Ontario’s New Non-Compete Law: What It Means for You?
What significant changes to non-compete laws took effect in Ontario in 2021?
In 2021, significant changes to non-compete laws took effect in Ontario, aiming to balance the rights of employers to protect their business interests with the rights of employees to seek alternative employment opportunities. One notable example of this evolving legal landscape was the near banning of non-compete agreements for most Ontario employees. Despite this new legislation, non-compete agreements entered into before 2021 may be enforceable, depending on the terms.
What exceptions to the non-compete ban exist under the new legislation?
In October 2021, Ontario introduced new legislation under the Employment Standards Act, 2000 (the “ESA”) banning non-compete agreements for most employees. Exceptions were carved out to accommodate circumstances deemed necessary for business operations and fair competition, such as certain C-Suite employees and business transfers, where non-compete agreements may continue to apply to protect the goodwill and proprietary information transferred as part of the business sale.
However, non-compete agreements entered into before October 2021 may still be enforceable against ordinary employees. To determine if they are enforceable, non-compete clauses are scrutinized to ensure they are reasonable in scope, duration, and geographic limitation.
In the recent decision of Dr. C. Sims Dentistry Professional Corporation v. Cooke, 2024 ONCA 388, the Ontario Court of Appeal upheld the lower court’s decision to enforce a non-compete agreement against Dr. Sim. While not common for these agreements to be enforceable, the court found that this clause, although broad, was reasonable and necessary to protect MedTech Solutions’ legitimate business interests. These interests included safeguarding confidential information and maintaining client relationships, which were deemed essential to the company’s operations.
How should employers craft non-compete agreements to ensure they are enforceable?
The decision underscores the court’s stance on balancing the rights of employers to protect their business with the rights of employees to seek alternative employment, emphasizing that they are prepared to enforce reasonable non-competition agreements in specific circumstances. It also encourages employers to carefully craft non-compete agreements that are tailored to specific roles and circumstances, promoting clarity and fairness in employment contracts.
Where can I seek legal advice about non-compete agreements and employment rights?
As non-compete laws continue to evolve, staying informed about these changes is crucial for both employers and employees navigating the complexities of modern employment agreements and business practices. To better understand your employment rights, we encourage employees and employers to seek legal advice. We at Whitten & Lublin are happy to provide insight and advice into your specific circumstances. If you are looking for employment lawyers and would like more information about what Whitten & Lublin can do for you, please contact us online or by phone at (416) 640-2667 today.