients and counsellor-employees what
that employer will do in collecting, using and disclosing client personal information. The employer’s
policy should clarify the steps that will be taken when clients exercise their right to have their
personal information transferred to a departing counsellor.
To be clear, the employer cannot refuse a client’s request to have personal information (as
contained in the clinical records) transferred to another counsellor, nor
See footnote 14, supra. Section 5(c) of PIPA goes further and
requires a counsellor to make information available on request
about the counsellor’s PIPA policies and practices, and also
32
33
about the counsellor’s complaint process. This section does not
mean, however, that the counsellor must provide anyone with a
written copy of the policies and procedures; only that the
counsellor must provide general information about those
policies, etc.; see Twentieth Century Fox Film Corp., OIPC Order P06-04 (Oct. 26, 2006) at para. 74. But a
counsellor who disclosed his or her policies, such as posting them at the website, would exceed the basic requirements of
section 5(c).
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
can the employer create barriers that prevent the transfer. The client’s rights of access include the
right to direct where the personal information in the clinical file should be sent, whether by sending
the original file or a copy. In a sense, clients who ask that their personal information be sent to
another counsellor are simply requesting a copy of their own personal information, but directing it
to a third party rather than to themselves.
That said, the employer can charge a reasonable fee (to be paid by either the client or the
receiving counsellor) for transferring the client’s information upon request. The amount of that
transfer fee should be set out in the employer’s privacy policy, and – like an access fee that can be
charged under section 32 of PIPA – this transfer fee must also be a minimal amount and should not
34
create a barrier to the transfer.
Sections 34 and 35 of PIPA require that a client’s personal
information, which has been recorded in clinical records, be
retained, transferred or disposed of in a safe and secure fashion.
If one counsellor in a shared private office arrangement fails to
follow these requirements, it could result in serious legal
consequences for all counsellors in that office.
(b) Recognizing PIPA policies and procedures
The most important thing that counsellors who are working in private practice in a shared
office arrangement can do to protect themselves and their clients is to set out in a written agreement
what their individual and collective responsibilities will be concerning the collection, use and
disposal of all client personal information, regardless of how it is recorded.
Drafting such an agreement will make counsellors think about their business relationships
with their fellow practitioners, and how they could change. In particular, each member of the group
should address what they will do, both individually and collectively, when any one of them decides to
leave the group, or the group itself decides
For a discussion on the application of section 32 of PIPA
(“Fees”) see Bowman Employment Services Inc. OIPC Order P08-02 (June 11, 2008); Ironwood Chiropractic
34
and Massage Therapy Clinic, OIPC Order P08-03 (Dec. 5, 2008); Cross King Crauford Physical Therapist Corp OIPC
Order P08-04 (Dec. 5, 2008). While these decisions were rendered in the context of a request for access to information,
they should apply equally for a request to have a copy of a file sent to another counsellor.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
to disband.
Such a policy could address notifying active clients about changes in their counsellor’s
practice, and options for transferring the clients’ personal information. This could include the option
of simply being provided with a copy of their clinical record if the group is disbanding and no client
files are to follow individual counsellors.
Counsellors in a private group practice must also inform their clients about the following
specific issues:
•
who will be in possession and control of the clinical records containing that client’s personal
information;
•
who will receive the client’s request for access to his or her records, if the client makes such a
request; and
•
who will act on the client’s request to have his or her clinical records transferred elsewhere, if
the client makes such a request.
These details should be provided to the client in a timely fashion, but certainly before the
counsellor leaves the group or the group disbands.
Counsellors sometimes work in a multi-profession practice or in informal group practices
where professionals simply share office space. While PIPA would apply to all such practitioners, the
counsellors may be jointly liable for the privacy mistakes their fellow professionals make. Much
would depend on how they have structured and organized their group practice.
For example, if a counsellor in a shared office or group practice keeps client records in a
locked filing cabinet and no one else has access to those files, and no one else in the group
provides services to those clients, then that counsellor may be considered to be practicing
essentially as an individual and in compliance with PIPA despite the appearance of a shared office
arrangement.
