By Greg Prekupec, Farai Munyurwa, Mercedes Parsons and Javeria Baig

Introduction

Restrictive covenants – such as non-competition and non-solicitation clauses – can be important tools in employment and business contracts protecting business and employer interests. However, they must balance reasonable protection of the business with the individual’s right to work.  In One World Logistics Group Corp. v Sotiri, the Ontario Superior Court of Justice considered whether to grant interim injunctive relief to enforce a 5-year non-competition and non-solicitation clause.

The Facts

In January 2025, the defendant, Mr. Sotiri, sold his shares in his transportation business to One World Logistics Group Corp. (“One World”). The Share Purchase Agreement contained a non-competition and non-solicitation clause. Mr. Sotiri continued working for the business as an employee and signed a confidentiality agreement, but was terminated 4 months later. Following his termination, Mr. Sotiri started an import/export business where he plans to buy and sell used vehicles. One World alleged that Mr. Sotiri breached the non-competition and non-solicit covenants and the duty of confidentiality. One World sought interim injunctive relief to restrict Mr. Sotiri’s from competing pending completion of an injunction motion.

The Decision

The Court declined to enforce the non-competition and non-solicitation covenant at this interim stage, emphasizing several key issues:

• Overly Broad: The covenant spans 5 years, applies in both Ontario and New York, and covers a very wide scope of activities, which could severely restrict Mr. Sotiri’s livelihood.
• Doubts on Enforceability: Justice Papageorgiou noted there would likely be “good arguments” against the covenant’s enforceability given the duration, scope, and geographic area of restriction.
• Compensable In Damages: It was unclear how the allegedly competitive activities would not be compensable in damages.
• Economic Hardship: Sotiri is 65-year-old and unemployed. Additionally, $70,000 of the $100,000 he was to be paid per the Share Purchase Agreement was held back. After considering this, the Court was not prepared to restrict his ability to earn a living for the next two months until the injunction motion hearing.

Why This Matters for Our Clients

At Dipchand LLP, many of our clients regard restrictive covenants, especially non-competition and non-solicitation clauses, as critical tools for protecting the value of a business post-sale or during sensitive transitions. However, this case shows that overly broad and lengthy restrictions may not suffice in court.

This case stands in interesting contrast to the Ontario Court of Appeal’s decision in Dr. C. Sims Dentistry v Cooke, where a 5 year non-competition clause in a Share Purchase Agreement was upheld. The key distinction here? In Sims, the parties had ongoing employment for over two years post-sale, the clause was geographically limited (15 kilometers), and the Court found the clause to be reasonable and proportionate, emphasizing that both sides had equal bargaining power and legal representation.

Moving Forward: Transition Periods & Enforceability

For Dipchand LLP’s clients, these two cases together underscore a critical point: context matters. While courts are willing to uphold restrictive covenants that are narrowly drafted and clearly tied to protecting legitimate business interests, they will often push back when the clause is:

• Overly broad in scope or duration
• Detached from legitimate business needs
• Imposed without due consideration for post-employment realities

This is especially important during transition periods. For example, when a seller continues to work for the business post-sale, it’s crucial to anticipate what might happen if the relationship ends prematurely. A clause that looks reasonable at signing can feel oppressive later if the employment doesn’t last or if the seller is left without a means to earn a living.

Bottom Line

Restrictive covenants must be tailored very specifically. At Dipchand LLP, we help our clients strike the right balance by protecting the goodwill of the business without drafting clauses that are destined to be unenforceable.