Non-Competition

Many employment contracts contain provisions restricting the ability of the employee to compete directly with an employer following the termination of the employment agreement.  The law has always been at least slightly uncertain in this area as courts have often had difficulty finding the appropriate balance between the right of an employee to earn a living and the right of an employer not to have the investment that they have made in an employee turned against them.

 

Recent caselaw suggests that there are circumstances where a non-competition agreement will be held up by the courts, and others where the agreement will be set aside.  The analysis is based on the details of the employment relationship in question and the nature of the non-competition agreement.

 

In determining whether an agreement is reasonable, the court will look for a legitimate business purpose for the agreement.  If a business can demonstrate real harm that could come from an employee competing against it, in the context of a well-drafted agreement, then the courts are likely to enforce.  However, where a blanket clause that thoughtlessly restricts all competition by a former employee is dropped into an employment agreement, then a court is likely to set that clause aside.

 

When advising clients on how their non-competition agreement should be drafted, the first question we ask is if there is an element to the business that actually requires this sort of protection.  If there is, the next step is to find out enough about the nature of the business so that we can craft an agreement that is as limited in scope as possible, while still protecting the business as strongly as possible.  This includes considerations on the length of time needed to restrict competition, as well as the realistic geographic protection that requires protection.

 

The worst type of non-competition agreement is one that has been cut and pasted from another agreement or one that isn’t hand-crafted for the employment relationship in question.  If it is worth it to you to add a non-competition clause to your employment agreement, then it is well worth it to talk to us about the right agreement for the job.

 

Please feel free to contact me by phone or at with any questions or comments.

 

-Scott R. Young

 

 

 

 

Tips when being cross-examined

Being examined as a witness is generally a traumatic experience for most. Not many people wake up in the morning and decide a nice grilling by a lawyer would make a great way to spend the day.

So, remember that if you are going to be examined as a witness in a court action, you are not the first. The butterflies and dry mouth are perfectly natural fear responses.

Our job (aside from winning the case) is to try to lessen the trauma for you. We will meet with you prior to your examination to review the documents and your recollections of the events that are at issue. If we expect the examination by the other lawyer may be particularly grueling, we may roll play for a portion of the meeting and ask you all sorts of provocative and nasty questions in the hopes of getting your blood boiling – just so that you can realize when really being examined not to take the bait.

Here are some basic tips on how to act when being cross-examined by another lawyer:
– dress professionally, as it really does help.
– ask for a glass of water when going into the witness stand at court or when at the reporters office for a discovery – it helps cure that dry mouth problem.
– wait for questions to be asked before responding and consider the answer that you want to give – a sip from the water glass will buy you a few more seconds.
– if you don’t know the answer to the question, say so or ask for the question to be clarified.
– If you know that there is a document that will help you with your memory in answering the question, refer to it and ask to see it.
– Be careful of the sentences that start “Wouldn’t you agree …”. Agreeing without thinking is usually is a bad thing when being cross-examined, so consider the question asked and answer it honestly and carefully.
– Answer the question, stop talking and wait for the lawyer to ask the next question
– Don’t ramble on. Sometimes lawyers will intentionally not ask another question and will just look at you. They are trying to goad you into talking more than you should.
– Do not ever fight with the lawyer who is asking you questions. You will rarely win that battle of wits. When you lose your cool, you’ve lost more than just that.
– Don’t use “uh-huh”, “nope” or “yup”. Those are not words. And avoid nodding or shaking your head, as there is a reporter present whose job is to type out what you say.
– If you get tired, ask for a break.

Paul H. Voorn

Codicils

I find that as my clients age, as their children grow up and leave the home, as their friends come and go and as the nature of their estate matures, they periodically want to change minor details in their Will, to reflect the new realities.  In fact, I highly recommend reviewing your Will every three years or so, to ensure that it meets your needs.  However, the changes that need to be made are often minor and it is reasonable to wonder whether it is worth the time and expense to make the change.

 

Historically, lawyers used a document known as a Codicil to make the changes as quickly and as inexpensively as possible.  A Codicil is a short legal document that amends only the portion of your Will that needs amending.  A Codicil can be drafted quickly by an experienced lawyer, on limited direction, and can then be executed and kept with your Will.  And as Wills were historically typed out in long form, they were by far the method of choice for making small changes to a Will.

