When a Sales Director Left and Took the Client List With Him

The situation

Marco and Antonio co-owned a franchisee corporation based in Chatham, operating in the southwest Ontario corridor with annual revenue somewhere between $5 million and $20 million. Marco managed operations and the office; Antonio, a professional engineer by training, ran the technical side of the business and signed off on every project specification before it went to a client. Between them they had built a company that depended, more than either liked to admit, on relationships — long-standing accounts that had been serviced by the same person for years.

That person was Winston, their sales director. Winston had been with the company for a little over six years. He managed roughly forty active accounts, knew which contacts wanted a phone call and which wanted an email, and carried, in a spreadsheet he had built himself, contact names, pricing history, renewal dates and margin notes for every client the company served. On a Friday afternoon in late spring, Winston resigned effective immediately, citing a better opportunity. Two weeks later, Marco started getting calls from clients asking why Winston, now working for a competitor, was reaching out to them directly with pricing that undercut the company's own renewal quotes.

What the review found

Marco and Antonio came to Treadstone Law wanting to know two things: could they stop Winston from contacting their clients, and could they recover anything for what looked like a calculated, planned departure. The answers turned out to be more nuanced than either owner expected, and getting them right meant understanding what Ontario employment law actually protects — which is narrower than most employers assume. Their first instinct was to point to the eighteen-month non-competition clause in Winston's contract and assume it settled the matter. Understanding why it didn't became the real starting point of the file, and it shaped everything the letter and the negotiation that followed were built around.

Winston's employment contract, signed six years earlier, contained a confidentiality clause and a broad non-competition clause barring him from working for a competitor anywhere in Ontario for eighteen months after leaving. It did not contain a specific non-solicitation clause naming clients by category. Under the Employment Standards Act, 2000, non-competition clauses are generally unenforceable against most employees in Ontario, with narrow exceptions for senior executives and for agreements made in connection with the sale of a business. Winston was a director in title but not an owner, officer or shareholder of the company, and the sale exception plainly did not apply. That made the eighteen-month non-compete very likely unenforceable — a real problem, since it was the clause the owners had been counting on.

What remained were two separate legal footholds, and they mattered more than the contract's headline clause. First, the confidentiality obligation: the client list itself, with its pricing history and renewal timing, was confidential business information, and using it to target the company's own accounts could support a breach of confidence claim regardless of what any non-compete said. Second, a duty that exists independent of any written contract — every employee owes a duty of good faith during their employment, and a senior employee who plans a competing move while still drawing a salary, quietly exporting client data before resigning, can be found to have breached that duty even without a formal non-solicitation clause. The evidence mattered here: the company's IT records showed the client spreadsheet had been emailed to a personal address eleven days before Winston resigned.

What we did

1. Assessed the real exposure before sending anything. We reviewed Winston's contract, the IT export logs and the client contact history to separate what was provable from what was suspected. The eleven-day-old email export was the single strongest piece of evidence in the file, and it anchored everything that followed.
2. Sent a formal letter addressing the confidentiality breach specifically, not the unenforceable non-compete. Leading with a covenant a court was likely to strike down would have weakened the company's position. Instead, the letter focused on the export of confidential client data and its apparent use to solicit specific named accounts, with a demand that Winston stop contacting those accounts and confirm the data had not been shared further.
3. Quantified the accounts actually at risk. Of the roughly forty accounts Winston had managed, we worked with Marco and Antonio to identify which ones had already been contacted or had shown signs of moving their business, rather than treating the whole client base as equally exposed. That shorter, evidenced list became the basis for negotiation.
4. Opened settlement discussions through Winston's new employer's counsel. A competitor that has just hired someone has its own interest in avoiding a costly claim tied to its new sales director. That gave both sides a reason to resolve the dispute without litigation, which would have taken well over a year to reach trial and cost far more than what was actually in dispute.
5. Negotiated a written settlement rather than pursuing the case in court. The company's realistic recovery through litigation — after accounting for the time, cost and uncertainty of proving damages tied to a handful of contracts — was smaller than either owner initially expected. A negotiated resolution captured most of the practical value without the multi-year timeline.

The outcome

The settlement, reached about four months after the resignation, was a genuine compromise rather than a clean win. Winston agreed to stop contacting eight specifically named accounts he had already approached, and to a one-year restriction on soliciting the company's active clients generally — a narrower, more defensible commitment than the original eighteen-month non-compete, negotiated as a settlement term rather than relying on the old contract clause. He also paid the company an amount in the low tens of thousands of dollars, reflecting a portion of the margin the company estimated it had lost on the accounts he had already moved, though not the full value the owners had originally hoped to recover.

In exchange, the company agreed not to pursue further legal action and not to contest Winston's new employment more broadly. Of the eight named accounts, three had already switched to the competitor by the time the settlement closed and did not come back — that business was gone regardless of what the settlement said. The other five stayed with the company. Marco and Antonio came out of it with roughly two-thirds of the at-risk revenue retained, a monetary payment that covered a meaningful slice of what they'd lost, and — more valuable going forward — a clear picture of how exposed their client relationships had been to a single departing employee.

What you can learn from this