In Ontario, a non-compete clause in an employment agreement entered into on or after October 25, 2021 is prohibited and void, with only two exceptions: executives holding defined chief-officer titles, and the seller of a business who becomes the buyer's employee as part of the sale (ESA ss. 67.1 and 67.2). Earlier Ontario agreements, and non-compete clauses in British Columbia, are judged under the common law, where a non-compete is a restraint of trade that the employer must prove reasonable, and an ambiguous clause fails (Shafron v. KRG Insurance Brokers, 2009 SCC 6).
Why the question comes up
You signed an offer letter two years ago that said you could not work for a competitor for twelve months after leaving. Now a competitor has made you an offer. The answer depends on three things: the province, the date you signed, and whether you are the kind of employee the law still allows to be bound.
Ontario: the statutory ban
Ontario amended the Employment Standards Act so that employers may not enter into an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement (ESA s. 67.2(1)). A non-compete agreement is one that prohibits the employee from engaging in any business, work, occupation, profession, project or other activity that competes with the employer after the employment ends, whether or not it is limited in time or geography (ESA s. 67.1). A prohibited clause is void (ESA s. 67.2(2)).
Two exceptions remain:
- Sale of a business: where a business or part of a business is sold or leased, the seller immediately becomes an employee of the buyer, and the non-compete is entered into as part of the sale, the clause is allowed (ESA s. 67.2(3)). The Ministry's guide explains this as a business operated as a sole proprietorship or partnership, so a share sale of a corporation is not expected to qualify.
- Executives: a non-compete is allowed for an employee who is an executive, meaning a chief executive officer, president, chief administrative, operating, financial, information, legal, human resources or corporate development officer, or any other chief executive position (ESA s. 67.2(4) and (5)). The list is title-based: a vice-president, director or general manager qualifies only if they actually hold one of the listed offices or another chief executive position.
The ban applies to agreements entered into on or after October 25, 2021 (Working for Workers Act, 2021). Older clauses are not void by statute, but they still face the common law test below, as does an executive or sale-of-business clause that survives the statutory exception.
British Columbia and older Ontario clauses: the common law test
Courts treat non-competes as restraints of trade. A covenant in restraint of trade is enforceable only if it is reasonable between the parties and with reference to the public interest, and the Supreme Court has said that only in exceptional cases will the nature of the employment justify a non-compete rather than a simple non-solicitation clause (Elsley v. J.G. Collins Insurance Agencies, [1978] 2 S.C.R. 916). The onus is on the employer to show the clause is reasonable (Shafron v. KRG Insurance Brokers, 2009 SCC 6, para. 27). An ambiguous restrictive covenant is prima facie unenforceable because reasonableness cannot be shown, and notional severance, reading a clause down to make it enforceable, is not available to cure a defective covenant (Shafron, paras. 27 and 43). In practice, most non-competes against ordinary employees fail.
What employers can still use
Non-solicitation clauses, which stop a former employee from approaching the employer's clients or staff for a period, remain available in both provinces when reasonably drafted. Confidentiality and intellectual property clauses are not non-compete agreements as the ESA defines them, so the Ontario prohibition does not reach them. For Ontario employers, the safe approach since 2021 is a well-drafted non-solicitation clause and clear confidentiality terms rather than a non-compete. The full list of clauses for an offer letter is in our Ontario offer letter article.
Before you accept the competitor's offer, or before you draft a clause
- Which province's law governs the contract?
- When was the agreement signed? In Ontario, on or after October 25, 2021 matters.
- Are you an executive as the ESA defines it, or did the clause arise from a business sale?
- Is the clause a non-compete or a non-solicitation? They are treated very differently.
- How long, how wide and how broad is the restriction?
FAQ
My Ontario contract from 2023 has a non-compete. Is it valid?
For an ordinary employee, no. Non-competes in Ontario employment agreements entered into on or after October 25, 2021 are void, unless the executive or sale-of-business exception applies (ESA s. 67.2).
Does the Ontario ban apply to independent contractors?
The ESA prohibition applies to employees. Whether a contractor is in fact an employee is a separate question, and it decides which rules apply.
Are non-competes banned in British Columbia?
In British Columbia, courts apply the common law restraint-of-trade test from Elsley and Shafron: the employer carries the onus, and an ambiguous or unreasonable clause fails.
Can my employer still stop me from contacting clients?
A reasonable non-solicitation clause can, for a limited period. That is different from a non-compete.
What about the United States?
Rules vary by state, and several states, California among them, restrict or void non-competes. OptiMaxWork AI covers US state rules as well.
Want to know whether your specific clause binds you? OptiMaxWork AI asks which province, when you signed and what role you held, then checks official sources and shows them, in English or Korean. Ask your question.
For information only, not legal advice, and no lawyer-client relationship is created. Figures and rules were checked against the Ontario Employment Standards Act, 2000 (ss. 67.1 and 67.2), ontario.ca Your guide to the ESA (Non-compete agreements) and Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6 on CanLII, and against an OptiMaxWork AI verified report, then reviewed by an SHRM-SCP. Confirm current sources before acting.