On October 25, 2021, amendments to Ontario's Employment Standards Act, 2000 (ESA) took effect, introducing section 67.2 — a provision that bans most non-compete agreements between employers and employees. This was a significant policy shift aimed at increasing labour mobility, particularly in technology and innovation industries. Ontario became the first Canadian province to legislatively ban non-competes by statute (as opposed to relying solely on the common law reasonableness test). This guide explains what section 67.2 means for Ontario employers and employees in 2026.

What Section 67.2 of the ESA Prohibits

Section 67.2 of the ESA states that an employer shall not enter into an employment contract or other agreement with an employee that is or includes a non-compete agreement. A "non-compete agreement" is defined as an agreement, or a provision in an agreement, that prohibits the employee from engaging in any business, work, occupation, profession, project, or other activity that is in competition with the employer's business after the employment relationship ends.

This provision applies to employment contracts entered into on or after October 25, 2021. Existing agreements signed before that date are not invalidated by section 67.2, though they were already subject to the common law enforceability test (discussed below). A non-compete clause in a post-October 2021 employment agreement is void and unenforceable under the ESA — the employer cannot seek to enforce it.

Scope of the Ban: The ban applies to employment relationships under the ESA. It does not apply to agreements entered into in the context of the sale of a business (where a seller agrees not to compete with the business they just sold) — a common and legitimate commercial arrangement. Independent contractor agreements are also not governed by the ESA, though misclassification risk applies.

The Executive Exception

The ESA's ban on non-competes includes one narrow but important exception: it does not apply to a person who is an "executive" — defined in the regulations as a person who holds the position of or exercises the authority of an officer of the corporation or holds one of the following positions: chief executive officer, president, chief administrative officer, chief operating officer, chief financial officer, chief information officer, chief legal officer, chief human resources officer, chief corporate development officer, or any other "C-suite" equivalent. For these executives, a non-compete agreement may still be included in the employment contract.

Importantly, the executive exception does not mean any non-compete against an executive is automatically enforceable — it means the ESA's per se prohibition does not apply. An executive-level non-compete must still satisfy the common law test for enforceability.

The Common Law Test: Still Applies to Executives

For executives (who fall within the exception) and for agreements predating October 2021, the common law enforceability test applies. Canadian courts have historically been reluctant to enforce non-compete agreements unless they are reasonable in the circumstances. The test is whether the restriction is reasonable as between the parties and from the perspective of the public interest. Specifically, a court will consider whether:

Case law analysis of Globex Systems Inc v Kotler and similar Ontario decisions confirms that courts apply these criteria strictly and will not "blue pencil" (partially rewrite) an overly broad non-compete to make it reasonable — an unreasonable clause is simply void.

Non-Solicitation Clauses: Still Valid

While non-compete agreements are largely prohibited, Ontario employers can still protect their interests using non-solicitation clauses. A non-solicitation clause restricts a former employee from:

Non-solicitation clauses are not covered by the ESA ban (section 67.2 is specific to non-compete restrictions). However, they must still be reasonable to be enforceable at common law — overly broad non-solicitation clauses (e.g., covering all clients the employee ever heard of, not just those they personally served) may still be struck down. A well-drafted non-solicitation clause typically restricts direct solicitation of clients the employee had personal contact with, for a period of 12–18 months post-employment.

Don't Mislabel a Non-Compete as Non-Solicitation: Some employers attempt to draft what is functionally a non-compete (prohibiting work in the same industry) but call it a "non-solicitation" clause. Ontario courts look at substance over form — if the practical effect of the clause is to prevent competition (rather than merely preventing solicitation of identified clients), courts will treat it as a non-compete and apply the ESA ban or common law restrictions accordingly.

Client Lists as Trade Secrets

Independent of non-compete and non-solicitation clauses, employers can protect confidential business information — including client lists — through the law of trade secrets and breach of confidence. A departing employee who takes a confidential client list and uses it to solicit the employer's clients may be liable for breach of the implied duty of confidentiality, even without any written agreement, if:

This claim can be pursued even where a non-compete clause is unenforceable. The employer may seek an injunction to prevent continued use of the information and damages for any business lost as a result.

Practical Advice for Employers Post-2021

Given the ESA ban, Ontario employers should review and update their standard employment agreements to: