Recent legislative changes have further narrowed the scope of when such agreements are legal
Canada’s approach towards restrictive covenants, particularly post-employment non-competition agreements, is rapidly transforming. Across the country, courts continue to scrutinize non-competition agreements rigorously, with Ontario imposing a legislative prohibition within the employment context, subject to specific exceptions.
Federal competition law reform has introduced criminal liability for certain restraints while also expanding the scope of civil remedies and related mechanisms. In the 2025 Federal Budget released on Nov. 4, 2025, the Government of Canada announced plans to amend the Canada Labour Code to restrict non-competition provisions within employment contracts for federally regulated employers, including those in the banking, telecommunications, and transportation industries.
The trend is clear: except in the sale of a business context and certain narrowly defined exceptions, non-competition agreements are increasingly disfavoured and should be generally avoided. Non-solicitation clauses, confidentiality provisions, and reliance on common law duties that survive the termination of the employment relationship should be the preferred tools.
Ontario is the only province to statutorily prohibit post-employment non-competition agreements for most employees. Since Oct. 25, 2021, the Employment Standards Act, 2000 voids agreements...
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