Restrictive covenants show up in Ontario employment contracts all the time, sometimes as a quick clause near the end, sometimes as a whole separate “post-employment obligations” section. And a lot of people still treat them like harmless boilerplate.
In Ontario, that’s risky now, especially for non-competes. Between the Employment Standards Act (ESA) amendments and years of strict court decisions, both employers and employees need a realistic picture of what these clauses actually do, and when they will (and won’t) hold up.
Understanding Restrictive Covenants: Non-Compete vs. Non-Solicitation in Ontario Employment Law
These clauses are cousins, not twins:
- Non-compete clauses try to stop a former employee from working for a competitor (or starting a competing business) after employment ends.
- Non-solicitation clauses usually aim to stop a former employee from actively going after the employer’s clients, customers, or sometimes employees for a period of time.
A quick “real life” distinction:
- If the clause says “you can’t work in this industry,” that’s a non-compete.
- If it says “you can work wherever, but don’t poach our customers,” that’s typically a non-solicit.
Courts generally prefer employers to protect themselves with narrower tools, non-solicits and confidentiality clauses instead of broad “you can’t compete” bans. This fits with long-standing Supreme Court of Canada decisions like:
- RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54
- Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6
Both decisions underline the same theme: restrictive covenants in employment are restraints of trade and will be enforced only if they are clear, reasonable, and tied to a legitimate business interest.
Visual: Non-Compete vs. Non-Solicitation (Ontario context)
| Feature | Non-Compete Clause | Non-Solicitation Clause |
| Main goal | Block competition itself (working in/operating a competing business) | Protect relationships (clients, customers, staff) |
| Typical wording | “You shall not engage in any business competitive with…” | “You shall not solicit any client/employee of…” |
| ESA status (post–Oct 25, 2021) | Largely prohibited in employment, except limited cases | Still allowed, but scrutinized as restraint of trade |
| Court attitude | Historically disfavoured in employment; now mostly banned by statute | More acceptable if clearly and narrowly drafted |
| Better for… | Very limited executive/sale-of-business contexts | Most ordinary employment relationships |
The 2023 Legal Shift: Why Most Non-Compete Clauses Are Now Unenforceable in Ontario
The “big change” people felt around 2022–2023 wasn’t a sudden new case, it was the practical impact of Ontario’s statutory ban on most employment non-competes starting to sink in.
1) ESA Prohibition on Non-Competes (Effective October 25, 2021)
Ontario amended the Employment Standards Act, 2000 to prohibit employers from entering into non-compete agreements with employees (with narrow exceptions).
A “non-compete agreement” is any agreement that stops an employee, after employment ends, from engaging in any business, work, occupation, profession, project, or other activity that is in competition with the employer.
Key point: if a clause walks and talks like a non-compete, calling it something else (for example, “non-solicit”) does not save it. Substance beats label.
2) The Two Main Exceptions
The ESA ban does not apply in two broad situations:
- Sale of business
- In many sale-of-business transactions, a non-compete between the buyer and the seller (who then becomes an employee of the buyer) can still be valid, because it is tied to the sale of goodwill rather than just an employment relationship.
- See the ESA and Government of Ontario guidance on non-competes in sale-of-business contexts: Ontario – Employment Standards.
- Certain executives
- The ESA permits non-compete agreements with specific top-level executives (think CEO, president, CFO, COO, CIO, CHRO or similar C-suite roles).
- Even then, the clause must still be reasonable under common law. The ban just says “you’re allowed to try”; it doesn’t guarantee enforcement.
3) What About Older Contracts?
If the non-compete was signed before October 25, 2021, the ESA amendment does not automatically wipe it out. Those clauses are generally assessed under traditional common-law principles:
- Is the restriction clear, specific, and unambiguous?
- Is the scope (time, geographic area, activities) no broader than necessary?
- Is there a legitimate interest that can’t be adequately protected by a non-solicit or confidentiality clause instead?
4) Even “Allowed” Non-Competes Are Hard to Enforce
In all contexts, courts remain reluctant to enforce non-competes in employment relationships. They’ve repeatedly said:
- Ambiguity is usually fatal; courts don’t like re-writing or “fixing” bad clauses.
- If a non-solicit or confidentiality clause can do the job, a non-compete is often seen as overkill.
So in practice, post–October 25, 2021, most Ontario employees should not be seeing enforceable non-competes in standard employment contracts at all.
