A non-compete clause in Ontario is a provision in an employment contract designed to prevent an employee from working for a competitor, or starting a competing business, in the same industry after their employment ends.
However, under the Ontario Employment Standards Act (ESA), non-compete clauses are illegal and void for the vast majority of employees. If your employer is pressuring you to sign a non-compete agreement, or threatening legal action after you resign, it is critical to understand that their contract is likely unenforceable under Ontario law.
On This Page:
- 1. Is a Non-Compete Clause Legal in Ontario?
- 2. Non-Compete & Independent Contractors
- 3. Non-Compete vs. Non-Solicitation
- 4. Can My Employer Force a Non-Compete?
- 5. Review Your Contract
Is a Non-Compete Clause Legal in Ontario?
No. For the vast majority of employees, non-compete clauses are completely illegal and unenforceable in Ontario.
In late 2021, Ontario passed the Working for Workers Act, which amended the ESA to explicitly prohibit employers from including non-compete agreements in employment contracts.
If you entered into an employment contract after October 25, 2021, any non-compete clause inside it is legally void, with only two strict exceptions.
The Two Legal Exceptions to the Ban
An employer can only legally enforce a non-compete clause in Ontario if you fall into one of these two categories:
- C-Suite Executives: The ban does not apply to executives who hold positions such as Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), or President.
- Sale of a Business: If you are the owner of a business, sell it, and then immediately become an employee of the buyer, the buyer can include a non-compete clause to prevent you from immediately opening a rival shop across the street.
Non-Compete Clauses & Independent Contractors
Employers constantly search for loopholes, which leads many to ask: Does the non-compete ban apply to independent contractors?
The ESA ban technically applies to “employees.” To get around this, companies will frequently misclassify their workers as “independent contractors” so they can force them to sign restrictive non-compete agreements.
This is a common legal myth. Just because your contract labels you an independent contractor does not mean you are one in the eyes of the law. If your employer controls your schedule, provides your tools, and dictates how you do your work, you are likely a dependent contractor or an employee. If so, your non-compete clause is still completely illegal.
Non-Compete vs. Non-Solicitation Clauses
While employers can’t stop you from working for a competitor, they are still allowed to protect their client lists and staff. They do this using a Non-Solicitation Clause, which is entirely legal in Ontario.
It is crucial to understand the difference before you transition to a new job:
| Legal Provision | What It Means | Is It Legal in Ontario? |
|---|---|---|
| Non-Compete Clause | Prevents you from working for a competing business or in the same industry. | ❌ Illegal (Except for C-Suite & business sales). |
| Non-Solicitation Clause | Prevents you from poaching your former employer’s clients, vendors, or coworkers. | ✅ Legal (If reasonable in time and scope). |
| Confidentiality Clause | Prevents you from sharing trade secrets or proprietary company data with your new employer. | ✅ Legal (Standard in most contracts). |
What Happens if My Employer Forces a Non-Compete?
If your employer includes an illegal non-compete clause in your contract, the clause itself is void, but the rest of your employment contract may still be valid. However, employers frequently cross the line when trying to enforce them.
You have grounds for a Wrongful Dismissal claim in Ontario if your employer does any of the following:
- Fires you for refusing to sign a new contract containing an illegal non-compete clause.
- Withholds your severance pay until you agree to sign a release featuring a non-compete restriction.
- Threatens your new employer with a lawsuit, causing you to lose your new job opportunity.
Review Your Contract with an Ontario Employment Lawyer
If you are transitioning to a new job and are worried about a non-compete clause, or if you have been fired and handed a restrictive severance package, do not face your employer alone.
The employment lawyers in Ontario at Samfiru Tumarkin LLP have successfully invalidated thousands of restrictive corporate contracts across Ontario. We can review your employment agreement, expose illegal clauses, and protect your right to earn a living in your chosen field.