Executive Summary: Key Legal and Evidentiary Issues

• Restrictive covenant interpretation hinged on whether to apply employment contract standards or commercial transaction standards based on the shareholders' role in company management.
• The three-year non-compete clause covering all New Brunswick and eastern Quebec territory was found unreasonably broad, effectively preventing the engineers from practicing their profession.
• Sweeping restrictive language ("directly or indirectly," "any action") combined with geographic and temporal scope eliminated viable employment alternatives in the field.
• Plaintiffs failed to establish causality between the $706,499.94 in claimed damages and the defendants' departure or any breach of the restrictive covenant.
• Intentional interference claim was rejected because Louis Ruest initiated contact with the competitor and no unlawful means were employed.
• Defendants' counterclaim for severance pay failed because they voluntarily resigned rather than being terminated.

Groupe Roy Consultants ltée v. Ruest: Restrictive covenant enforceability in employment context

The parties and dispute

Groupe Roy Consultants Ltée, an engineering consulting firm operating throughout New Brunswick and eastern Quebec, sued two former key employees—Louis Ruest and Alain Carrier—and their new employer, Crandall Engineering Ltd. (a subsidiary of Englobe Corp.), for $706,499.94. The plaintiffs claimed breach of a three-year non-competition clause in the Unanimous Shareholders' Agreement and intentional interference with contractual relations after both men resigned in May 2019 to work for the competitor.

Factual background

Ruest and Carrier began employment with Roy Consultants in 2009 as civil and electrical engineers respectively, working primarily from the Edmundston office. Five years later, in November 2014, they each purchased shares in the holding company and signed the existing shareholders' agreement. Ruest eventually became regional director of the Edmundston office, and both were considered key employees controlling daily operations. Crucially, neither ever held board positions or senior management roles. In May 2019, after Ruest contacted former colleague Mike Cormier at Englobe, both men resigned with notice effective June 21, 2019, sold their shares, and commenced employment with Crandall Engineering on June 24, 2019. The departure triggered the resignation of four additional Edmundston staff members.

The restrictive covenant clause

Clause 18 of the Unanimous Shareholders' Agreement imposed a three-year non-competition obligation across "all territory served by the company and/or the affiliated company" (New Brunswick and eastern Quebec). The clause used broad language prohibiting direct or indirect business competition, assistance to competitors, client solicitation, and "any action of a nature to make competition." It also contained non-solicitation provisions.

The court's analysis

Justice Danie Roy held that the restrictive covenant must be interpreted as an employment-related clause rather than a commercial transaction provision. Although Ruest and Carrier had become shareholders, they adhered to a pre-existing agreement, never held decision-making authority (the board, not shareholders, made the property acquisition decision), and their share purchases were intimately tied to their employment. Employment-related restrictive covenants receive stricter scrutiny to protect employees from employer-employee power imbalances.

The judge found the clause unreasonably broad on multiple dimensions. The three-year duration combined with geographic scope covering the entire province and eastern Quebec, paired with sweeping restrictive language ("directly or indirectly," "any action"), effectively prohibited Ruest and Carrier from practicing engineering in the relevant region. This eliminated viable employment alternatives and unreasonably restricted their ability to earn a living—a critical factor for reasonableness in employment contexts. The plaintiffs' reliance on Ensign Drilling, which upheld a multi-province restriction in a business sale context involving sophisticated negotiation between represented parties, was distinguishable.

The court also rejected the damages claim, finding the plaintiffs had failed to establish any causal link between the alleged losses and the defendants' conduct. Financial fluctuations at the Edmundston office between 2015 and 2022 did not clearly connect to the May 2019 departures, and the property investment decision preceded the resignations. The intentional interference claim also failed because Ruest had initiated the contact with Englobe, and no unlawful means were employed.

Outcome

Justice Roy granted summary judgment in favor of the defendants, finding the non-competition clause unenforceable as unreasonable. The plaintiffs' claim for $706,499.94 was entirely dismissed. Additionally, the court dismissed the defendants' counterclaim for severance pay because they had voluntarily resigned rather than been terminated. The defendants were awarded costs of $3,000 payable immediately by the plaintiffs.