Non-Compete Agreements in Ontario: What’s Actually Enforceable

Non-compete agreements used to be a common feature of Ontario employment contracts, typically restricting an employee from working for a competitor or starting a competing business for a set period after leaving a job. That landscape changed significantly on October 25, 2021, when amendments made by the Working for Workers Act, 2021 to Ontario’s Employment Standards Act, 2000 came into force.

Those amendments added a general prohibition on non-compete agreements between employers and employees. In plain terms, an employer generally cannot require an employee to agree not to work for a competitor or start a competing business after their employment ends — and a clause that attempts to do so is generally void, regardless of how it’s worded or what the employee signed.

This was a significant shift. Ontario became the first province in Canada to ban non-competes so broadly, responding to concerns that overly restrictive non-compete clauses were unfairly limiting ordinary workers’ ability to move between jobs in their own field, often with little real justification tied to legitimate business interests.

Before the amendments, Ontario courts already treated non-competes with real skepticism, generally preferring a narrower non-solicitation clause whenever one would adequately protect the employer’s legitimate interests. The 2021 changes went further, removing the option entirely for most employment relationships rather than leaving it to case-by-case judicial scrutiny.

The ban isn’t absolute. The Employment Standards Act, 2000 carves out two specific exceptions where a non-compete with an employee can still be valid.

The first applies to certain senior executives — the Act defines this narrowly, generally covering individuals holding specified C-suite-level positions such as chief executive officer or president, rather than any employee with a senior-sounding title. Whether a given role actually fits within this exception depends on the precise position held, not just how the role is described internally.

The second applies to non-competes made in connection with the sale of a business. Where a person sells a business — or a part of it — and, as part of that transaction, agrees not to compete with the purchaser, that non-compete can fall outside the statutory ban even if the seller also becomes an employee of the purchaser afterward. The logic is that a business sale often depends on the buyer being able to protect the value of what they purchased, including the seller’s ongoing goodwill and customer relationships.

A lot of confusion in this area comes from lumping together clauses that are legally quite different. A non-compete tries to stop someone from working in a competing business or role altogether, for a period of time, often within a defined geographic area. This is the category the 2021 amendments target.

A non-solicitation clause is narrower — it doesn’t stop someone from working for a competitor, but restricts them from actively approaching or soliciting specific clients, customers, or employees of their former employer for a period of time. Non-solicitation clauses are treated as a separate legal category from non-competes and generally remain enforceable in Ontario employment agreements, provided their scope and duration are reasonable.

A confidentiality clause is different again — it protects trade secrets, client lists, pricing, and other sensitive business information from being disclosed or used, without restricting where the person can work afterward at all. Confidentiality obligations are unaffected by the non-compete ban and remain a standard part of most employment agreements. Where confidentiality is a significant concern on its own, a dedicated non-disclosure agreement is often used alongside the employment contract.

Because these three categories are often grouped together under a single “restrictive covenants” heading in a contract, it’s worth reading each clause individually rather than assuming an entire section is either fully enforceable or fully banned.

It’s also worth noting that simply renaming a clause doesn’t change what it actually does. A clause labelled “non-solicitation” that, in substance, prevents someone from working for a competitor at all — rather than just restricting outreach to specific clients — may still be treated as a non-compete for the purposes of the statutory ban, regardless of its heading. What the clause actually restricts matters more than what it’s called.

The Employment Standards Act ban applies specifically to the employer-employee relationship. Non-competes outside that relationship — with a genuine independent contractor, or as part of a business sale — are analyzed under the older, common law reasonableness test instead of the statutory prohibition.

That reasonableness test generally asks whether the restriction goes no further than necessary to protect a legitimate business interest, considering three main factors: geographic scope (is the restricted area proportionate to where the business actually operates and competes), duration (is the length of the restriction proportionate to how long any competitive advantage would reasonably last), and the specific activity restricted (is the clause limited to genuinely competing work, or does it sweep in unrelated activity).

Ontario courts applying this test have generally been reluctant to rewrite an overly broad non-compete into a narrower, reasonable version — if a clause goes too far in any of these dimensions, the usual result is that the whole clause is struck down rather than trimmed back to something enforceable. This makes careful, narrow drafting considerably more important than relying on a court to fix an overreaching clause after the fact.

Signing a document doesn’t change its legal status. If a non-compete clause falls within the Employment Standards Act prohibition and doesn’t fit the executive or business-sale exception, it’s generally void regardless of what the employee agreed to in writing, and an employer generally cannot successfully enforce it through the courts.

That said, a void non-compete clause doesn’t typically void an entire employment contract. Most agreements include a severability clause that allows an unenforceable provision to be removed while the remainder of the contract continues to operate normally — so other obligations, including valid non-solicitation and confidentiality provisions, generally remain in force even where a non-compete clause doesn’t.

A worker who believes a non-compete clause is being improperly relied on to discourage them from taking a new job may have options worth exploring, including raising the issue with the Ministry of Labour, though the right path depends heavily on the specific facts involved.

For most Ontario employment relationships, the practical result of the 2021 amendments is that non-compete clauses have largely been replaced by a combination of non-solicitation and confidentiality provisions, which can still meaningfully protect a business’s client relationships and sensitive information without running into the statutory ban.

For business sales and genuine independent contractor relationships, non-competes remain a live and commonly used tool, but one that still needs to be drafted narrowly to survive the traditional reasonableness test if it’s ever challenged.

Anyone reviewing an employment offer, a contractor agreement, or a business purchase agreement that includes a restrictive covenant benefits from checking which category the clause actually falls into — employee non-compete, permitted exception, non-solicitation, or confidentiality — since each is treated quite differently under current Ontario law, and the labels a document uses aren’t always a reliable guide on their own.

This article explains, in general terms, how non-compete, non-solicitation, and confidentiality clauses are typically treated under Ontario law, and isn’t legal advice about any specific contract or employment situation. Readers reviewing a specific clause may also find our broader agreements hub useful, or can reach us through our contact page.