Non Compete Agreements In Canada. What You Can And Cannot Enforce
If you rely on non compete agreements in the US, you need to understand that the landscape in Canada is fundamentally different.
Ontario effectively banned non-competes for most employees in 2021. Other provinces apply strict reasonableness tests that frequently render them unenforceable.
If you’re hiring Canadian employees and planning to use the same restrictive covenant template you use in the US, it will almost certainly fail.
Ontario’s Non Compete Ban
Effective October 25, 2021, Ontario amended the ESA to prohibit non-compete agreements for most employees. The only exceptions are C-suite executives (defined narrowly) and non-competes agreed to in connection with the sale of a business, such as Ontario where non-competes are generally void for most employees, subject to limited ESA exceptions.
For all other employees, a non compete clause is void and unenforceable, regardless of what the contract says.
Other Provinces
- British Columbia – Non competes are not banned by statute but BC courts apply strict reasonableness tests. The clause must be limited in scope, geography, and duration, and must protect a legitimate business interest. BC courts generally scrutinize hostile to broad non competes.
- Alberta – Courts apply a similar reasonableness analysis. Overly broad non competes are regularly struck down.
- Québec – Non competes are governed by the Civil Code of Québec. They must be limited in terms of activity, territory, time, type of employment, and the employer must prove validity.
What You Should Use Instead
- Non Solicitation Clauses – Preventing a departing employee from soliciting your clients or employees is generally more enforceable than a blanket non compete. The clause must still be reasonable in scope and duration.
- Non Disclosure Agreements – Protecting confidential information and trade secrets is enforceable across all provinces when properly drafted.
- IP Assignment Clauses – Ensuring that work product created during employment is assigned to the employer. Essential for technology and consulting roles.
- Garden Leave Provisions – Paying the employee to stay away from competitors during their notice period. This can achieve similar results to a non compete without the enforceability issues.
How Bridgewater TI Handles It
We draft restrictive covenants that reflect the enforceability standards of the specific province where each employee works. We do not use a one size fits all template.
An Ontario employee gets a contract without a non compete (because it’s banned). A BC employee gets narrow, carefully scoped provisions that have a chance of surviving judicial scrutiny.
Every clause is drafted to protect your interests within the boundaries of what Canadian Law allows.
Need Restrictive Covenants That Actually Hold Up?
Book a call. We’ll draft province specific provisions that protect your business.