However, if two or more of these practitioners (again, either as a group of counsellors or
working in a multi-disciplinary practice) share a common storage area for
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
client files, and – even more importantly – if they see each other’s clients or provide different
services that are recorded in a single, common file, then each of these practitioners would be
responsible for both their own and the other professional’s compliance with PIPA, because of the
shared record. This is because, as a matter of law, they would be found to be jointly and separately
liable for complying with PIPA.
5.3) The enforceability of non-competition clauses
As noted in Chapter 4, some shared office contracts contain non-competition clauses that
restrict what a departing counsellor can do in setting up a new practice. These clauses may be directed
at legitimate business competition issues, but they can also interfere with clients’ rights to access their
personal information. This raises some important questions: How enforceable are non-competition
clauses in shared office agreements? In what circumstances will they be upheld in the courts? When
are they likely to be struck-down?
Previously, Canadian courts refused to enforce any provision that restrained a person’s
ability to earn a living, and said that non-competition clauses and similar restrictive covenants
35
could only be enforced in a narrow set of circumstances.
It is now common practice for employers to put
non-compete provisions into their employment contracts, but
whether a court would enforce any particular non-competition
provision in a shared office agreement depends a great deal on
the particular circumstances. The courts have developed a test
that applies a series of fundamental questions to assess the
reasonableness and validity of such clauses. The analysis can be
36
conveniently described in two steps.
First, the party (usually the employer) trying to enforce
the non-competition clause must provide evidence that
addresses each of the following questions:
1. Does the employer have a proprietary interest that is entitled to protection?
McCamus, J. D., The Law of Contracts, Irwin Law: Toronto (2005); see in particular “Covenants in
Restraint of Trade,” pages 447 to 459. Adapted from Tevlin, D.M & S.K. Bhalloo
“Employment Contracts: Enforcing Non-Competition,” The Advocate
35
36
53:6, pages 879-894 (Nov. 1995).
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
1
If so, are the restrictions (as to practice, geography and time) reasonable?
2
In particular, are the restrictions reasonably required to protect the employer’s legitimate
interest?
If the employer is able to provide evidence in support of these questions, then the party being
restricted by the clause (usually the former employee) must provide evidence to address the next set
of questions:
1
2
Are the restrictions more excessive than is reasonable in the circumstances?
Is the non-competition clause contrary to the public interest?
It is useful to consider how these factors have been applied by the courts, to better predict
how enforceable any particular non-competition clause may be.
(a) Identifying the employer’s proprietary interests
The sort of proprietary interests that an employer can claim are entitled to protection would
include situations where the former employee had access to the employer’s trade secrets or
confidential business information, or where the employee could access client information or had a
close relationship with clients. Another example would be if the employee’s services were considered
by the clients to be special, unique or extraordinary, or where the clients relied significantly on that
37
employee.
In general terms, the more involved the former employee
was in the management of the employer’s business or the higher
that employee’s position was within the company, the more
likely it is that the employee would be found to have a fiduciary
duty to that employer not to set-up a competing business, even if
there were no non-competition clause.
38
It can sometimes be difficult to draw a clear distinction
between a former employee’s skills and abilities and that
employee’s past relationship with the clients of
Elsley v. J.G. Collins Insurance Agencies Ltd. 1978 CarswellOnt 1235, 3
B.L.R. 183, [1978] 2 S.C.R. 916, 36 C.P.R. (2d) 65, 83 D.L.R. (3d) 1, 20 N.R. 1 (S.C.C.). Alberts v.
37
38
Mountjoy, 1977 CarswellOnt 48, 2 B.L.R. 178, 16 O.R. (2d) 682, 36 C.P.R. (2d) 97, 79
D.L.R. (3d) 108 (Ont.H.C.J.).
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
the employer. In a few cases, it has been held that where the customers are likely to be attracted to the
39
former employee due to his or her interpersonal skills, the non-competition clause is not enforceable.
Or if a customer is likely to be indifferent to the identity of the employee
40
providing the service, the clause may be found to be excessive.
