In October 2021, the Government of Ontario ushered in several changes to the Employment Standards Act, 2000 (“ESA”), one of which was the prohibition of non-competition clauses1. Ontario was the first province in Canada to do so. While this news made headlines, it has become clear that the amendment simply codified the existing caselaw that interpreted such clauses strictly and narrowly. More importantly, the amendments left in place two exceptions, allowing non-competes for executives and in the context of the sale of a business. As set out below, employers are also still afforded the protection of confidentiality and non-solicitation provisions.
Background
Ontario’s prohibition against non-compete agreements is set out at Section 67.2(1) of the ESA and came into force on October 25, 2021, as part of the amendments included in the Working for Workers Act, 2021. The exceptions are set out at Sections 67(3) and (4).
The ESA defines a non-compete as “an agreement, or any part of an agreement, between an employer and an employee that prohibits the employee from engaging in business, work, occupation, profession, project, or other activity that is in competition with the employer’s business after the employment relationship between the employee and the employer ends.”
State of the Law Prior to the Amendments
Before the amendments to the ESA came into force, the legislature left it up to the Courts to determine the enforceability of non-competition agreements between employees and employers. This often resulted in employers suing departed employees and after years of expensive litigation, the case would be dismissed, often in favour of the employee.
