In the News: Ontario Government Proposes Ban on Non-Compete Agreements, Among Other Changes
The Ontario government has proposed new legislation that prohibits employers from having their employees sign non-compete agreements, along with other employee-friendly changes, such as a “disconnect from work” policy.
The proposed legislation was introduced on October 25, 2021 and is part of Bill: 27 Ontario’s Working for Workers Act, 2021. The Bill proposes a ban on non-compete agreements, which have been used by employers (especially in the tech industries) to prevent employees from leaving a company for a new job with a direct competitor.
If Bill 27 is passed, the Employment Standards Act, 2000 will be amended, and Ontario would be the first Canadian province to ban non-compete clauses in employment contracts.
We’ve highlighted 2 of the proposed changes below:
1) Non-Competes: Employers will be banned from entering into non-compete agreements with their employees. This relates to an employee finding a job with a competitor after employment, however the amendment doesn’t prevent an employer from prohibiting an employee from competing with the employer’s business during employment or using non-competes tied to the sale of a business.
The proposed legislation doesn’t stop employers from protecting their confidential information, intellectual property and client relationships through other means, such as non-solicitation clauses and non-disclosure agreements.
As it’s been written, the ban on non-competes will be effective as of October 25, 2021 and doesn’t seem to retroactively apply to non-competes entered into prior to that date. However, since the legislation has only been carried through first reading, it remains subject to change.
2) “Disconnect from Work” Policy: Employers with 25 or more employees (as of January 1 each year) must create a disconnect from work policy by March 1 of that year. The policy must relate to the practice of not engaging in work-related communication (ex: phone, text, email) past a certain hour of the day. The goal is to alleviate the employee from any work obligations after hours.
The policy will have to be written and a copy of the policy must be provided to all employees within 30 days of the preparation of the policy. An employer will also be required to retain a copy of every written policy on disconnecting from the workplace for 3 years after the policy ceases to be in effect.
Going forward, we recommend that employers review their employment agreements and consider whether they will continue to use a non-compete clause. Bill 27 hasn’t passed yet, however non-competes have always been risky, as courts may not uphold them. In order to continue to protect your business, employers should look at the enforceability of their non-solicitation clauses and make sure they have proper confidentiality agreements in place. If you have 25 or more employees, it’s also a good idea to start to consider your after-hours work policies.
If you need any legal support for your business, don’t hesitate to email us at info@awelegal.com.
Also, don’t forget to check out our lawyer drafted contract templates at AWE Contracts.