 

While that all seems well and good, without exception, I always recommend AGAINST the amendment of a Will by way of Codicil.  Here’s why:

 

  • Codicils reflect small but important changes to a Will; if a Codicil is not executed properly, is not kept with the Will, is lost or contains a typo referencing an incorrect provision in the Will, it is worthless; and

  • Codicils that change gifting provisions are very indiscreet.  With the original gift readily apparent in the Will, a beneficiary who receives less by Codicil, or a jealous beneficiary who receives relatively less (or who is excluded outright) by Codicil, is much more likely to contest your Will, adding trouble and pain to your beneficiaries’ lives and adding the burden of significant legal fees to your estate.

 

So what’s the solution for someone who just wants to make a simple change in their Will?  Cut and paste.  Any Will that has been drafted in the past fifteen years should have been drafted on a computer.  While a lawyer’s requirement to maintain books and records doesn’t specifically mandate that an electronic copy of your Will be kept by your lawyer, in practice, this is almost always the case.

 

Changing a minor detail in your Will should be as easy as asking your lawyer to cut and paste a new clause into your Will and having it executed as a fresh document.  If you only have a hard copy of your Will and you move to a new lawyer, you can always ask that an electronic copy be forwarded to your new lawyer – it’s yours and you’ve already paid for it.

 

In practice, even minor changes to your Will can now be done quickly and cost effectively – and keeping all of your testamentary information in one document makes the administration of your affairs that much easier for your estate trustee.

 

If you have any questions about your estate planning needs, never hesitate to contact me by phone or at

 

– Scott Young

Why use our firm ?

16 1/2 years ago I started this law firm and from day one it has earned a reputation for being different from the average law firm.  I’m feeling nostalgic, so I’m taking up blog time to wax poetic about our firm philosophy and why we are a great law firm to use for your corporate/commercial needs.

On the litigation side of things I believe our firm is better than most because we always ask the question before starting “how will you collect this judgment”?  From our point of view there is no good reason to have our firm be the only one who benefits from a law suit – you must be able to collect.

The theme of “collecting the final judgment” drives the pace of our litigation as well – we do not take a slow, laid back approach.  Deadlines are met and enforced promptly and with professional courtesay; however, we always ensure that we are getting to Court as quickly as possible given the nature of the litigation.

On the paperwork side of the practice, we never recommend creation of documents or organizations that are not required and frequently find ourselves explaining to clients why their money would be wasted taking a step that they are suggesting.

At the end of the day, our firm is here to help make your business profitable and we can’t do that if we don’t have our eye on the bottom line.

16 1/2 years of experience, hourly rates that are reasonable and a dedication to our clients bottom line – this is why you should use our firm.

Inga B. Andriessen, Senior Lawyer

Do you need a Trade-mark Opinion?

I have trade-mark clients who range from the very small – startups who want to protect what little intellectual property they have, knowing it will one day be their greatest asset – to the very large – national and multinational corporations who protect all of their intellectual property as a matter of habit.  They both desire the same result – solid registration of a strong trade-mark – but they often have different ways of getting there.

Trade-mark registration is a long process, often lasting for two or three years, that begins with an idea about a proposed mark and ends with a certificate from the Canadian Intellectual Property Office, telling you that no one else is allowed to use your mark.  The decision as to when to bring your lawyer into that process is one that will determine how much you spend, when you spend it, and may ultimately determine your success or failure in the application.

With larger corporations, the mark usually comes from the marketing department; it’s a word or phrase that they’re going to use in the branding of one of their upcoming lines of products or services and they want to have the registration process started before the launch.  This is where the legal department or outside counsel steps in and advises them not to invest a significant sum of money into the campaign until they’ve had a chance to clear the mark.  The clearance they’re speaking of is the trade-mark opinion on registrability. 

In order to provide an opinion, a lawyer conducts extensive searches of government databases and a variety of public sources so that they may determine whether the desired mark (or something confusingly similar to the desired mark) is currently in use somewhere in the jurisdiction.  A lawyer reviews the search results and analyses them based on the statutory and common law criteria for confusion.  The lawyer will also generally make comments on registrability based on the sections of the Trade-marks Act that dictate what is and what is not allowed. 