Non-Solicitation Agreements: Enforceable Standards and Common Pitfalls
Non-solicits are still very much “on the table” in Ontario but they are absolutely not “set it and forget it.” Courts view them as restraints of trade, especially in employment, and scrutinize them carefully.
What Courts Tend to Look For
A non-solicitation clause has a better chance of being enforced when it is:
- Clear: written in plain language with minimal mushy wording
- Narrowly tailored : focused on real business interests, such as client relationships, goodwill, or key employees
- Reasonable in time: often months, not years (exact reasonableness depends on the role and industry)
- Reasonable in scope: clearly defines who you can’t solicit, and what “solicit” actually means
Supreme Court of Canada decisions like Elsley v. J.G. Collins Insurance Agencies Ltd., 1978 CanLII 7 (SCC) and Payette v. Guay inc., 2013 SCC 45 discuss how non-solicits and non-competes are assessed, and how a non-solicit can start to look like a non-compete if drafted too broadly.
Common Drafting Pitfalls
Patterns that often get employers into trouble:
- Overbroad “everyone we’ve ever heard of” customer definitions
- If “customer” includes every past, present, and prospective lead in any CRM ever, it can function like a stealth non-compete.
- “Solicit” defined so broadly it captures passive business
- If the clause stops the former employee from doing business with someone even when the client reaches out first, courts may see it as more than just non-solicitation.
- Ambiguity or internal contradictions
- Confusing, inconsistent, or poorly defined terms can sink the entire clause. If a covenant can be reasonably read two ways, the employee usually gets the benefit of the doubt.
- Trying to use a non-solicit as a backdoor confidentiality clause
- Courts are more comfortable with direct protection of confidential information and trade secrets than with broad bans on competing. If you’re really trying to guard sensitive data, a clear confidentiality provision is usually the right tool.
A Practical “Sweet Spot” for Non-Solicits
In plain English, many defensible non-solicits tend to:
- Target clients/customers the employee actually dealt with or had material contact with (often within a defined lookback period, like the last 6–12 months), and
- Last for a reasonable time after termination (commonly 6–18 months, depending on the context).
Visual: Non-Solicitation Drafting – Bad vs. Better
| Topic | Better (More Likely to be Enforceable) | Bad (Risky Approach) |
| Who is covered | Limit to clients the employee actually serviced or influenced, with a lookback window | Define “client” as any past, present, or potential contact in any database |
| Time period | Use a specific, reasonable term (for example, 6 months) | Use multi-year restrictions with no real justification |
| Definition of “solicit” | Focus on active outreach (calls, emails, targeted proposals) | Treat any business—even where the client initiates—as “solicitation” |
| Employees | Limit non-poaching to employees the person supervised or worked closely with | Ban contact with any employee of any affiliate worldwide |
| Relationship to confidentiality | Pair a reasonable non-solicit with a strong confidentiality clause | Try to use a non-solicit to block all competitive activity generally |
Compliance Obligations and Risk Management for Ontario Employers
Ontario employers now face two overlapping layers of risk: statutory compliance and common-law enforceability.
- Statutory risk: breaching the ESA non-compete ban (post–October 25, 2021).
- Common-law risk: having restrictive covenants (especially non-solicits) struck down in court.
A Practical Risk-Management Checklist
- Review your templates immediately
- If your standard Ontario offer letter for non-executives still contains a non-compete, you almost certainly have a problem under the ESA.
- Review and update employment contracts, promotion letters, equity/bonus plans, and any “side letters” that contain restrictive covenants.
- If you rely on the executive exception, document why
- Avoid defining positions by just adding the word “executive”; it must be more than just a job title.
- Internal records should show meaningful executive authority (decision-making, reporting lines, responsibilities).
- Use layered protections instead of a single “don’t compete” hammer
- Better protection with less legal risk often comes from a combination of:
- Confidentiality/trade secret clauses
- IP ownership and assignment provisions
- Narrowly tailored non-solicits
- Return-of-property/data obligations
- Offboarding procedures that remind departing staff of ongoing duties
- Better protection with less legal risk often comes from a combination of:
- Be careful with “deemed solicitation” language
- Some contracts say “if a client follows you, that counts as solicitation.” That’s the kind of wording that can turn a non-solicit into something closer to a non-compete.
