Non-Competition Agreements — Ontario Employment Law
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About Non-Competition Agreements
In Ontario, the legal landscape surrounding non-competition agreements underwent a massive transformation with the passing of the Working for Workers Act, 2021. This legislation amended the Employment Standards Act, 2000 (ESA) to officially ban employers from entering into non-competition agreements with most employees on or after October 25, 2021. A non-competition agreement is a restrictive document or provision that attempts to prevent a worker from engaging in a business, work, or occupation that directly competes with their former employer after their employment ends.
Despite this general prohibition, non-competition agreements are not entirely extinct in Ontario. There are two major exceptions under the ESA. First, an employer can still enter into a non-competition agreement with an employee who holds an executive position, such as a President, Chief Executive Officer, or Chief Financial Officer. Second, these agreements remain valid in the context of the sale of a business. If a business owner sells their enterprise and becomes an employee of the purchaser, a non-competition agreement can be used to protect the buyer's newly acquired investment.
For agreements that fall into these exceptions, or for older agreements signed before the October 2021 cut-off, Ontario courts evaluate their enforceability under strict common law principles. Historically, judges view these agreements as a restraint of trade that limits employee mobility. To be enforced, an employer must prove that the agreement is absolutely necessary to protect a legitimate proprietary interest (like trade secrets) and that a less restrictive measure, such as a non-solicitation agreement, would not suffice. Furthermore, the agreement must be reasonable in its geographic scope, the length of time it lasts, and the specific activities it prohibits. If a court finds an agreement is too broad, it will not rewrite it to be lawful; instead, the entire agreement will be struck down.
Because the enforceability of these restrictive covenants hinges on precise wording, the worker's exact role, and the date the document was signed, standard generalizations rarely apply. Assessing whether you are legally bound by a non-competition agreement requires a careful examination of your specific circumstances by a qualified legal professional.
Frequently Asked Questions
Are non-competition agreements legal in Ontario?
For most employees, no. The Employment Standards Act (ESA) bans employers from entering into non-competition agreements on or after October 25, 2021. However, exceptions exist for specific executive roles (like a CEO or President) and in situations involving the sale of a business.
What happens if I signed a non-competition agreement before October 2021?
Agreements signed before the statutory ban are not automatically void, but they are subject to strict scrutiny under common law. A court will only enforce the agreement if its time limits, geographic radius, and restricted activities are proven entirely reasonable and necessary to protect the employer's business.
Who qualifies as an executive under the ESA exception?
The ESA defines an executive 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.
Will a judge fix a non-competition agreement if the geographic area is too large?
No. Ontario courts generally do not fix or rewrite overly broad restrictive covenants, a practice known as 'blue-pencilling'. If a non-competition agreement is found to be unreasonably broad in time or geography, the judge will typically render the entire agreement unenforceable.
Can my employer use a non-solicitation agreement instead?
Yes. While non-competition agreements prevent you from working in the same industry, non-solicitation agreements merely prevent you from poaching your former employer's clients or staff. Non-solicitation agreements are not banned by the ESA and are much more easily enforced by Ontario courts.
When should I consult an employment lawyer about a non-compete?
You should seek legal counsel before signing any contract containing a non-compete, or immediately if a former employer sends a cease-and-desist letter or threatens an interlocutory injunction to stop you from starting a new job.
Common Scenarios
- A graphic designer signs a new employment contract in 2024 that includes a non-competition agreement; because the designer is not a chief executive, the agreement is statutorily void under the Employment Standards Act.
- A senior dentist sells their successful practice to an incoming buyer and signs an agreement promising not to open a competing clinic within a 15-kilometre radius for three years, which an Ontario court upholds to protect the buyer's goodwill.
- A Chief Operating Officer departs a logistics company to join a direct competitor in the same city; because the COO falls under the executive exception, their former employer seeks an interim injunction to enforce the 12-month non-competition agreement they signed.
- A salesperson who signed a non-competition agreement in 2019 is restricted from working in the software industry anywhere in North America; a court strikes down the agreement entirely because the geographic scope is far too broad to be reasonable.
What You Should Know
- Check the exact date you signed the document; if you are an ordinary employee who entered into a non-competition agreement on or after October 25, 2021, the restriction is legally void in Ontario.
- Do not assume your job title automatically protects you; if you hold a title similar to a 'chief executive,' contact an employment lawyer to determine if the specific ESA exceptions apply to your contract.
- Even if you believe your non-competition agreement is unenforceable, do not take confidential information or customer lists to your new job, as you still owe common law duties to your former employer.
- If your employer serves you with legal papers seeking an interlocutory injunction to enforce a non-compete, act immediately—these motions move incredibly fast and ignoring them can severely impact your career mobility.