On the other hand, if the employee’s role in the business
creates a strong bond of loyalty between the customers and that
employee, the post-employment restriction will be upheld. It will
also be upheld where the employee has obtained special
knowledge of the employer’s customers and has the means to
influence them, as in the case of a lawyer or a medical
practitioner. But if the employer could be protected by a less
onerous restriction, such as a non-solicitation clause, the
non-competition clause would not survive. (More on enforcing
non-solicitation clauses below.)
41
42
43
44
(b) Reasonableness of an activity restriction
For a court to find that a non-competition clause is reasonable, the activities or practices that
the employer is attempting to restrict must directly relate to the employer’s business. A court will
study the particular circumstances of the employer and employee, as well as the original and
subsequent businesses. The court will also consider how the activity restriction itself was framed in
light of the overall nature of the contract.
In general terms, the activity that is being restricted must relate to the nature of the business
A restriction on activities should not be so broad as to
prevent the departing employee from providing new services.
For example, if the employer’s business was focused on drug
and alcohol counselling, the non-competition clause should not
try to prevent the departing counsellor from providing other
counselling services.
45
itself.
39
Attwood v. Lamont
(1920), [1920] All E.R. Rep. 55, [1920] 3 K.B. 571 (Eng. C.A.);
NorthernMessenger & Transfer Ltd. v. Fabbro (1964), 45 D.L.R. (2d) 73 (Man. Q.B).
Winnipeg Livestock Sales Ltd. v. Plewman (2000), 192 D.L.R (4 ) 525
(Man. C.A.). J.C. Collins Insurance Agencies Ltd. v. Elsley, 1978 CarswellOnt 1235, 3 B.L.R. 183, [1978] 2
th
40
41
S.C.R. 916, 36 C.P.R. (2d) 65, 83 D.L.R. (3d) 1, 20 N.R. 1 (S.C.C.)
42
Fitch v. Dewes, [1921] 2 A.C. 158 (En. H.L.) Routh v. Jones [147] 1 All E.R. 758 (C.A.);
43
Mills v. Gill, 1952 CarswellOnt 44; [1952] O.R. 257, 16
C.P.R. 46, [1952] 3 D.L.R. 27, [1952] O.W.N. 176 (Ont. H.C.J.)
Lyons v. Multari (2000), 50 O.R. (3d) 526 (C.A.). Nordenfelt v. Maxim
Nordenfelt Guns & Ammunition Co. (1894), [1894] A.C. 535, 11 R. 1, [1891-94]All E.R.
44
45
Rep. 1 (U.K. H.L.); British Reinforced Concrete Engineering Co. vs. Schelff, [1921] 2 Ch. 563 (Eng. Ch. Div.); Goldsoll v.
Goodman, [1915] 1 Ch. 292 (C.A.).
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
A further refinement is that a non-competition clause that applies to an employee during the
course of working for an employer is more likely to upheld that a clause that applies to that same
employee after the employment has ended. In general terms, post-employment restraints that are
46
intended simply to restrict competition are more likely to be found to be invalid.
If the activity restrictions are more than is reasonably
necessary to protect the employer’s particular business interests,
a court will likely strike down the entire clause, even if it also
contained other reasonable geographic or time restrictions (see
next topic). The result would be no protection at all for the
employer against the former employee’s competing business.
47
(c) Reasonableness of geographic or time restrictions
As noted in Chapter 4, non-competition clauses typically set out a geographic restriction or a
time restriction, or both. As was the case for activity restrictions, the courts will consider the
particular facts to assess the reasonableness of these restrictions. The court will look at the particular
circumstances of the parties involved and the nature of the contract itself. In general terms, both the
geographic and temporal restrictions in a non-competition clause must be no greater than is necessary
48
to protection the employer’s legitimate and proven business interests.
Given that the courts typically strike out a geographic or
time restriction that is more than is necessary to protect the
employer’s interest, lawyers are now drafting non-competition
clauses that have multiple increasing (or “cascading”)
geographic and time restrictions. The hope is that if a court finds
a large restriction excessive, it might allow a smaller one that is
included as an alternate option in the clause.