As most searching is outsourced to expert agencies, a disbursement of between $400 and $700 is usually associated with the search.  Add to this your lawyer’s hourly rate multiplied by the two or three hours of their work involved and the opinion will cost somewhere between $1000 and $2000.  If your organization is considering spending significantly more than that on marketing, branding, packaging and other associated costs, then the cost of an opinion is an absolute necessity.  Although an opinion doesn’t guarantee registration, an opinion will give you a good idea of the likelihood of success.  Seeing clients spend tens of thousands of dollars to change out a failed brand name on a product line mid stream isn’t something I enjoy and I would caution any business to do the due diligence and get an opinion before such expenditure.

On the other hand, I often find that smaller businesses have already fallen in love with their proposed mark before they talk to me.  They often have the mark in mind before they have fully conceptualized the product or service that goes along with it.  They’ve done a Google search and a NUANS and they’re confident that the mark doesn’t infringe any existing mark.  Although I have to warn the client about the possibility of a failed registration, or worse yet, a passing off claim if they use a mark that someone else already claims, I have to admit that there is some economic sense in this approach. 

If your business is small, then the investment in the product or service line is bound to be (relatively) small as well.  If you can afford to find out a year or two down the road that your mark isn’t registrable, then it makes sense not to spend the money on the opinion and just to go ahead with the trade-mark application itself – especially when the application will likely run about $1500 to $2000 including fees and disbursements.  I would of course caution against letting the CIPO examiner be the first opinion you get on registrability, but the economics of the process do make that a reality sometimes.

So, as always, the answer depends on your resources and your business needs.  I’m always going to recommend the opinion, but I’m also going to understand that business people aren’t lawyers; business people are risk-takers – and sometimes an application without an opinion is a risk that makes sense.

Scott R. Young

The stages of a Regular Procedure Law Suit

For many companies, they have limited experience in a law suit and are overwhelmed with the unknown.  I am going to discuss over my next few blog entries the different types of law suits in Ontario and how their procedures differ.

This week’s entry is “Regular Procedure” – let me start off by saying there is nothing actually called the “Regular Procedure”; however, there is something called the Simplified Procedure which I”ll address another time.   Before the days of the Simplified Procedure there was just the one type of way to run a law suit and to have a point of reference I”m starting with it here.

Regular Procedure is available for all law suits that are claiming over $ 50 000.00.

A statement of  claim is issued and must be served within six months of being issued. 

Once served with a claim the defendant(s) must serve and file a defence within a specific period of time (20 or 40 days depending on where they are located).  This can be extended an automatic 10 days by filing a Notice of Intention to Defend or longer by agreement.

The plaintiff has the option to serve a Reply within 10 days of receipt of the Defence. 

The Statement of Claim, Statement of Defence and Reply are referred to as Pleadings. 

Once the Pleadings are exchanged, each party must serve an affidavit of documents which is a 3 schedule listing of all documents relevant to the issues in the litigation.

The next step is examinations for discovery – these are an opportunity for each party to ask a representative of the other party questions regarding their allegations under oath.  A transcript is formed from the examination and it can be used to impeach credibility at trial.

At any time during a law suit, but most frequently after discoveries, either party may bring a motion before the Court asking for an Order regarding a step in the proceedings.  The most commong motion after discoveries is to ask a Court to Order a party answer a question they refused to answer on discovery.

In certain cases there is mandatory mediation required – this is an off the record meeting with a neutral party who attempts to broker a settlement of the action.

All cases have a pre-trial after discoveries are concluded.  The pre-trial is an off the record meeting with a Judge who does not hear the trial of the action – the purpose of pre-trial is to narrow the issues and attempt to see if a settlement is possible.

If the matter does not settle at pre-trial, the final step is trial. 

The length of time all of the above takes depends on many factors, lawyer and client schedules as well as Court schedules.

In our firm the above generally takes between 1 1/2 and 4 years to complete, depending on the jurisdiction where the trial is heard.

Next blog from me will be about the Simplified Procedure.

Inga B. Andriessen

Incorporation – Scott promised he'd get to telling you about it ….

Incorporation

 In a recent blog entry I touched on the question of when to incorporate your small business.  I’d like to give that question a little more consideration here.

 I see the incorporation question as a two-part test where the bottom line is how incorporation affects your bottom line.  The first part of the test is the legal analysis of risk and reward and the second part is the budgetary analysis.  They both come down to the question of which form of business operation is going to save or make you the most money.