- When selling a business, negotiate the duration and geographic boundaries of any non-compete thoughtfully; courts are highly likely to enforce these agreements strictly against vendors in commercial transactions.
Featured Cases
K. v. P.
2022 ONSC 2717 (CanLII) · 2022-05-05This is a motion for summary judgment regarding the enforceability of a non-competition agreement. The court addressed issues of timeliness in bringing the application.
1760465 Ontario Ltd. v. 5010520 Ontario Inc.
2019 ONSC 6573 (CanLII) · 2019-11-14Non-Compete Enforceability: Interlocutory Injunction Refused
This interlocutory proceeding involved a plaintiff seeking an injunction against former employees who allegedly breached fiduciary duties and non-competition agreements by soliciting customers. The court refused the injunction, finding that damages were an adequate remedy and that the broadly worded non-competition agreements were likely unenforceable.
Conestoga Materials Handling v. C. et al
2013 ONSC 5445 (CanLII) · 2013-08-23Non-Competition & Fiduciary Duty in Employment
An employment law dispute concerning the enforceability of a non-competition agreement and the existence of fiduciary duties owed by an employee.
698871 Ontario Inc v Menard & Associates Inc
2012 ONSC 6166 (CanLII) · 2012-11-01Non-Competition Agreement & Trade Secrets Dispute
An employment law dispute concerning the enforceability of a non-competition agreement and the protection of trade secrets.
Dr. Jack Newton Dentistry Professional Corporation v. T.
2005 CanLII 37351 (ON SC) · 2005-10-17Non-Competition Clause Enforcement in Dental Employment Agreement
A case involving the interpretation and enforcement of non-competition clauses in an employment agreement between a dental practice and an associate. The court determined that the non-competition clause in the offer to purchase remained valid and enforceable, and found the vendor in breach of the restrictive covenant. An interim injunction was granted to prevent the vendor from practicing within a 15-kilometre radius for three years.
Aon Consulting Inc. v. Watson Wyatt & Co.
2005 CanLII 28852 (ON SC) · 2005-08-17Enforceability of Non-Competition Clauses in Employment Contracts
A case involving the enforceability of restrictive covenants in employment contracts, including non-competition and non-solicitation clauses. The court examined whether such covenants were reasonable and whether the defendant breached a fiduciary duty by soliciting clients. The court found that the non-solicitation clause was reasonable but did not find a strong prima facie case of breach of fiduciary duty.
S. v. 3829537 Canada Inc.
2005 CanLII 20816 (ON SC) · 2005-06-10Non-Compete Agreement Repudiation in Employment Contract Context
An employment contract dispute involving a non-compete agreement tied to the sale of a business. The court examined whether late payment of $50,000 non-compete remuneration constituted repudiation of the employment agreement and whether restrictive covenants in the agreement were enforceable after alleged repudiation.
C.H.S. Air Conditioning Ltd. v. Environmental Air Systems Inc.
1996 CanLII 8137 (ON SC) · 1996-04-18Employee Mobility and Non-Competition Agreement Dispute
A case involving a dispute over whether former employees breached fiduciary duties or improperly used corporate opportunities, and whether a non-competition agreement was enforceable. The court found no fiduciary duty, no exploitation of corporate opportunities, and the non-competition clause unenforceable.
W. v. Stelco Inc.
1996 CanLII 8180 (ON SC) · 1996-04-01Enforceability of Non-Competition Clause in Employment Contract
A case involving the enforceability of a non-competition clause in a retirement benefits contract. The court applied the Elsley test to determine whether Clause 4 was reasonable and enforceable, considering factors such as geographic and temporal scope, and whether it protected the employer’s legitimate interests without violating public policy. The plaintiff was found to have breached the clause by providing consulting services to competitors.
OEB International Ltd. v. L.
1995 CanLII 7332 (ON SC) · 1995-11-21Non-Competition Agreement Dispute: Employee's Part-Time Employment with Former Client
A case involving the interpretation of a non-competition agreement and best efforts clause in an employment contract. The defendant accepted part-time employment with a former client, and the court examined whether this constituted a breach of the non-competition agreement or fiduciary duty. The restrictive covenant was interpreted as applying only to employment with competing public relations businesses, and the defendant was found to have fulfilled his best efforts obligations.
Empire Stevedores (1973) Ltd. v. S. et al.
1978 CanLII 1479 (ON SC) · 1978-04-17Injunction Denied in Fiduciary Duty Case
A case involving a former employee who resigned and competed with their former employer by underbidding them on a contract. The court assessed whether fiduciary duties prevented post-resignation competition in the absence of a non-compete agreement. The plaintiff's motion for an interlocutory injunction was denied because the balance of convenience favoured the defendant and there was serious doubt about the plaintiff's likelihood of success at trial.