Ontario proposes ban on Non-compete clause

The Ontario government is proposing new legislation to ban non-compete clauses for employees. This would mark the first time non-compete clauses have been banned in Canada.

Labour Minister Monte McNaughton made the announcement, saying the ban is meant to make employment in Ontario more attractive to tech workers who commonly see such clauses in their employment contracts. He also added that such clauses are frequently used to intimidate employees and that such practices were increasingly being used on low-wage workers, as well.

WATCH: Employment lawyer Lior Samfiru explains non-competition clauses, in season 5 episode 23 of the Employment Law Show.

A non-compete agreement is an agreement between an employer and an employee that restricts an employee from engaging in any business, profession, work, project, or other activity that is in competition with the employer’s business after the employer-employee relationship has ended.

Non-compete clauses are typically used to prevent workers from seeking employment with competition after termination, sometimes for years after they’ve left their former employer. The practice has been seen as preventing low-wage workers from seeking better employment opportunities. Even with their widespread use, many non-compete clauses are not upheld when challenged in court in Ontario.

In the U.S, President Joe Biden recently issued an executive order asking the Federal Trade Commission to stop the use of the clauses, saying that they “may unfairly limit worker mobility.”

The ban on such clauses in California has been partly credited for allowing the tech sector to flourish there, and McNaughton’s hope is that it will do the same for Ontario’s tech sector.

The proposed changes would amend the Ontario Employment Standards Act (ESA), but would still allow companies to restrict former employees from sharing confidential information or intellectual property with competitors. It would also still allow the clause in some cases where businesses are sold and prevent ex-employees from seeking out business from clients of their former employers.

The changes are part of an omnibus bill to be introduced on Monday that will guarantee delivery workers access to washrooms, improve credential recognition for foreign (non-medical) workers, and bring changes to temp agencies to prevent exploitation of workers.

The proposed legislation will also make ‘right to disconnect’ policies mandatory for companies with 25 or more employees. The law seeks to make a clear distinction between work time and family time, helping employees by requiring policies on email response times and the use of out-of-office notifications when an employee is not working.