McCamus, J. D., The Law of Contracts, supra footnote #35, at page 451. Creditel of
Canada Ltd. v. Faultless, 1977 CarswellOnt 52; 2 B.L.R. 239, 18 O.R. (2d) 95, 36 C.P.R. (2d) 88, 81
46
47
48
Friesen v. McKague
D.L.R. (3d) 567 (Ont.H.C.J.).
, 1991 CarswellMan 197; [1991] 5 W.W.R. 567, 38
C.P.R. (3d) 199, 38 C.C.E.L.150, 74 Man. R. (2d) 155 (Man.Q.B.), varied in part 1992 CarswellMan 144; [1993] 1
W.W.R. 627, 44
C.C.E.L. 280, 45 C.P.R. (3d) 46, 96 D.L.R. (4th) 341, 81 Man. R. (2d) 290, 30 W.A.C. 290 (Man.C.A.)
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
(d) Contrary to the public interest
What a court is likely to consider “contrary to the public interest” depends on the particular
circumstances. For example, a non-competition clause will be struck down where the public would be
Or it will be struck down where it prevents a
professional from providing services to persons who were
unlikely to have ever obtained professional services from the former employer.
49
deprived of a critical service.
50
BC courts have also refused to enforce a non-competition
where the effect of that clause would be to prevent a professional
from earning a living or working within his or her chosen profession. In
this respect: “[T]he employee’s interest in being able to compete
in the marketplace and earn a living is quite consistent with the
public interest in access to a competitive marketplace.”
51
52
Discussion
The legal literature and reported cases suggest that a non-competition clause may be upheld
only in certain business contracts between counsellors, such as where one counsellor sells a clinical
practice to another. In this situation, there is a legitimate business interest that would likely be
recognized as needing protection: to prevent the business vendor from immediately turning around
Such direct competition would
undermine the business valuation of the counselling practice that
had just been sold.
53
and opening up a new counselling clinic nearby.
In contrast, a non-competition clause in an office rental or lease agreement that purports to
prevent the tenant counsellor from opening up a new office is not likely to survive judicial
scrutiny. This is because there is no direct relationship between the business of renting an office
and the attempt to restrict a counselling practice.
In the employment context, it may be equally difficult for the employer or principal
counsellor to enforce a non-competition clause against a former employee or
49
50
Elsley v. J.G. Collins Insurance Agencies Ltd., supra at footnotes #37 and 41.
Salloum v. Thomas, 1986 CarswellBC 899; 12 C.P.R. (3d) 251, [1986] B.C.W.L.D. 3383 (B.C.S.C.)
51
Terra Engineering Ltd. vs. Stuart (1994), 56 C.P.R. (3d) 177 (B.C.S.C.)
McCamus, J. D., The Law of Contracts, supra footnote #35, at page 456. McCamus, J. D.,
52
53
The Law of Contracts, supra footnote #35, at page 448.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
even an independent contractor. The courts are very reluctant to uphold clauses that prevent
professionals from practicing. The courts would be even more reluctant to enforce such a clause if
there were a demonstrable need for counselling services within the geographic boundaries described
in the non-competition clause. Some courts have suggested that, given the importance of a health
professional’s relationship with a client, no client should be deprived of access to the profession in
54
whom they have placed their confidence by the application of a non-competition clause.
5.4) The practical limits of enforcing non-competition clauses
In addition to the legal concerns mentioned above, there are also practical reasons why
non-competition clauses in shared office agreements will be difficult to enforce.
A major problem with non-competition clauses is that they can be expensive to enforce in
55
the courts. It may not be worth the cost, even if the application is successful.
In addition to suing for loss of income, the enforcing
counsellor may sue for a share in the new profits that the departing counsellor is
enjoying in the new office. While loss of future profits may also be
claimed, these may be harder to quantify. Again, unless the
potential award for loss of profit is likely to be substantial, it
may not be cost-effective to pursue the matter in court.
