Ontario releases guidance on prohibition of non-competes in Ontario

The Ontario Ministry of Labour, Training and Skills Development has recently confirmed that the amendments to the Ontario Employment Standards Act, 2000, under Bill 27, do not prohibit non-compete agreements that were entered into before October 25, 2021 nor does Bill 27 prohibit the use of non-solicit agreements or non-disclosure agreements.

We previously wrote about the recent decision of Parekh et al v. Schecter et al, 2022 ONSC 302 (“Parekh”), where the Ontario Superior Court of Justice confirmed that the Ontario Employment Standards Act, 2000, as amended by Bill 27, the Working for Workers Act, 2021, does not prohibit non-compete agreements signed prior to October 25, 2021.

The Ontario Ministry of Labour, Training and Skills Development (“MLTSD”) has released guidance confirming its interpretation of the prohibition on entering into non-compete agreements under Bill 27. Specifically, under the recent guidance, it is the MLTSD’s position that non-compete agreements entered into before October 25, 2021 are not prohibited by Bill 27.

The MLTSD’s guidance also clarified that Bill 27’s prohibition on entering into non-compete agreements does not apply to non-solicit agreements or non-disclosure agreements. Employers are wise to remember, however, that when determining whether an agreement meets the definition of a “non-compete agreement,” the substance of the agreement is what matters, not the words or terminology used to label the agreement.

Finally, the MLTSD’s guidance reiterated that the exception to the prohibition on non-compete agreements for “executives” remains circumscribed to any person who holds the office of:

• president;
• chief administrative officer;
• chief operating officer;
• chief financial officer;
• chief information officer;
• chief legal officer;
• chief human resources officer;
• chief corporate development officer; and/or
• any other chief executive position.

It is important to remember that the guidance documents published by the MLTSD do not have the force of law.  However, such guidance could be persuasive in the interpretation of the Ontario Employment Standards Act, 2000 and therefore should not be disregarded by employers.

If you have any questions about the impact of Ontario’s prohibition on non-compete agreements, do not hesitate to contact any lawyer in our Ontario Employment and Labour Law Group.   

This article provides only general information about legal issues and developments, and is not intended to provide specific legal advice. Please see our disclaimer for more details.