Ontario government introduces bill to prohibit non-compete agreements for employees

An omnibus bill introduced today by the Ontario government called the Working for Workers Act includes provisions prohibiting non-compete clauses for employees. Such clauses prevent employees who leave their employment from competing with their former employers – which, for many employees in specialized industries can mean temporarily giving up their livelihoods. Non-compete clauses are different and more onerous than other clauses that protect employers by preventing the use of confidential information or preventing former employees from actively soliciting clients or other employees of the former employer.

Today’s government press release in connection with this legislation outlined the change as follows:

“The proposed legislation will also prohibit employers from using non-compete agreements. These types of contracts often restrict employees from taking new jobs with another business in the same field after they leave the company. The proposed changes would ban this unfair restriction to help workers in Ontario advance their careers and earn more money. This would also give the province a competitive advantage in attracting global talent. Employers would still be able to protect their intellectual property through narrower clauses.”

Even without a legislative prohibition, non-compete clauses have rarely been enforced by the courts. They are seen as prima facie illegal covenants in restraint of trade that are contrary to public policy. However, even unenforceable non-compete clauses can be used by employers to intimidate employees and discourage them from leaving to work for competitors. This change should be a welcome one for employees – especially in competitive industries – and it should also provide some relief for companies looking to recruit top talent.