Most employee non-competition clauses signed in this province are now void. Therefore, before you try to enforce a non-compete in Ontario, you need to know whether your clause survived the 2021 statutory ban at all. Executives, sellers of businesses and pre-ban contracts still sit outside that prohibition, although the common law then applies a demanding test of its own. This guide explains where courts actually draw the line.
Ontario’s Non-Compete Ban: What the Law Actually Says
The Working for Workers Act, 2021 added Part XV.1 to the Employment Standards Act, 2000. Section 67.2(1) is blunt. No employer shall enter into an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement.
The definition is deliberately wide. It captures any agreement prohibiting an employee from competing with the employer’s business after the employment relationship ends.
Moreover, the consequence is harsh. A prohibited clause is void rather than merely unenforceable, so nobody needs a court order to kill it. Ontario law now presumes that a non-compete cannot be enforced against an employee.
The clause still looks intimidating on the page. However, an employer who wants to enforce a non-compete in Ontario against an ordinary employee starts with nothing at all.
The date that decides everything: October 25, 2021
Although Bill 27 received Royal Assent in December 2021, the ban took effect on October 25, 2021. As a result, agreements signed before that date escape the prohibition completely, and the older common law governs them instead.
That carve-out shrinks every year, though. Because most restrictive covenants run for one to three years, a pre-ban employment clause has usually expired on its own terms by now.
Ontario courts have confirmed the ban does not reach back in time, and they still enforce pre-ban covenants under the older common law.
A footnote for federally regulated employers
Banks, telecommunications companies and interprovincial carriers answer to the Canada Labour Code rather than the ESA. Bill C-31, the Budget 2025 Implementation Act, No. 2, would add a federal ban on non-competition clauses for those employers. First read in May 2026, it remains before Parliament and is not yet law. Consequently, a federally regulated business should confirm the current federal position first.
Who Can Still Enforce a Non-Compete in Ontario?
Only two categories of agreement escape the ban, and both are narrower than most business owners expect.
The executive exception
Part XV.1 does not apply to an employee who is an “executive.” Critically, the Act defines that word by office rather than by pay, influence or seniority.
The list is short and specific: 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, or any other chief executive position.
Therefore, a company may still enforce a non-compete in Ontario against a genuine chief officer. A vice-president of sales does not qualify, however, no matter how valuable that person is to the business.
Because the exception turns on the office someone actually holds, careful drafting alone will not create it. No Ontario appellate decision appears to have interpreted the definition yet, so expect an argument.
The sale-of-business exception
The second exception is tighter still. Three things must line up: a sale of a business or part of a business, a non-competition covenant given as part of that sale, and a seller who immediately becomes an employee of the purchaser.
Miss any one element and the exception disappears. For example, a seller who stays on as a consultant rather than an employee falls outside the wording. Note too that “sale” includes a lease.
Purchasers who satisfy all three conditions may enforce a non-compete in Ontario notwithstanding the ban. One wrinkle matters, though. Part XV.1 governs employer-employee agreements only, so a covenant from a vendor who never joins the purchaser’s payroll sits outside the ban altogether.
Ontario’s own plain-language guide to non-compete agreements sets out both exceptions in accessible terms.
The Common Law Test Courts Still Apply
Surviving the ban is only the first hurdle. Ontario courts enforce a non-compete on strict conditions, because judges treat restrictive covenants as presumptively invalid restraints of trade.
The foundational authority remains Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 SCR 916, where Dickson J. compressed the principle into a single sentence:
A covenant in restraint of trade is enforceable only if it is reasonable between the parties and with reference to the public interest.
Ontario courts will therefore enforce a non-compete clause only where it survives that test, measured on three axes: the activity restricted, the geographic area covered, and the duration.
A fourth question quietly decides many cases. Does the employer hold a proprietary interest worth protecting, such as trade connections or confidential information?
General competition from a skilled former employee does not count as a protectable interest. Without something more, Ontario judges will not enforce a non-compete at all.
Ambiguity is fatal
In Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, the Supreme Court struck down a covenant restricting competition within the “Metropolitan City of Vancouver” — a place that does not legally exist. Rothstein J. explained why vagueness proves fatal, at paragraph 43:
if the covenant is ambiguous, in the sense that what is prohibited is not clear as to activity, time, or geography, it is not possible to demonstrate that it is reasonable.
Just as importantly, the Court refused to repair the clause. At paragraph 37 it held that “notional severance has no place in the construction of restrictive covenants in employment contracts.” Blue-pencil severance survives, although only where the offending words are trivial, clearly severable, and no part of the main purport of the covenant.
The lesson lands hard on employers. Draft broadly and no judge will trim the clause back. Unclear drafting is the most common reason Ontario courts refuse to enforce a non-compete.
Would a non-solicitation clause have been enough?
Ontario courts also ask whether something narrower would have done the same job. Where a well-drafted non-solicitation clause would have protected the employer, judges decline to enforce a non-compete instead.
A non-solicit is no automatic cure, however. In Mason v. Chem-Trend Limited Partnership, 2011 ONCA 344, a clause barred a former salesperson from dealing with any customer he had encountered across seventeen years, with no geographic limit at all.
