Non-Competition Clauses — Ontario Employment Law
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About Non-Competition Clauses
A non-competition clause, sometimes called a non-compete agreement, is a term in an employment contract that attempts to restrict an employee from working for a competitor or starting a competing business after their employment ends. For many years, these clauses were common in Ontario workplaces, but their enforceability has always been questionable. Courts in Ontario have traditionally viewed non-competes as a restraint of trade, running contrary to the public policy that individuals should be free to earn a livelihood in their chosen field.
This judicial skepticism was codified into law with a major change to Ontario's Employment Standards Act, 2000 (ESA). As of October 25, 2021, the ESA explicitly prohibits employers from entering into employment contracts that contain a non-competition clause. This ban applies to the vast majority of employees in the province, regardless of their role or industry. However, the legislation includes two key exceptions: the ban does not apply to certain high-level executives (often referred to as the 'C-suite'), nor does it apply in the context of the sale of a business where the seller becomes an employee of the purchaser. For agreements entered into before this date, or for roles that fall into an exception, the old common law rules still apply. Under those rules, a non-compete clause is presumed to be unenforceable unless the employer can prove it is 'reasonable' in its scope. This means the restriction must be narrowly tailored in terms of duration (how long), geographic area, and the specific activities it prohibits. It must also be necessary to protect a legitimate business interest, such as trade secrets, and not simply to prevent ordinary competition. Because the legal analysis of any restrictive covenant is highly dependent on its specific wording and the factual circumstances, understanding your rights by reviewing the contract with a professional is often a critical step.
Frequently Asked Questions
Is my non-compete clause legal in Ontario?
For most employees, if your employment contract was entered into on or after October 25, 2021, the non-compete clause is illegal and void under the Employment Standards Act, 2000. There are narrow exceptions for certain executives and in the context of a sale of a business.
What is the difference between a non-competition and a non-solicitation clause?
A non-competition clause prevents you from working for a competitor. A non-solicitation clause is less restrictive; it only prevents you from actively trying to take clients, customers, or employees from your former employer. Courts are more likely to enforce a reasonable non-solicitation clause.
My employer wants me to sign a new contract with a non-compete. Do I have to?
For most employees, your employer is prohibited by the ESA from requiring you to sign a non-compete. If you fall into an exception (e.g., you are a C-level executive), the employer must provide you with something new of value (like a raise or bonus) in exchange for signing, otherwise it may be unenforceable.
What happens if I just ignore my non-compete clause?
Even if a non-compete is likely unenforceable, your former employer could still try to sue you to stop you from working for a competitor (an injunction). This would force you to incur legal costs to defend yourself, so it's risky to simply ignore it without getting a legal opinion first.
I signed my non-compete agreement in 2020. Is it affected by the new law?
The ESA ban on non-competes is not retroactive, so it doesn't automatically void clauses signed before October 25, 2021. However, these older clauses are still subject to the very strict common law test and are often found to be unreasonably broad and unenforceable by courts.
When should I get a lawyer to look at a non-competition clause?
You should seek legal advice before you sign any contract containing a non-compete. If you've already signed one, it's crucial to have it reviewed by an employment lawyer after your employment ends and before you start looking for a new job in the same industry.
Common Scenarios
- A marketing coordinator in Hamilton is laid off and her severance offer includes a new, restrictive 12-month non-compete clause she must sign to receive her payment.
- A software engineer leaves a tech firm in Waterloo and is reminded by HR of the 2-year, North America-wide non-compete she signed in her 2022 offer letter.
- The owner of a chain of physiotherapy clinics sells the business and agrees to a 3-year non-compete as part of the sale agreement, preventing him from opening a new clinic within 50km.
- A senior investment banker, who holds the title of Chief Investment Officer, is negotiating a new employment contract that includes a non-competition clause.
- A dental hygienist quits her job and her former employer sends a threatening letter, referencing a non-compete in her contract, after learning she has started working at another clinic across the street.
What You Should Know
- Check the date on your employment agreement. If it's on or after October 25, 2021, any non-compete clause is likely illegal under Ontario's Employment Standards Act, 2000.
- Do not assume a non-compete clause is valid just because it's in your contract. The vast majority, even those predating the 2021 ban, are struck down by courts as unreasonable.
- Distinguish between non-competition and non-solicitation. While a non-compete is likely void, a clause preventing you from poaching former clients or colleagues may still be enforceable.
- If your former employer threatens legal action over a non-compete, do not ignore it. Seek immediate legal advice to understand your risks and formulate a response.
- Before accepting a job with a competitor, have an employment lawyer review your old contract to assess the risk of your former employer attempting to enforce a non-compete clause.
