As previously discussed in our December 6, 2021 blog post, Ontario’s Employment Standards Act, 2000 (“ESA”) was recently amended to include a prohibition on non-competition clauses in employment agreements, subject to limited exceptions. The prohibition does not apply to agreements with executive-level employees, nor does it apply in a merger and acquisition context where the seller agrees not to compete with the purchaser’s business post sale and becomes an employee of the purchaser immediately following the sale.
The Ontario Superior Court recently considered these legislative amendments in Parekh et al v. Schecter et al, 2022 ONSC 302 (CanLII), where it confirmed that the prohibition only impacts non-compete agreements entered into on or after October 25, 2021. Non-compete agreements entered into prior to October 25, 2021 are not affected by the legislative amendments.
What does this mean for employers? Going forward, employers should refrain from including non-compete clauses in employment agreements unless the agreement is with an executive-level employee or the agreement is entered into in the context of a merger or acquisition. Note that in this context, only the President and executive-level employees with “Chief” in their title are considered “executives”. In addition, the introduction of these legislative amendments presents a good opportunity for employers to review other clauses in their employment agreements to ensure compliance with employment standards.
If you have any questions concerning the legislative amendments or the enforceability of existing non-compete clauses, please contact Tiffany O’Hearn Davies or your regular Norton Rose Fulbright Lawyer.