The Court of Appeal struck it down as unworkable and overbroad, because he could not tell which customers were off limits.
Similarly, in H.L. Staebler Company Limited v. Allan, 2008 ONCA 576, a clause barring a departing employee from serving or accepting business from clients read as a non-compete in disguise. It did not survive either.
When Courts Won’t Enforce a Non-Compete in Ontario
Three drafting failures explain most refusals to enforce a non-compete in Ontario. Geography untethered from where the business operates fails. Duration beyond the time needed to rebuild a client relationship fails. Activity restrictions reaching work the employee never performed fail too.
M & P Drug Mart Inc. v. Norton, 2022 ONCA 398 shows how little it takes. A one-year, 15-kilometre clause barred a pharmacist from being “concerned with, or interested in” any business similar to or competitive with the employer’s.
Tellingly, the Court of Appeal took no issue with the distance or the term. The clause failed purely on the activity restriction, which on its face caught passive investments and non-pharmacy work in a supermarket.
The words on the page govern
Notably, the court also refused to use the parties’ pre-contract negotiations to narrow the text. What the covenant says is what the court reads.
For employees, that reasoning is encouraging. For employers, the message is stark: overreach and Ontario courts will not enforce your non-compete at all.
The one context where courts lean the other way
Commercial covenants play by different rules, and Elsley explained why:
A person seeking to sell his business might find himself with an unsaleable commodity if denied the right to assure the purchaser that he, the vendor, would not later enter into competition.
In Payette v. Guay inc., 2013 SCC 45, the Supreme Court held that covenants given on the sale of a business carry a presumption of validity, and the party challenging one carries the burden of proving it unreasonable. Payette arose under Quebec civil law, although Ontario courts have since taken the same approach.
Dr. C. Sims Dentistry Professional Corporation v. Cooke, 2024 ONCA 388 shows how that plays out on real facts. A dentist sold his Hamilton practice for $1.1 million, with goodwill valued at roughly $741,000, and promised not to practice within 15 kilometres for five years after his association with the practice ended.
When he began working 3.3 kilometres away, the Court of Appeal upheld the covenant. Sophisticated parties with legal advice get held to the bargain they struck. Sims remains the clearest recent example of an Ontario court agreeing to enforce a non-compete.
The reasoning matters enormously for anyone hoping to enforce a non-compete in Ontario after buying a business. Purchasers pay for goodwill, and courts protect what purchasers paid for.
Protecting Your Business Without a Non-Compete
Since you usually cannot enforce a non-compete in Ontario against an ordinary employee, the protection has to come from somewhere else. Fortunately, several tools remain fully available.
Non-solicitation clauses escape the ban, because they restrict solicitation rather than competition. Keep them narrow: limit them to customers the employee actually dealt with, use a defined look-back period, and choose a modest term.
Above all, do not bar the employee from accepting or servicing business that arrives unprompted. That drafting converts a non-solicit into a non-compete in substance, and the clause fails.
Confidentiality and trade secret protection survives Part XV.1 untouched. Define what counts as confidential, state how someone may use it, and require its return or deletion on departure.
Fiduciary duties bind directors, officers and genuinely key employees whether or not anyone signed anything. Those duties prohibit diverting corporate opportunities, soliciting clients and poaching staff.
Departure duties survive even without a covenant for senior staff who are deemed to owe a “fiduciary duty” to the employer. In RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54, the Supreme Court confirmed that ordinary employees may compete after they leave, provided they give reasonable notice and do not misuse confidential information. The branch manager fared far worse. Because he owed a duty to retain the staff he supervised, the Court held him liable for the branch’s lost profits.
Structural protections work quietly too. Deferred compensation, clawbacks, garden leave, IP assignment clauses, and limiting who holds the client list all reduce the damage a departure can do.
Finally, one warning. Do not answer the ban with informal no-poach or wage-fixing arrangements between employers. Those agreements have amounted to a criminal offence under section 45(1.1) of the Competition Act since June 2023.
What to Do Next: When to Call a Lawyer
Speed decides most of these disputes. The usual remedy is an interlocutory injunction, which requires a serious issue to be tried, irreparable harm that damages cannot repair, and a balance of convenience favouring the moving party.
Delay undermines the second and third branches at once. Consequently, waiting months often costs you the case outright, whatever the merits looked like on day one.
Before you spend money trying to enforce a non-compete in Ontario, answer three questions. When was the agreement signed? What office did the employee actually hold? Did a sale of a business form part of the picture?
Next, preserve the evidence: client lists, device and download logs, email forwarding, and the timing of the resignation. Identify which customers have already moved, too, because that drives urgency and damages.
If you are the departing employee, do not assume the clause binds you simply because you signed it. Equally, do not assume the ban protects you, since confidentiality obligations, non-solicits and fiduciary duties operate independently of Part XV.1.
Either way, speak to a litigator before you act rather than afterwards. A demand letter sent on the wrong legal footing hands the other side leverage, while a week of hesitation can hand them your customers.
Ontario’s non-compete rules reward precision and punish guesswork. If you are trying to enforce a non-compete in Ontario, or someone has just threatened to enforce one against you, contact Cowan for a straight assessment of where you truly stand.