 Liability

  The primary legal benefit to incorporation is the limitation on liability that the corporation affords.  Barring improper or fraudulent conduct, the legal liability of the corporation, including debts to suppliers and others, is limited to the corporation itself.  This means that if there is a risk of exposure due to either the nature of your business or the marketplace, then incorporation may properly restrict the risk of failure to the business itself. 

 This doesn’t mean, however, that corporations are get-out-of-jail-free cards.  There are considerable penalties for those who use corporations to fraudulently convey funds or for those who act in bad faith and then try to hide behind the corporate veil.  If you do business with honour and integrity, bargain in good faith, and conduct your business as a prudent business owner, the liability limitation is there – but if you play with fire, you’re going to get burned.

 Accounting

 I will not get into the specifics of an accounting analysis of incorporation – that’s the role of a good accountant, and in some cases, a really good tax-specific lawyer.  But I always try to give my clients a list of things to talk about with their accountant so that they can do a real analysis of the possible advantages of incorporating.  Some of those things include:

  • Preferred tax rate
  • Small business deduction
  • Deductibility of professional fees (including incorporation)
  • Various industry-specific tax credits

 The Other Reasons

 In addition to the two-part test that covers most contingencies, there are sometimes other reasons for incorporating.  I’ve recently had a number of clients who needed to incorporate their business in order to qualify for government funding of a project; others who had an existing corporation in one jurisdiction and needed to move it (a “continuance”) to another in order to be eligible for federal licensing requirements.

 There are many compelling reasons to incorporate and every growing business will have to ask itself, when, not if, is the right time for us.  If you are asking that question, please contact me and we can see if you have crossed your threshold.

 Scott R. Young

"Coles Notes" on Constructions Liens

If you are a construction contractor or your business involves the supply of services or materials for construction projects, you likely have some knowledge of lien rights.

 

If you have a solid understanding of liening projects, you need read no further.

 

But if you have only a vague understanding of lien rights, then what is below will give you some more insight.

 

If you have not been paid on a project, you have the right to lien for the amounts that are owed to you.  However, you must do this within 45 days of the last date that you provided services or materials to the project or the date that substantial completion of the project was published in the Commercial Daily News, whichever date is earlier.  This is the general rule.  There are some tweaks to this, but this rule will cover most situations.

 

If you want to lien a project, we would search title for you to ensure that we place the lien on the correct property.  You would sign the lien documents and then we would register the lien on title.  By registering the lien documents on title, we have “preserved” your lien rights.  Don’t wait to the last minute to have us register a lien.  Title searching can be complex, especially for subdivision projects where lien rights may be expiring on a lot by lot basis.

 

We would place the owner of the property on notice of your lien, as well as the contractor and any mortgage company who has registered a charge against the property.  The lien will generally stop the flow of construction funds from the mortgage company to the owner.

 

If the lien does not result in you getting paid and us discharging the lien that we registered, then you have to “perfect” your lien.  This means that we have to start a court action no later than 90 days after the last date that you provided services or materials to the project or the date that substantial completion was published, whichever date is earlier.  Once again, this is the general (but not universal) rule.  Notice is put on title that an action was commenced, which then perfects the lien.

 

We then have two years to set the matter down for a trial and we begin to duke it out with the other lawyers.

 

Something else to remember – under the Construction Lien Act, an owner’s liability for the debt owed to you will be restricted to the amount of the holdbacks it has in hand and any portion of the contract not yet paid out to the party above you in the construction chain.

 

When it comes to lien matters, I always recommend that you do your best to ensure you have a strong position going in.  Ensure the contract is signed and all change orders are in writing and signed.  Keep stringent records of all phone calls.  Keep copies of all plans, emails, letters, payments, invoices and purchase orders – and of course, keep my number handy.

 

Paul H. Voorn

When to call a lawyer

Two weeks ago our Blog Entry dealt with when to use a law firm in Small Claims Court, but the question doesn’t just come up with matters that are $ 10 000.00 or less.

 

In the ordinary course of your business you may run into a situation where you would be better off (and spend less money on legal fees in the long run) if you called a lawyer, rather than dealing with the situation yourself.

 

A good general rule is that if you are contacted by a law firm representing someone other than your company, you should consult a lawyer. 

