Breach of Restrictive Covenant: Termination Considerations

Summary

This practice note reviews whether employees' duties of good faith, fidelity and loyalty extend beyond the duration of the employment relationship and considers the interplay between such duties and the termination of the employee's employment. It reviews the distinction between fiduciary and non-fiduciary employees with respect to whether such duties continue as well as the effect of restrictive covenants. It also reviews the manner of termination and how that affects the continuation of a restrictive covenant: termination for just cause, repudiation/constructive dismissal, termination without cause and without adequate notice, termination without cause but with adequate notice, resignation by the employee, and termination as a result of a sale of the business. This practice note contains practical guidance.