Non-Compete Clauses in Ontario: What You Need to Know

The 2021 Landmark Change

On October 25, 2021, Ontario's Working for Workers Act, 2021 made Ontario the first province in Canada to largely ban non-compete agreements in employment contracts. This was a significant shift in employment law, designed to increase worker mobility and allow employees to freely use their skills and knowledge after leaving an employer.

What the Law Says

Section 67.2 of the Employment Standards Act, 2000 (ESA) now provides that employers shall not enter into an employment contract with an employee that is, or that contains, a non-compete agreement. A "non-compete agreement" is defined as an agreement that prohibits the employee from engaging in any business, work, occupation, profession, project or other activity that is in competition with the employer's business after the employment relationship ends.

The Two Exceptions

Exception 1 — Executives: The ban does not apply to "executives" — defined as the CEO, president, COO, CFO, CIO, chief legal officer, chief human resources officer, or any other chief executive position. For these individuals, non-competes can still be included in employment agreements.

Exception 2 — Business Sale: The ban does not apply to a non-compete agreement entered into in connection with the sale of a business or the sale of the person's interest in a business. Non-competes in business sale contexts remain fully enforceable if they are otherwise reasonable.

Non-Solicitation Clauses: Still Enforceable

Non-solicitation clauses — which restrict you from soliciting clients, customers, or employees after leaving — are not banned by the 2021 amendments. They remain enforceable if they are reasonable in scope, duration, and geographic coverage.

What If Your Contract Has a Non-Compete?

If your employment contract contains a non-compete clause (and you are not an executive), the clause is void and unenforceable. Your former employer cannot take legal action to enforce it. However, a non-solicitation clause in the same contract may still be valid. If your employer is threatening legal action, consult an employment lawyer.