56
57
Another remedy may be a simple demand letter trying to force the departing counsellor
to comply with the non-competition clause. While a demand letter can be inexpensive as
compared to a lawsuit, the demand is worthless unless it is capable of being backed up by legal
action.
Sherk v. Horwitz [1972] 2 O.R. 451 (Ont. H.C.J.), aff’d on other grounds [1973] 1 O.R. 360 (Ont. C.A.),
leave to appeal to S.C.C. refused (1972), 9 C.P.R. (2d) 119n (S.C.C.). Moore International
(Canada) Ltd. vs. Carter, 1984 CarswellBC 267; 56 B.C.L.R. 207, 1 C.P.R. (3d)171, B.C. Corps.
54
55
L.G. 78, 262 (C.A.), B.C. Corps. L.G. 78,262, [1984] B.C.W.L.D. 2252, [1984]
56
57134 Manitoba Ltd. v. Palmer
B.C.W.L.D. 2263, [1984] B.C.W.L.D. 2276 (B.C.C.A.)
1985
CarswellBC 251; 65 B.C.L.R. 355, 8 C.C.E.L. 282, 30 B.L.R. 121, 7 C.P.R. (3d) 477, [1985] B.C.W.L.D. 2427, [1985]
B.C.W.L.D. 2436, [1985] B.C.W.L.D. 2469 (B.C.S.C.)
57
Tree Savers International Ltd. v.
Savoy, 1992 CarswellAlta 220; 84 Alta. L.R. (2d) 384, 39 C.C.E.L.253, [1992] 2 W.W.R. 470, 87 D.L.R. (4th) 202,
40 C.P.R. (3d) 173, 120 A.R. 368, 8 W.A.C. 368(Albt.C.A.)
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
5.5) The enforceability of non-solicitation clauses
Courts are more likely to uphold non-solicitation than non-competition clauses.
As discussed in Chapter 4, a non-solicitation clause is a form of restrictive covenant that
prevents a departing counsellor from soliciting clients of the former shared office, clinic or
employer. For example, a non-solicitation clause could prohibit the departing counsellor from
mailing notices to clients announcing the opening of a new office. Unlike a non-competition clause,
a non-solicitation clause does not try to prohibit the departing counsellor from providing services. It
only attempts to limit solicitation of clients.
There is a line of cases that suggests that non-solicitation clauses are likely to be upheld as
reasonable, such as when such a clause is intended to prevent “poaching” of the clients of a
professional practice. A non-solicitation clause would normally be sufficient to protect an employer’s
legitimate interest in controlling the former employee’s ability to access clients of the employer.
Non-solicitation clauses are now more commonly used than non-competition clauses in the medical,
dental and legal professions. Generally speaking, the courts will not enforce a non-competition clause
58
if a non-solicitation clause would adequately protect an employer's interests.
Further, if a contract contains both a non-competition and
a non-solicitation clause, only the non-solicitation clause is likely to survive. Where
a contract provision contains elements of both non-competition
and non-solicitation, such a clause will be assessed on the
stricter test of a non-competition clause. As such, hybrid
clauses are likely to be found to be unreasonable and, therefore, unenforceable.
59
60
58
Lyons v. Multari; 2000 CarswellOnt 3186; 3 C.C.E.L. (3d) 34, 50 O.R. (3d) 526, 136 O.A.C. 281, 2001
C.L.L.C. 210-011, 99 A.C.W.S. (3d) 771 (Ont. C.A.) W.R. Grace & Co. of Canada Ltd. v.
59
Sare, 1980 CarswellOnt 770; 28 O.R. (2d) 612, 111 D.L.R. (3d) 204, 51 C.P.R. (2d) 83 (Ont. H.C.J.)
Dinsdale, H. & J. Goodman “Restricted Covenants: Multiple
Jurisdiction Creates Challenges,” Canadian Lawyer (Jan. 2010); source:
60
http://www.canadianlawyermag.com/Restrictive-covenants.html.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
5.6) The doctrine of severance
If a court finds that a particular provision in a contract is an unreasonable restraint on trade,
the court may apply what is known as the doctrine of severance. The court will remove the terms that
are unreasonable, and uphold the remainder of the contract.