Featured Cases
P. v. ITCAD Tech Inc.
2025 ONSC 1697 (CanLII) · 2025-06-02Independent Contractor Non-Compete & Punitive Damages
This case addresses whether the plaintiff was an employee or independent contractor and the enforceability of a non-competition clause in their agreement. The court upheld the independent contractor relationship and found the 12-month non-compete restriction reasonable. Damages for breach of the non-compete were awarded, along with punitive damages for the withholding of funds.
Dymon Storage Corporation v. N.C.
2022 ONSC 5883 (CanLII) · 2022-10-18Non-Compete Covenant Enforceability in Employment
This interlocutory proceeding addressed the enforceability of a 10-year, Canada-wide non-competition clause in the defendant's employment agreement and allegations of misuse of confidential information. The court found the non-competition clause unreasonable due to excessive scope and duration, denying the injunction on that basis, while partially granting relief regarding specific confidential materials. Additionally, a stay of proceedings was granted in favor of arbitration for claims against the defendant.
Aware Ads Inc. v. W.
2022 ONSC 5543 (CanLII) · 2022-09-29Injunction Denied: Expired Non-Compete Clauses
This interlocutory proceeding involved an employer seeking an injunction to prevent a former employee from working for a competitor based on expired non-competition and non-solicitation clauses. The court applied the RJR-MacDonald test and found the restrictive covenants overbroad and unenforceable, while also excluding key evidence due to lack of authentication. The employer failed to establish a strong prima facie case of breach of fiduciary duty or irreparable harm, leading to the denial of the injunction.
P. et al v. S. et al
2022 ONSC 302 (CanLII) · 2022-01-13Enforceability of Non-Compete Clauses in Dental Associate Agreements
This interlocutory proceeding addresses whether non-competition and non-solicitation clauses in an Associate Agreement between dental practitioners are enforceable. The court considered whether the clauses were reasonable, whether they flowed from a sale of goodwill or an employment context, and the impact of the Working for Workers Act, 2021. A strong prima facie case was established in favor of the plaintiffs, with the balance of convenience favoring the enforcement of the restrictive covenants and the return of patient records.
1162268 Ontario Limited v. U.
2021 ONSC 7016 (CanLII) · 2021-09-23Employment: Fiduciary Duties & Non-Compete Clauses
An employment law dispute involving allegations regarding fiduciary duties and the enforceability of restrictive covenants, specifically non-competition clauses.
M & P Drug Mart Inc. v. S.N.
2021 ONSC 5211 (CanLII) · 2021-07-26Enforceability of Non-Compete Clause in Employment Agreement
This case addresses the enforceability of a non-competition clause contained in the respondent's employment agreement. The court applied the test for reasonableness regarding scope, duration, and geography, while also considering the bargaining power of the parties and the context of the negotiations.
B. v. M.
2018 ONSC 3645 (CanLII) · 2018-06-13Non-Compete Enforcement: Injunction Denied
This interlocutory proceeding involved a plaintiff seeking an injunction to enforce non-competition and confidentiality clauses against former employees and their new employer. The court found the non-competition clauses overly broad and unenforceable, determined that the businesses were not competitors, and concluded that no irreparable harm was demonstrated, resulting in the denial of the injunction.
K. v. American Iron & Metal Company Inc.
2017 ONSC 7174 (CanLII) · 2017-11-30Enforceability of Non-Compete Covenants in Employment
This case addresses the enforceability of non-competition covenants and restrictive covenants within an employment context. The court considered issues related to civil procedure and costs, referencing statutory provisions and relevant precedents such as Acurate General Contracting Ltd. v. Anderson and Agius v. Home Depot Holdings INC.
Ceridian Dayforce Corporation v. D.W.
2017 ONSC 6763 (CanLII) · 2017-11-20Non-Compete Clause Enforceability: Partial Summary Judgment
This is a partial summary judgment motion concerning the enforceability of a non-compete clause in an employment agreement. The court found the clause unreasonable and void due to its overly broad scope, geographic reach, and duration, ruling that the employee's acceptance of payments did not validate the unenforceable restriction.
N. v. Socast Inc.
2017 ONSC 5616 (CanLII) · 2017-08-17Wrongful Dismissal: 19-Month Employee Awarded 9 Months Notice
This wrongful dismissal case involved a plaintiff terminated without cause after 19 months of service, where no contractual limitation on termination entitlements existed. The court applied the Bardal factors and found the plaintiff entitled to nine months' notice plus benefits, considering factors such as an overbroad non-competition clause and the employer's failure to provide a reference letter which hindered mitigation efforts.