 

This rule applies to both positive and negative situations – if a lawyer contacts you regarding a client who is interested in entering into a trade relationship with you or if the lawyer represents a former employee seeking compensation.

 

No doubt you’re wondering why you should call if a positive event is happening, well, colour me pessimistic, but deals can go sour and while people enter into deals with the best of intentions, it is important to protect yourself, just in case things go wrong.  It is also much less expensive to have a lawyer review documentation before entering into a  transaction, rather than paying a litigation lawyer to fix the problems it after the fact.

 

With respect to calls or letters from lawyers threatening to sue you, this is very dangerous territory to handle without a lawyer: you likely do not know the law, nor what can be used against you as evidence: it is better to simply take a name and number and contact your lawyer to ensure you are protected.

 

A common situation that many employers believe they can handle on their own is termination of employees and this is simply not the case.  Employment law is changing regularly and your obligations to your employees may be different than you believe them to be.  A Wrongful Dismissal Law Suit that goes to the conclusion of trial will cost at least $ 15 000.00 in legal fees.  Obtaining legal advice prior to dismissal will usually be less than $ 1 000.00.  The savings on money and the headache of a law suit are worth consulting your lawyer.

 

Another common problem that many business owners have and sometimes don’t even realize they have is protecting their ability to take back product that is not paid for under a conditional sales agreement.  A lawyer can guide you through what your agreement must contain in order to be able to register it and take priority over any other creditors – an important consideration given the economy these days, you don’t want your goods going to your customer’s bank instead of back to you if they are not paid for.

 

So while the old joke claims that a  thousand lawyers at the bottom of the sea is a  “good start”,  before you put us there, you may want to consider how we can help you save money and protect the business you have worked hard to create.

 

Inga B. Andriessen

Estate Planning for Business Owners & Individual Pension Plans

 Individual Pension Plans

 

A few weeks ago I had an interesting lunch with Scott Plaskett, CFP of IRONSHIELD Financial Planning.  We were talking about some of the different kinds of estate planning work that we do for our respective clients – I draft wills and powers of attorney, establish trusts and offer advice on corporate divestment, and Scott works on the financial side of things.  During the conversation, Scott brought up something that I wasn’t familiar with – the Individual Pension Plan.

 

Scott explained that IPPs, introduced by legislation in 1991, worked similar to RRSPs in that they allowed for tax deferred accumulation of income, for the purpose of retirement planning; however, they differ in that they are characterized by greater flexibility and higher contribution limits than RRSPs.  IPPs must be tied to a sponsoring corporation, so they are a perfect fit for small business owners and professionals who work through personal corporations. 

 

I immediately thought of several of my clients who fit these criteria; business owners between the ages of 40 and 71 who typically max out their RRSP contributions.  IPPs offer considerably more than just tax deferral though.  When we sat down and looked at some of the case studies that his firm had worked on, the results were impressive:

  • Savings of thousands of dollars per year versus RRSPs
  • Tax deductibility of management fees
  • Generous past service buy-in allowances
  • Complete flexibility in contribution amounts
  • Tax preferred transferability of unused pension on death

 

The last item is of particular interest to small business owners who are interested in adding value to the corporate assets that they leave behind to loved ones.  Although my typical estate planning practice includes significant consideration for the succession planning of the corporation, in the past, the bulk of pension contributions were lost.  That doesn’t have to be the case anymore.

 

Clearly this is not your parents’ pension plan.  It’s a highly customizable financial vehicle that offers excellent savings for the right candidate.  Despite the fairly complicated process involved in setting the plan up, Scott will provide us with an illustration that will offer hard numbers  to reveal whether the plan is going to save the client money. 

 

I know that this is another great option that I’ll be keeping in mind when I do estate planning work for my business clients and something I’ll be recommending to a few of you in particular.  If you have any questions about your business and personal estate plan, contact me.  If IPPs fit into that plan, Scott Plaskett would be happy to assist in adding that part to the overall package.

 

Now my obligatory disclaimer – Scott Plaskett and Ironshield Financial Planning are not related to Andriessen & Associates in any way and the comments above are not meant to endorse any particular product or service.  That said, if you think that the product or service may be right for you, I encourage you to seek out the professional of your choosing to get more information.

 

Scott R. Young