Non-Competes After Ontario's Working for Workers Act: What Still Works

What the Working for Workers Act Actually Changed

On December 2, 2021, Ontario's Working for Workers Act, 2021 (Bill 27) received Royal Assent, adding s.67.2 to the Employment Standards Act, 2000 (ESA). The provision is straightforward: employers are prohibited from entering into non-competition agreements with employees, subject to a narrow exception for executives. The ban took effect on October 25, 2021 — the date the bill was introduced — meaning it applies to non-compete agreements entered into on or after that date.

The provision was significant, but it was not the earthquake that some commentary suggested. Non-competition clauses in employment agreements were already difficult to enforce in Canada. Ontario courts, following the Supreme Court of Canada's framework in Shafron v. KRG Insurance Brokers, 2009 SCC 6, had been striking down overbroad non-competes for decades. What the ESA amendment did was convert a case-by-case judicial analysis into a blanket statutory prohibition.

The Scope of the Ban

ESA s.67.2 prohibits non-competition agreements between employers and employees. Every word in that sentence matters.

The ban applies only to the employment relationship. It does not apply to:

• Shareholder agreements: A non-compete in a shareholders agreement between co-founders or between a company and a shareholder-employee is not an employer-employee agreement — it is a shareholder agreement. These remain enforceable, subject to the common law reasonableness analysis.
• Asset or share purchase agreements: Non-competes in M&A transactions, where the seller agrees not to compete with the business being sold, are commercial agreements between sophisticated parties. These are fully enforceable, and courts have historically given them a wider scope than employment non-competes.
• Partnership agreements: Restrictions on departing partners are not employment agreements.
• Independent contractor agreements: The ESA applies only to employees. A genuine independent contractor relationship (as determined by the Sagaz test) falls outside the scope of the prohibition. However, if the contractor is found to be a dependent contractor or a misclassified employee, the ban would apply.

The Executive Exception

The sole exception to the ban is for employees who hold the title 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 any other "chief executive position." The exception also applies to any employee who "holds a position that is an executive" of the employer.

The language is notable for its breadth — it is not limited to the C-suite titles specifically listed, but extends to anyone who holds an "executive" position. However, the term "executive" is not defined in the ESA, which means its scope will be determined by future case law. Until that jurisprudence develops, the safest approach is to limit non-compete reliance to clearly senior positions where the executive has genuine access to strategic information, customer relationships, and competitive intelligence.

Even where the executive exception applies, the non-compete must still satisfy the common law reasonableness test from Shafron: the restriction must be reasonable in geographic scope, duration, and the activities it prohibits, and it must protect a legitimate proprietary interest of the employer.

Three Alternatives That Remain Fully Enforceable

1. Non-Solicitation Clauses

The Working for Workers Act does not affect non-solicitation clauses. An agreement that restricts a departing employee from soliciting the employer's clients, customers, or employees remains enforceable — provided it meets the common law reasonableness standard. The key distinction is that a non-solicitation clause restricts who the employee can approach, not where they can work. It leaves the employee free to compete in the same market, take a position with a competitor, or start a competing business — they simply cannot actively solicit your clients or recruit your team.

Courts are generally more willing to enforce non-solicitation clauses than non-compete clauses because they are less restrictive. A 12-to-24-month non-solicitation of clients and a 12-month non-solicitation of employees is typically within the range of reasonableness for most roles.

2. Garden Leave

A garden leave clause requires the employee to provide an extended notice period (typically three to six months) during which they remain employed, receive full compensation, but are not required to attend the workplace or perform duties. During garden leave, the employee remains bound by their fiduciary and contractual obligations, including confidentiality — and practically speaking, they cannot start a new role.

Garden leave achieves a similar result to a non-compete — it keeps the employee out of the competitive market for a defined period — without triggering the ESA prohibition because the employee is still employed during the restriction period. The employer pays for the protection, which makes courts more sympathetic to enforcement.

3. IP Assignment and Confidentiality Provisions

A comprehensive IP assignment clause, combined with robust confidentiality obligations, protects the employer's most valuable assets without restricting where the employee can work. If the employee cannot use your trade secrets, proprietary processes, or client data in a new role, the competitive harm is substantially mitigated even without a non-compete.

Confidentiality obligations are not subject to the same reasonableness analysis as non-competes. Courts will enforce a confidentiality clause that protects genuinely confidential information for a reasonable period — and "reasonable" for trade secrets can mean indefinitely, as the Supreme Court recognized in Lac Minerals Ltd. v. International Corona Resources Ltd.

What About Other Provinces?

As of early 2026, Ontario is the only province with a statutory ban on employment non-competes. However, the common law across Canada has long been hostile to overbroad non-competition clauses. In practice, the enforceability of non-competes in every province depends on the Shafron reasonableness analysis — and courts in British Columbia, Alberta, and other provinces regularly strike down non-competes that are broader than necessary to protect the employer's legitimate interests.

The trend is clearly toward further restriction. Founders should draft their employment agreements with the assumption that non-competes are unreliable in the employment context, and build their protective framework around non-solicitation, confidentiality, and IP assignment instead.

Practical Recommendations

For most Canadian startups, the loss of the employment non-compete is not as significant as it may seem. Non-solicitation, garden leave, and confidentiality provisions — properly drafted and tailored to the specific role — provide substantial protection without the enforceability risk that has always plagued non-competes. The key is to draft these alternatives with precision, tie them to genuine business interests, and ensure they are supported by adequate consideration. A boilerplate restrictive covenant clause that was not specifically negotiated or tailored to the employee's role is exactly the type of provision that courts decline to enforce.