• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Blog

Logo 1 Created with Sketch.

  • About
  • Our Lawyers
    • Andrew Wray
    • Juan Echavarria
    • Salman Rana
  • Expertise
    • Employment Law
    • Civil Litigation
  • Blog
  • COVID-19 Resources
  • Contact Us
  • Book a Consultation
Employment-Lawyers-Toronto-Non-Competition-Agreements-Empoyment-Standards-Act-Ontario

Non-competition Agreements Restricted under the Employment Standards Act

February 1, 2022 Tags: Employment Law

Employers in various industries often include non-competition agreements or clauses into their contracts with employees. This is common, for example, in professional services industries such as accounting, dentistry, legal, and also financial services, among others. Non-competition clauses prevent employees from leaving their current employer to work for a competing business while engaging in the same profession or activity. The purpose of such agreements is to safeguard the employer against potential losses that could arise where an employee leaves for a competing business, and such employee has developed relationships with the employer’s clients, or key knowledge about the industry or knowledge specific to the employer. However, Courts in Ontario have often refused to enforce non-competition agreements as they are frequently found to constitute a restrain of trade. This means that the Court’s view the agreement as too restrictive to the employee’s ability to earn a living in his or her chosen profession. Therefore, the enforceability of such agreements often requires a balancing of the interest of the employer, to remain competitive, and the employee, to earn a living. When engaging in this balancing act, the Court will generally inspect whether the agreement is reasonable, taking into account how broad the area is, in which it prohibits the employee from working for a competing business, the length of time it is to be enforced, and the type of activity it prohibits.

The enforceability of non-competition agreements has been the subject of extensive litigation in Ontario. However, recently the Government of Ontario decided to introduce amendments to the Employment Standards Act (ESA), via Bill 27, which prohibit the use of non-competition agreements for the majority of employees. As a result of the proposed amendments, employers are now prohibited from introducing non-competition agreements or clauses in their contracts with employees, and any such agreement entered into after October 25, 2021, are now considered void.

This legislation facilitates the job mobility of employees in Ontario. However, when enacting the reforms, one exception was introduced by the government regarding employee’s who are classified as “executives”. In the new amendments to the ESA, “executive” is defined as:

“executive” means 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…”

This exception will permit employers to continue to require non-competition agreements as a condition of employment for certain key positions. This recognizes the potential hardship on employers when losing a key employee. However, though the provisions of the ESA are yet to be litigated, it is expected that any employer attempting to enforce a non-compete on the basis that an employee occupies a “chief executive position” or is a key employee, will require an examination of the employment relationship, including the employee’s title, duties, and compensation, among others.

As lawyers with expertise in employment law, we regularly provide advise regarding the enforceability of employment agreements.

We often assist employees regarding the enforceability of non-competition clauses in their agreements when contemplating a job change, or once employers attempt to enforce such agreements. Though such agreements are now prohibited for the majority of employees, those entered into prior to October 25, 2021, may still be enforced.

Similarly, we often advise employers when considering a potential hire or seeking to conduct a review of their employment contracts. As a result of the amendments pursuant to Bill 27, the permitted use of non-competition clauses is now much more limited. However, in this regard, we are able assist to determine whether any prospective employee fits within the allowed exceptions in the ESA, for key employees, regarding the use of non-competition agreements.

Employers and employees may contact us at any time regarding their employment contract questions and needs.

 

Primary Sidebar

Recent Posts

  • Career Opportunity at Wray Legal
  • Am I entitled to termination pay if I am fired for cause?
  • Should Companies update their Employment Contracts?
  • Non-competition Agreements Restricted under the Employment Standards Act
  • Termination during COVID can result in longer notice periods

Tags

#EmploymentLaw Blog Civil Litigation Constructive Dismissal Covid Employment Law Covid Mental Health Covid Wrongful Termination Employment Employment Law Health and Safety Human Rights Juan Echavarria Just Cause Termination Limitation Period Long-Term Disability Benefits LTD Benefits LTD Insurance Benefits Mechanical Business News Resignation Sale of Business Severance Pay Stock Options termination notice Total Disability wrongful dismissal

Footer

Contact Us

181 University Avenue, Suite 2200 Toronto, Ontario Canada M5H 3M7

T 416-642-0460
F 416-363-7875

Contact Page LinkedIn
Book a Consultation






    Please note that contact through our website is for informational purpose only and does not create a lawyer-client relationship.

    * Required

    Reviews

    • I had the pleasure of working with Andrew & his team and I could not be more thankful for having them represent me during a very trying time. They were very knowledgeable and helped guide me thru the entire process. Going thru any legal issue can be very emotionally draining but knowing I had Andrew on my side def helped ease my anxiety. In the end, Andrew was able to win my dispute and I owe it all to his attention to detail and wealth of knowledge.

      Charlene De Silva

    • Robert Tarantino and his associates at Wray Legal handled my case against my former employer with compassion, ethically sound expert advice in plain language and professional courtesy during my termination process, a stressful event in any working person's life. I was presented with all potential courses of action during my initial meeting prior to making a decision to retain services, and was treated with respect and dignity every step of the way. Wray Legal was able to mediate an acceptable settlement without having to proceed with a formal human rights violation compliant at the Ontario Human Rights Tribunal. Thank you Robert, Andrew and Samantha.

      Ian G.

    • We contracted with Robert Tarantino of Wray Legal to do a respectful workplaces presentation to our organization. This was part of a follow up to a StressAssess.ca survey we had done with all of our staff. Robert’s presentation included: Introduction; Overview – Why ‘Respectful Workplaces’ is an Important Topic; What is a Respectful Workplace?; Occupational Health and Safety Act – workplace harassment; Human Rights Code – discrimination in employment; Fostering a Healthy and Respectful Workplace; and Q & A – Discussion. The presentation was extremely well done, very engaging and included excellent examples. Robert did an excellent job and I would highly recommend his services.

      Michael Roche

      CEO, Occupational Health Clinics for Ontario Workers

    • I am grateful to have worked with Andrew Wray on a Third Party Claim that was filed against me. While we arrived at a very amicable conclusion, it was a rather complex route to get there. Andrew was extremely patient with both me and the other party. His legal advice was insightful and he always acted in an extremely professional manner. I asked a lot of questions regarding law and process and Andrew always took the time to ensure that I was comfortable with both. I really had the feeling that he was actually working for me and looking out for my best interests. I would have no reservations about contacting Andrew again for help, nor would I have any reservations in recommending him to a friend or colleague. Many thanks!!

      KM

    • Andrew Wray helped me settle a dispute with my past employer which lead to a healthy settlement. I would recommend Andrew to anyone looking for a professional and cost-effective litigator.

      A Google User

    • Andrew Wray came highly recommended and now I know why! Andrew took a personal and very supportive approach as he helped to guide me through a long and challenging labour hearing process that had already cost me too many sleepless nights. His demonstrated understanding of the complex legal and procedural issues gave me a tremendous confidence. Having never previously testified or given evidence, his advice on what I could expect on the stand was worth its weight in gold. I was kepy completely in the loop with regard to strategies and next steps, and was always made to feel like I was steering the ship - with Andrew as my formidable engine. Oh, and by the way, we won the case! :)

      Jamie S.

    © 2023 Wray Legal
    Site by Cameron Duncalfe
    Privacy Policy