The severance doctrine has resulted in lawyers drafting restrictive covenants with multiple
cascading provisions. The hope is that, even if a Court severs one or more of the greater restrictions,
it will leave a lesser one in place.
As noted in Chapter 4, some restrictive covenants create cascading geographic restrictions
(e.g. within the province of BC, Lower Mainland, City of Vancouver, five-mile radius, one-mile
radius, etc.) or time restrictions (e.g. within ten years, five years, three years, one year, 6 months,
etc.). Sometimes both types of cascading restrictions are included in the same covenant, which can
make them particularly long and complex. While these sorts of cascading provisions are probably
more common in non-competition clauses, they can also be found in non-solicitation clauses.
Whether this approach to drafting either non-competition or non-solicitation clauses will
succeed in any particular circumstance is difficult to predict. The danger is that by presenting the
court with a series of options, the counsellor wanting to assert the restriction is effectively
admitting that the least restrictive provision is all that is reasonably necessary to protect the
counsellor’s business interests.
Some writers have commented that by severing cascading provisions until an enforceable
In
one recent case, the Supreme Court of Canada took the position
that it is always inappropriate to apply the doctrine of severance
to read down a contract provision to make it enforceable or to remove those provisions
61
limit is reached, courts simply encourage employers to draft overly broad restrictive covenants.
62
that are unenforceable.
In summary, relying on what can sometimes be complex
and lengthy restrictive covenants composed of a series of
cascading limitations is no guarantee that any of them
61
Dinsdale, H. & J. Goodman “Restricted Covenants: Multiple
Jurisdiction Creates Challenges”, Canadian Lawyer (Jan. 2010); source:
http://www.canadianlawyermag.com/Restrictive-covenants.html. Shafron v. KRG Insurance
Brokers (Western) Inc.,
62
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
will survive judicial scrutiny. A counsellor would be better to spend more time considering whether it
is even necessary to propose any type of restrictive covenant in a shared office agreement.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
6) RECOMMENDATIONS
Each counsellor must decide for him- or herself what shared office arrangement is suitable
and what terms are acceptable. Independent counsellors who choose to share an office space and
related services should ensure that their arrangements do not compromise the confidentiality of each
counsellor’s client information, the professional independence of each counsellor, and the separate
legal obligations that each counsellor has under legislation like PIPA.
This final chapter offers some recommendations that counsellors should consider before they
enter into a shared office arrangement.
6.1) Document the shared office arrangement
Counsellors entering into any one of the different types of shared office arrangements
described in Chapter 2 should ensure that they have documented the essential terms of their
relationship. While a formal contract is probably the best option, at the very least, the counsellors
should exchange their views in writing outlining how their arrangement will work. In particular,
they should spend some time documenting how they anticipate dealing with the inevitable end of
their shared office arrangement.
This chapter identifies specific subjects that should be set out in the shared office contract. A
written contract will help to avoid confusion later, and – if correctly done – it should help resolve any
disputes arising at the end of the relationship. It is always better to try to anticipate problems and set
up mechanisms to deal with them when relations are good rather than trying to respond to the
problems after a dispute has emerged.
6.2) Refer to privacy policies
Perhaps the single most important feature of a shared office arrangement is how the
counsellors govern themselves in terms of their privacy policies and PIPA requirements. The
policies in place should cover the range of issues that can arise during the time of office sharing and
afterward when that relationship ends. For example, PIPA provides a very useful framework to
guide counsellors in dealing with issues about the
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
transfer of client files, etc. when one counsellor leaves a shared office arrangement.
While a single common policy for the entire office could be adopted by all counsellors and
attached to the agreement as an appendix, depending on the nature of the shared office arrangement,
each counsellor might need to establish a separate policy. In that case, there may be benefits in
ensuring that the multiple policies do not conflict with each other.
