Ontario Government Passes Bill Prohibiting Non-Compete Agreements For Employees

On November 30, 2021, the Ontario government passed Bill 27, Working for Workers Act, 2021 (the Act), which introduces, among other things, a prohibition on the use of non-compete agreements for employees and a requirement for certain employers to have a “disconnecting from work” policy.

The Act amends Ontario’s Employment Standards Act to prohibit employers from entering into “an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement”, as previously reported by the E-TIPS® Newsletter here.  Any non-compete agreements entered into after October 25, 2021 are now considered void.

A non-compete agreement is defined as “an agreement, or any part of an agreement, between an employer and an employee 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 between the employee and the employer ends.” 

The Act provides for the following two exceptions to the prohibition:

1. The prohibition does not apply to executive employees, which are defined as “any person who holds the office of chief executive officer, president, chief administrative officer, chief operating officer, chief financial officer, chief information officer, chief legal officer, chief human resources officer or chief corporate development officer, or holds any other chief executive position.”
2. There is an exception where the purchaser and seller of a business or part of a business (including a lease) enter into a non-compete agreement, and the seller becomes an employee of the purchaser immediately after the sale.

The Act also requires all employers with 25 or more employees to develop a written policy with respect to disconnecting from work, which is defined as “not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work.”

With the passing of the Act, Ontario becomes the first province to prohibit non-compete agreements and establish the requirement for a “disconnecting from work” policy.

Summary By: Michelle Noonan