Ibolya Entered into an Employment Contract with a Toronto Advertising

question 108

Multiple Choice

Ibolya entered into an employment contract with a Toronto advertising firm, VertaNet Ltd. The agreement included a non-competition clause that prevented her from participating in the advertising field in Toronto for five years after termination of her employment. In the event of abreach, the contract provided that Ibolya would have to pay VertaNet the sum of $500,000 as liquidated damages. Ibolya worked for VertaNet for a period of time, then took another job in Vancouver where she worked for four and half years. Six months before the expiry of the five-year period in her VertaNet contract, Ibolya returned to Toronto to take a part-time position as a small advertising firm. Although VertaNet did not suffer any damage, VertaNet sued Ibolya claiming $500,000. What is the likely outcome?

• A) Although the amount claimed is unconscionable, the clause will be enforced as it is writing.
• B) Unless the $500,000 had been prepaid, Ibolya has no good defence.
• C) Liquidated damages clauses are illegal and therefore void.
• D) The non-competition clause is likely a penalty and therefore unenforceable.
• E) Non-competition clauses generally are void as not being in the public interest.

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Definitions:

Payroll Taxes

Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff.

Liabilities

Financial obligations or debts that a business needs to settle in the future as a result of past transactions or events.

Accounting Period

A specific period of time used for financial reporting purposes, typically a fiscal year or quarter.

Wage and Tax Statement

A document provided by employers to employees detailing the employee's earnings and taxes withheld during the year; commonly referred to as a W-2 form.