Are non-compete clauses in management agreements enforceable?

In a recent case, a condo corporation terminated its management agreement with a management firm and decided to move to a new firm, taking the on-site manager with them. However, the management agreement contained a non-compete clause that prohibited the corporation from entering into a new agreement involving a former employee of the management firm for one year after termination. Despite warnings, the corporation continued to employ the same manager under the new management firm, leading to a breach of the non-compete clause. The former management firm sued for damages, and the court ruled in favor of the management firm, awarding the revenue lost from both the condo corporation in question and its sister corporation managed by the same manager. The court upheld the enforceability of the non-compete clause, emphasizing its purpose to prevent clients from taking property managers and managers from taking clients to a new firm. However, it should be noted that new legislation in Ontario prohibits non-compete agreements in employment contracts, but it may not cover all forms of non-compete clauses. Condo corporations should carefully review their management agreements, including non-compete clauses, with legal counsel before termination to avoid potential legal issues.