In relation to a common PIPA privacy policy:
•
The policy should explain the steps that clients can take under PIPA to access their clinical
records, or to have a copy forwarded to a departing counsellor.
•
If a fee is charged for copying and forwarding clinical records, that fee must be reasonable
and minimal. The amount of the fee and any requirement for pre-payment must be made clear to the
client.
The original version of all client clinical records should be retained in accordance with the
63
adopted PIPA privacy policies.
•
6.3) Avoid non-competition clauses
As non-competition clauses may not be enforceable, but can be expensive to litigate, they
should be avoided unless they are absolutely necessary. Employers should avoid including them, and
employee counsellors should be wary of signing a contract that includes one.
6.4) Use non-solicitation clauses carefully
Given what appears to be a trend in the courts to favour non-solicitation clauses over
non-competition clauses in shared office agreements, in particular in employment or associate
agreements, counsellors may want to consider using this type of restrictive covenant rather than a
non-competition clauses. However, in doing so, the counsellor
It is recommended that originals of all clinical records be
retained for at least seven years from the date of the last entry
or visit, or – if the records are those of a child under the age of
19 – seven years from the date that child turns 19.
63
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
should also ensure that the effect of the non-solicitation clause would not result in preventing
clients from exercising their rights over their personal information as enshrined in PIPA.
In recognition of the paramouncy of the clients’ rights under PIPA to direct who may have
access to the records of their personal information, the agreement should not establish terms or
conditions that directly or indirectly undermine these rights.
6.5) Other recommendations
The following additional suggestions reflect business issues that are not directly related to
privacy concerns:
•
There should be a process set out in the agreement that explains how any remaining or
incomplete client services will be provided prior to or after the counsellor’s departure from the shared
office.
•
The agreement should clarify when a counsellor will be entitled to advise clients of a change
or pending change in that counsellor’s circumstances.
•
There should be a mechanism in place to advise clients who have a right to follow their
departing counsellor and have their clinical records sent to that counsellor’s new office.
•
While the principal counsellor who owns the clinic or is primarily responsible for the office
may assert in the shared office agreement ownership over certain clinical records, that claim should
not prevent a departing counsellor from advising his or her clients of the change in that counsellor’s
circumstances, nor should it prevent clients from being able to request that the information in their
clinical records be copied and forwarded to the departing counsellor.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements
7) SOURCES AND ACKNOWLEDGEMENT
In addition to the legislation, rules and reported cases set out in the footnotes, the following
sources and publications were consulted in the preparation of this Legal Commentary and are
recommended as further readings (in chronological order):
•
College of Physiotherapists of Ontario, Workplace Obligations for Physiotherapists, Jan.
2000; source: http://www.collegept.org.
•
Anderson, W. & J. M. Hartley, How To Protect Client Confidences In A Shared Office Space,
2003; source: http://www.wellslegaltech.com/SharedOffice.pdf.
•
Weston, William I. “Ethics Concerns in Shared Office Space,” GP Solo Magazine, Vol. 20,
No 5, July/Aug. 2003; available at www.americanbar.org/groups/gpsolo
•
Information and Privacy Commissioner of Ontario, Order HO-003, December 2006; source:
www.ipc.on.ca/images/findings/up-ho_003.pdf
•
College of Physiotherapists of Ontario, Record Keeping: Guide to the Standards for
Professional Practice, 2007, revised Jan. 2008; available at http://www.collegept.org.
•
BC Medical Association, et al, Principles for Protecting Patient Information in Physician
Practices, June 2009; available at http://www.oipc.bc.ca.
•
College of Physicians and Surgeons of British Columbia, Resource Manual: Medical Records
in Private Physicians’ Offices, Aug. 2010; available at https://www.cpsbc.ca.
Mr. Bryce would like to thank Jim Browne, Adrienne Mahaffey and Susan MacFarlane for
their helpful comments on earlier drafts of this Legal Commentary. Any errors or omissions are the
author’s alone.
G. K. Bryce – Legal Commentary on Restrictive Covenants in Shared Office Agreements