08 Mar Are non-compete clauses outlawed in Canada?
If you are an employee who has been given a non-compete clause with your Employment Agreement, it may no longer be enforceable. Employers are no longer permitted to issue non-compete agreements to their employees in Ontario. The province is the first in Canada to implement this ban, which came into effect on December 2, 2021.
What is a non-compete agreement? It is a document, that once signed by the employee, guarantees that they will not work for a competing business once their employment relationship ends. An employer would issue this document to protect information or skills that could be beneficial to their competitors.
Bill 27, the Working for Workers Act, recently passed with the intention of creating a better work life for employees in Ontario. Because of the limitations the non-compete clause enabled, removing this non-compete clause could mean more global hires and more opportunities for employees to experience growth in their industry. Overall, it could create more possibilities for employees.
There is an exception where non-compete agreements are still acceptable. For these clauses to be justifiable, they must be used in cases where one company is being purchased by another. The clause would assure that the purchased company would not develop a new business that would come into competition with their purchaser.
For this agreement to be reasonable in a court of law, three steps need to occur: there needs to be a sale, an agreement that the seller will not create a new business in direct competition with the buyer, and that the seller is now employed by the buyer.
Further, this new rule does not affect employees like airline workers, broadcasters, mail services etc. that are employed or regulated by the federal government. It also does not apply to gig workers – those that work for online apps like Uber, independent contractors, temporary workers etc. who work for short periods and have high client turnover. Finally, this new role does not apply to executive positions.
If you currently have a non-compete agreement and need advice on whether it is enforceable, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.