1003126 Ontario Ltd. v. C.D.
2013 ONSC 278 (CanLII) · 2013-02-22Non-Compete Enforceability & Injunctive Relief
This interlocutory proceeding addressed the enforceability of a non-competition clause in an employment context and the plaintiff's application for injunctive relief. The court found the non-competition clause unreasonable due to excessive temporal restrictions and determined that the plaintiff failed to demonstrate irreparable harm or provide sufficient financial information for an undertaking as to damages. Consequently, the balance of convenience favored the defendant.
Portable Packaging Systems Inc. v. B.
2011 ONSC 4440 (CanLII) · 2011-07-19Enforceability of Non-Compete Clauses in Employment
This case concerns an application by an employer seeking injunctive relief and damages against a former employee for breaching restrictive covenants in their employment contract. The court addressed whether the non-competition and non-solicitation clauses were enforceable and whether the employee's actions in joining a competitor constituted a breach. Additionally, the case examined the appropriate measure of damages for such a breach.
B. v. Forensic Investigations Canada Inc.
2009 CanLII 32268 (ON SC) · 2009-06-23Employment Contract Dispute: Non-Competition Clause Ambiguity and Fiduciary Obligations
An employment contract dispute involving the enforceability of a non-competition clause and fiduciary obligations. The court examined whether the arbitrator erred in law by finding the restrictive covenant enforceable, and whether fiduciary duties independently required non-competition. The restrictive covenant was found unenforceable due to ambiguity, and the constructive dismissal claim was dismissed due to lack of evidence.
I. v. SSI Equipment Inc.
2009 CanLII 32704 (ON SC) · 2009-06-19Employment Contract Dispute: Bonuses and Breach of Non-Competition Clauses
An employment contract dispute involving the I. family and SSI Equipment Inc., where the court examined breaches of non-disclosure and non-competition clauses, entitlement to bonuses, and the application of contractual remedies. The court found that the I. family was entitled to bonuses despite breaches of contract and denied punitive damages.
S. v. S.
2007 CanLII 48661 (ON SC) · 2007-11-13Enforceability of Non-Competition Clause in Employment Agreement
A case involving the enforceability of a non-competition clause in an employment agreement during the sale of a business. The court considered the reasonableness of the clause's scope and applied the RJR-MacDonald test. The case also included allegations of misuse of confidential information and the granting of an injunction to prevent its disclosure.
Sherwood Dash Inc. v. Woodview Products Inc.
2005 CanLII 45978 (ON SC) · 2005-12-08Enforceability of Non-Competition Clauses in Employment Contracts
A case involving the enforcement of non-competition clauses in employment agreements, with the plaintiff seeking to reinstate an interlocutory injunction against former employees. The court considered the test for granting interlocutory injunctions, the enforceability of restrictive covenants, and whether the plaintiff met the disclosure standard under Rule 39.01(6).
IT/Net Inc. v. D.
2005 CanLII 18412 (ON SC) · 2005-03-22Non-Competition Clause Enforceability in Employment Contract Dispute
A case involving a dispute over the enforceability of non-competition and confidentiality provisions in an employment contract. The court found the non-competition clause unenforceable due to lack of clarity and overbreadth, and no breach of fiduciary or common law duties was established.
Robert Half Canada Inc. v. J.
2004 CanLII 1532 (ON SC) · 2004-03-05Non-Competition Clause Injunction: Without-Notice Motion in Employment Dispute
A labour and employment case involving a plaintiff seeking an interim injunction without notice to restrain former employees from competing or soliciting. The court examined whether the plaintiff was justified in proceeding without notice and whether the injunction should be extended, considering the rules on without-notice motions and the duty of full and frank disclosure.
IT/Net Inc. v. C.
2003 CanLII 10653 (ON SC) · 2003-10-28Employment Contract Dispute: Breach of Non-Competition Clauses and Misrepresentation
An employment contract dispute involving misrepresentation and breach of restrictive covenants. The defendant left prior employment based on assurances of a one-year contract, which the plaintiff misrepresented. The defendant also allegedly breached confidentiality and non-competition clauses by assisting a competitor in securing a client contract. The court awarded damages for loss of profits but dismissed the counterclaim for negligent misrepresentation due to lack of proven loss.
Industrial Rush Supply & Service Ltd. v. F.
2003 CanLII 5657 (ON SC) · 2003-02-18Wrongful Dismissal and Restrictive Covenant Enforceability in Employment Agreements
A wrongful dismissal case involving the enforceability of restrictive covenants in employment and business sale agreements. The court examined whether termination without cause precludes enforcement of non-competition and non-solicitation clauses, and whether the covenants were reasonable in scope and duration.