Leaving a business relationship does not always end the contractual restrictions on working nearby. Non-competition disputes can turn on the worker’s legal status, the wording of the agreement, and evidence of harm to customer relationships. Where the parties operate in different provinces, the location of the dispute may become another contested issue.
In FYi Eye Care Services and Products Inc v. Steller, the Alberta Court of King’s Bench granted an injunction preventing an optometrist from practicing within five kilometres of his former clinic for 12 months following termination. Although the clinics were in Ontario, the agreement selected Alberta law and Alberta courts for injunctive relief. The decision examines issues that overlap with employment law, independent contractor relationships, and commercial contracts.
An Optometrist Moves to a Nearby Competitor
The clinic operator provided facilities, equipment, and staff, and controlled the retail sales component of the business. The optometrist treated patients and paid the operator a percentage of patient billings. Their relationship was governed by an Administrative Services and Licence Agreement.
The agreement prohibited the optometrist from practicing optometry within a five-kilometre radius of the practice location for 12 months after termination. After ending the relationship, he began working at a competing clinic approximately 600 metres from his most recent practice location. He also worked part-time at another clinic outside the restricted area.
The operator sought an injunction enforcing the restriction. The optometrist challenged Alberta’s jurisdiction and the enforceability of the covenant, including whether Ontario’s statutory prohibition on certain employee non-compete agreements applied.
Why an Ontario Dispute Was Heard in Alberta
The agreement provided for Alberta law and arbitration under Alberta’s Arbitration Act. It separately assigned applications for injunctive and other urgent non-monetary relief to Alberta courts. These dispute resolution provisions illustrate how business and corporate law arrangements can shape proceedings after a relationship ends.
The Court found the forum selection clause clear and enforceable. Both parties were sophisticated, and there was no credible suggestion of duress or a power imbalance undermining the clause. The optometrist did not establish sufficient reasons to displace the parties’ choice. The Court also rejected the argument that Ontario was a more appropriate forum for the application.
Separately, the Court found that the optometrist had submitted to Alberta’s jurisdiction by responding to the substance of the injunction application, despite describing his participation as conditional. The Court expressed concern about the procedural rule but applied the existing Alberta law. The decision distinguishes a party’s stated intention to preserve a jurisdictional objection from the legal effect of participating on the merits.
Independent Contractor Status Defeats the Statutory Argument
The optometrist argued that enforcing the forum selection clause would conflict with Ontario’s Employment Standards Act, 2000, which prohibits certain non-compete agreements between employers and employees. That argument depended on whether he was an employee within the legislation.
The Court found that he was an independent contractor. The financial arrangement involved the optometrist paying the operator for clinic services from his patient billings, rather than receiving wages. The agreement and his own communications described him as independent. Ontario’s professional regulatory framework also reinforced that conclusion. The Court therefore found that he could not rely on the statutory prohibition.
This finding concerned the particular relationship and regulatory setting. It does not establish that an independent contractor label determines status in every case. The Court referred to factors including control, financial risk, investment responsibilities, and opportunity for profit. Classification and contractual wording can affect disputes involving both service arrangements and employment agreements.
Contractor Status Did Not Lower the Injunction Threshold
An interlocutory injunction generally requires a serious issue to be tried, irreparable harm, and a balance of convenience favouring relief. In employment non-compete cases, the first requirement is elevated to a strong prima facie case. The operator argued that the lower threshold applied because the optometrist was an independent contractor.
The Court rejected that position. The relationship did not involve a sale of a business in which the purchaser had paid for goodwill and a corresponding non-compete covenant. Instead, the restriction limited the optometrist’s ability to practise his profession, raising restraint of trade concerns comparable to those arising in employment. The Court applied the higher threshold.
The distinction mattered: being outside the Ontario statutory prohibition did not automatically establish that the covenant was enforceable. The operator still had to demonstrate a strong prima facie case supporting enforcement in the circumstances.
Why the Five-Kilometre Restriction Passed Scrutiny
The Court considered whether the covenant was clear and whether its geographic and temporal limits were reasonable. The optometrist argued that the practice location was uncertain because he had transferred between clinics without a formal amendment to the original agreement. The Court found that a signed change-of-status document recorded the amendment. His new clinic was also within five kilometres of both former locations.
The Court found the geographic restriction reasonable given the surrounding market and the operator’s business interests. The operator received both a share of patient billings and revenue from eyewear sales, largely to the optometrist’s patients. Competition from a nearby clinic could therefore affect both revenue streams. The optometrist’s existing work outside the restricted area also demonstrated opportunities elsewhere.
The 12-month duration was reasonable as well. Considering the parties’ circumstances and the public interest, the Court found a strong prima facie case that the covenant was enforceable. These conclusions were specific to the agreement and evidence, rather than approval of every restriction using the same distance or duration.
Lost Referrals Supported a Finding of Irreparable Harm
At least 25 patients had followed the optometrist to the competing clinic. Although some patient migration might be measurable, the Court found that lost referrals and their future revenue effects could not be reliably quantified. That potential loss of market share and referrals supported a finding of irreparable harm.
The balance of convenience also favoured the operator. The optometrist already practised outside the restricted area, and the evidence indicated other opportunities in the broader market. There was no evidence that restricting one optometrist locally would impair public access to eye care. This fact-specific assessment formed part of the commercial litigation analysis.
The Result: A Local Restriction Measured From Termination
The Court prohibited the optometrist from practicing within five kilometres of his most recent clinic for 12 months commencing on termination. It did not impose a fresh 12-month period from the decision date. Any damages determination remained subject to the agreement’s arbitration process.
The decision demonstrates how worker classification, forum selection, covenant wording, and evidence of business harm can interact in a non-compete dispute. Independent contractor status resolved the statutory argument, while the restriction on professional practice still attracted the higher injunction threshold.
Contact DBH Law’s Calgary Employment Lawyers About Non-Compete Disputes
DBH Law assists employers and employees with employment agreements and workplace disputes in Calgary and across Alberta. Its employment and commercial litigation lawyers can assess restrictive covenants, contractor agreements, and disputes arising when a working relationship ends. To discuss a non-compete clause or other commercial or employment law matter, contact DBH Law online or call 403-252-9937.