Non-compete clauses are contractual provisions that restrict an employee’s ability to work for competitors or start a competing business after leaving their job. While once common in Ontario, recent legal reforms have significantly limited their enforceability. This blog explores your rights if asked to sign a non-compete agreement, the current legal landscape in Ontario, and steps to protect your interests.

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1. Understanding Ontario’s Legal Framework for Non-Competes‍

In 2021, Ontario’s Working for Workers Act, 2021 (Bill 27) introduced sweeping changes, rendering most non-compete clauses void and unenforceable for employees. Key exceptions include:

• Executives: Defined as high-level employees (e.g., CEOs, CFOs) with significant influence over the organization.
• Sale of a Business: Non-competes tied to the sale of a business (to protect the buyer’s investment) remain enforceable.

For all other employees, non-competes are generally prohibited. Employers may still use non-solicitation or confidentiality agreements, which are more likely to be upheld if reasonable.

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2. What to Do If Asked to Sign a Non-Compete

Step 1: Review the Agreement Carefully

• Identify whether the clause is a non-compete (prohibiting competition) or a narrower restriction (e.g., non-solicitation of clients).
• Confirm if you qualify as an “executive” or if the clause relates to a business sale.

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Step 2: Seek Legal Advice

Consult an employment lawyer to:

• Assess the clause’s enforceability under Ontario law.
• Clarify risks and obligations.
• Explore negotiation opportunities.

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Step 3: Negotiate Terms

If pressured to sign:

• Request removal of the non-compete clause entirely.
• Propose alternatives (e.g., a limited non-solicitation clause).
• Ensure any restrictions are tied to fair compensation or benefits.

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Step 4: Document Everything

Keep records of communications and revisions. If the employer insists on an unenforceable clause, note that Ontario law may invalidate it regardless.

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Step 5: Understand the Consequences of Refusal

If refusing to sign jeopardizes your job, seek legal guidance. Employers cannot legally terminate you solely for refusing an unlawful non-compete.

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3. Enforceability Factors in Ontario

Even if a non-compete falls under an exception, courts assess its reasonableness by evaluating:

• Scope: Restrictions must be narrowly tailored to protect legitimate business interests (e.g., trade secrets).
• Duration: Six months to one year is typical; longer periods face skepticism.
• Geographic Range: Must align with the employer’s operational area (e.g., not global for a local business).
• Consideration: The employee must receive something of value (e.g., a promotion, bonus) in exchange for signing.

Ontario courts are increasingly strict, often siding with employees unless the clause is demonstrably reasonable.

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4. Alternatives to Non-Compete Clauses

Employers may use legally safer tools, such as:

• Non-Solicitation Agreements: Prohibit poaching clients, customers, or employees.
• Confidentiality Clauses: Protect trade secrets and proprietary information.
• Garden Leave: Paid notice periods where employees stay home but remain on payroll, delaying their start with a competitor.

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5. Key Takeaways

• Most non-competes in Ontario are void unless you are an executive or selling a business.
• Do not assume a signed clause is enforceable—courts prioritize fairness and reasonableness.
• Negotiate aggressively and consult a lawyer to avoid unnecessary restrictions.

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Conclusion

While non-compete clauses are largely unenforceable for Ontario employees, understanding your rights and taking proactive steps is critical. Always seek legal advice before signing any restrictive agreement, and remember that the law prioritizes your ability to earn a living. By staying informed, you can navigate these situations confidently and protect your career mobility.

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Free Consultation with London Employment Lawyers

Ontario’s laws provide critical protections for employees during mass layoffs, ensuring they receive fair notice, severance pay, and support. If you’re affected by a group termination, understanding your rights and seeking professional advice can help you navigate this challenging time and secure the compensation you deserve. Please do not hesitate to contact our experienced Ottawa employment lawyers for a free legal consultation. Randy Ai Law Office can be contacted at (548) 489-2006 or fill out the contact form.

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