- Train HR, recruiters, and managers
- Make sure the people issuing offers know:
- Non-competes are generally off-limits in Ontario employment (except narrow cases).
- Reusing U.S. or other non-Ontario templates can be dangerous.
- Telling candidates, “We can enforce this no matter what,” is risky when the clause may be void under the ESA.
- Make sure the people issuing offers know:
- Be methodical when hiring from competitors
- Ask candidates up front whether they are subject to non-solicit, non-compete, or confidentiality obligations.
- Request a copy of their current employment agreements (with their consent) for legal review where necessary.
- Adjust territory, client allocation, or duties to respect reasonably enforceable restrictions and reduce litigation risk.
Visual: Employer Risk Checklist Snapshot
| Risk Area | Key Question | Example Action Item |
| ESA compliance | Do any Ontario non-executive employees have non-competes signed after October 25, 2021? | Remove non-competes from templates; get legal advice on cleanup strategy. |
| Executive carve-out | Are we relying on the “executive” exception appropriately? | Align titles, job descriptions, and authority with true executive status. |
| Non-solicit drafting | Are our non-solicits narrow, clear, and role-specific? | Tighten client/employee definitions and duration; avoid “everyone, everywhere, forever” language. |
| Offboarding | Do we consistently remind departing staff of obligations? | Implement a standardized offboarding script and written reminder. |
| Hiring from competitors | Do we check for existing restrictive covenants? | Add covenant questions to intake forms; involve legal where restrictions look aggressive. |
Protecting Your Rights: What Ontario Employees Should Know Before Signing
If you’re an employee in Ontario staring at a stack of contract documents, here’s how to think about restrictive covenants in real-world terms.
1) Don’t assume it’s enforceable just because it’s in the contract
Post–October 25, 2021, most employment non-competes in Ontario are prohibited by the ESA for non-executive employees. Sometimes, a clause appears in a contract even though it’s effectively “dead on arrival” under the statute.
That doesn’t mean you should ignore it. But it does mean: if a non-compete worries you, you can and should ask questions.
2) Figure out what type of clause you’re dealing with
Labels can mislead. A clause might be called “Non-Solicitation” but actually say something like “you can’t work for a competitor for two years” – that’s really a non-compete in disguise.
Scan for phrases like:
- “any business similar to or competitive with”
- “in any capacity whatsoever”
- “any prospective customer”
- “anywhere the employer does business”
These often signal aggressive restrictions that go beyond pure non-solicitation.
3) Watch for “quietly extreme” wording
Red flags that should make you slow down:
- Extremely broad client definitions (for example, any person who ever “expressed interest”)
- Restrictions on “directly or indirectly” dealing with any client or prospect
- Rules that say accepting business even when the client approaches you first, counts as prohibited solicitation
- Multi-year restrictions that feel disconnected from your role
Sometimes there’s a reasonable version of the clause hiding in there, but you won’t know unless you read it carefully.
4) Ask the obvious questions (even if it feels awkward)
If a clause seems like it could limit your future job options, it’s reasonable to ask your prospective employer:
- Why is this restriction needed for my role?
- Can we narrow it to clients I actually service or supervise?
- What is the shortest reasonable duration for this restriction?
- Can we clarify that passive acceptance of business (where clients approach me) is not “solicitation”?
Many employees are surprised to learn that these terms are negotiable, especially at the offer stage or when accepting a promotion.
5) Remember older clauses can still matter
If you signed a non-compete or non-solicit before October 25, 2021, the ESA ban may not automatically erase it. Enforceability becomes a traditional common-law question (scope, clarity, reasonableness). Courts remain strict about overly broad or ambiguous clauses.
6) Plan your move carefully when changing jobs
Even without a valid non-compete, you still have obligations:
- While employed: a duty of loyalty and good faith, you generally can’t secretly compete with your current employer.
- After leaving: continuing duties not to misuse confidential information or trade secrets, and to return company property.
Practical tips when you switch roles:
- Don’t forward client lists, pricing, or strategy documents to your personal email or devices.
- Don’t solicit clients or co-workers for your new employer until after your employment has ended and, if bound by a non-solicit, until that period expires.
- Keep copies of your signed contracts and any correspondence about your post-employment obligations.
- Consider independent legal advice if you’re in a senior, client-facing, or technical role with heavy restrictions.
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