Employee non-competes are not only unenforceable they are illegal!

In Ontario, unlike non-solicit and non-disclosure provisions, as of October 25, 2021 employers cannot enter into employment contracts or other agreements with employees that requires them to not-compete.  Non-compete provisions prohibit employees from engaging in any business, work, occupation, profession, project or other activity that is in competition with the employer’s business.  It doesn’t matter when the non-compete provisions applies, such as before, during or after employment, or where it applies, such as within a geographical region, it is still illegal.

However, there are two exceptions, the first one is where the non-compete stems from the terms and conditions of the sale or lease of an employer’s business (or part of it) that is currently operated as a sole proprietorship or partnership (not a corporation), and the seller/employer becomes an employee of the purchaser (i.e. the new employer).  The second exception is where employment is for an executive level role which is someone with the following office/title:

• chief executive officer
• president
• chief administrative officer
• chief operating officer
• chief financial officer
• chief information officer
• chief legal officer
• chief human resources officer
• chief corporate development officer
• any other chief executive position

Finally this prohibition in law does not apply to non-compete provisions entered into before October 25, 2021. However, case law has often substantiated that non-competes under similar circumstances as mentioned above are unenforceable (e.g. In M & P Drug Mart Inc. v. Norton, 2022 ONCA 398, the Court of Appeal for Ontario (OCA) dismissed an employer’s appeal of an application judge’s decision that a non-competition clause in an employment agreement governed by the common law was unenforceable because it was ambiguous and overbroad).

Levy Zavet Lawyers are always happy to help!  Feel free to contact us for a consultation by email, phone or even virtual meetings.

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