Are Non-Compete Agreements Enforceable in Ontario?

A non-compete looks like the cleanest protection money can buy. One clause, and the rep who knows all your customers cannot walk across the street and sell against you. It fits on a page. It feels like a fence.

In Ontario, for almost everyone you employ, that fence has not existed since October 2021.

That is the part most owners and sales leaders have not caught up to. The Employment Standards Act was amended by the Working for Workers Act, 2021, and as of October 25, 2021 employers are prohibited from entering into a non-compete agreement with an employee. Not "courts look at them closely." Prohibited. The clause is void.

And here is the quieter cost, the one that does not show up until your best rep resigns... if you were leaning on the non-compete, you probably took your eye off the two clauses that actually still work.

I am in HR. I have pointed at a signed non-compete before like it settled the matter. It did not settle anything. It was a photo of a fence.

Are non-compete agreements legal in Ontario?

For most employees, no. The ESA defines a non-compete agreement as any agreement, or part of one, 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 between the employee and the employer ends." That definition applies no matter how short the time limit or how small the geographic radius.

Since October 25, 2021, employers cannot enter into that kind of agreement with an employee. It does not matter whether the clause sits in an offer letter, a bonus plan, or a separate document. If it meets the definition, it is prohibited, and a prohibited clause is unenforceable.

This is not a rule nobody wanted, either. In an Angus Reid Institute survey of 2,023 Canadian adults, fielded in August 2023, 56% of Ontarians said they support banning non-compete clauses, and 27% of Canadians said they had been subject to one. Those are self-reported poll figures, not audited records, so read them as direction rather than precision. The direction is clear enough... a lot of people signed these, and most of them are relying on paper that no longer holds.

Who is exempt from Ontario's non-compete ban?

Two narrow groups.

The first is executives. The ESA still allows a non-compete with someone who holds the office of 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 chief executive position.

Read that list again, because this is where sales leaders get caught. A VP of Sales is not on it. A national sales director is not on it. Your top-billing account executive is definitely not on it. The exception was written for the C-suite, and courts read exceptions narrowly. Handing someone an impressive title does not move them onto that list.

The second exception is the sale of a business. If someone sells their business, or part of it, and then becomes an employee of the buyer, a non-compete tied to that sale is still allowed. That is a negotiated term between a buyer and a seller, not a routine employment clause.

If your person does not fit one of those two boxes, assume the non-compete is void. Confirm the specifics with employment counsel, because the drafting and the facts matter.

What about non-competes signed before October 25, 2021?

Those are not automatically dead. The ESA prohibition does not reach back in time. In Parekh v. Schecter, 2022 ONSC 302, the Ontario Superior Court confirmed that the prohibition does not apply retroactively, and it enforced a non-compete that had been signed in January 2020.

But do not exhale yet. A pre-2021 non-compete is not measured against the ESA. It is measured against the common law, and the common law has been hostile to these clauses for decades.

If the non-compete is void, what actually protects your sales book?

This is the real question, and it has a good answer.

Ontario never banned the two tools that protect the thing you actually care about... your customers and your confidential information. Non-solicitation clauses and confidentiality clauses remain permitted. A well-drafted non-solicit says a departing rep cannot chase the specific clients and prospects they worked with. A confidentiality clause protects your pricing, your pipeline, and your customer list. Together, that is far closer to what you meant when you reached for a non-compete in the first place.

There is a deeper reason to prefer them. Even before the ESA ban, Canadian courts treated non-competes as restraints of trade that are presumptively unenforceable, with the burden on the employer to prove the clause is reasonable. In Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, the Supreme Court refused to rewrite an overbroad covenant to rescue it, and confirmed that a clause that is ambiguous about time, activity, or geography cannot be shown to be reasonable. The older leading case, Elsley v. J.G. Collins Insurance Agencies Ltd. (1978), set the rule that a court will not enforce a non-competition clause where a non-solicitation clause would have protected the employer's interest just as well.

Put plainly... the courts have been telling employers for over forty years that the non-solicit was the right tool. Ontario just made it official for everyone below the C-suite.

The sales-leadership version of this is simple. Your customer relationships are your market. If the only thing standing between a resigning rep and your accounts is a clause the law erased in 2021, you do not have a protection plan. You have a comfort blanket.

How do you protect your business when a top rep leaves?

Here is the practical version, written as steps and kept general. Confirm the specifics with employment counsel before you rely on any of it.

1. Stop relying on employee non-competes signed after October 25, 2021. For anyone below a genuine chief-officer role, treat them as void and do not threaten to enforce them. Sending a demand letter over a prohibited clause carries its own risk.

2. Get a proper non-solicitation clause drafted, scoped to the clients and prospects the person actually dealt with, for a defined and reasonable period. Vague and overbroad is exactly how these get struck down.

3. Pair it with a confidentiality clause covering customer lists, pricing, and pipeline data, so the information that walks out the door carries far less value.

4. Protect the relationship, not just the paper. A rep who feels fairly paid and well managed is the cheapest non-solicit you will ever have. Comp design and coaching do more to keep a book intact than any clause.

5. Have counsel review your standard employment agreement now, not after a resignation lands. A contract that still leans on a void non-compete is usually a contract nobody has read in three years.

I build a lot of the front end of this... the hiring, the comp design, the sales-leadership structure that makes people want to stay. As a fractional sales and HR executive and retained-search partner in Guelph, Ontario, I see the same pattern often: the protection was never in the clause, it was in how the role was designed and led.

Which is the uncomfortable part. The non-compete was never the fence. It was the thing we reached for so we would not have to build the fence.

*General HR information, not legal advice. Employment law is fact-specific, and it changes... confirm your own situation with employment counsel.*

Key takeaways

• Since October 25, 2021, Ontario's Employment Standards Act (as amended by the Working for Workers Act, 2021) prohibits employers from entering into non-compete agreements with employees, and a prohibited clause is void.

• Two narrow exceptions survive: genuine C-suite executives (a defined list of "chief" offices, plus president) and a person who sells a business and stays on as the buyer's employee. A VP of Sales or a sales director does not qualify as an executive.

• Non-competes signed before October 25, 2021 are not automatically void; they are governed by the common law (Parekh v. Schecter, 2022 ONSC 302)

• Non-solicitation and confidentiality clauses remain legal, and they are what actually protect your customers and confidential information.

• Even before the ban, courts rarely enforced non-competes: they are presumptively unreasonable restraints of trade, and a non-solicit that would do the job makes a non-compete unenforceable (Shafron v. KRG Insurance Brokers, 2009 SCC 6; Elsley v. J.G. Collins Insurance Agencies, 1978).

• 27% of Canadians report having been subject to a non-compete, and 56% of Ontarians support banning them (Angus Reid Institute, August 2023, self-reported poll).

Frequently asked questions

Can my employer still make me sign a non-compete in Ontario?

For most employees, no. Since October 25, 2021 the ESA prohibits employers from entering into a non-compete with an employee, and a prohibited clause is unenforceable. The main exceptions are genuine C-suite executives and the sale-of-business situation. Confirm your own circumstances with employment counsel.

Does a VP of Sales count as an "executive" under the exception?

Almost never. The ESA exception lists specific "chief" offices and the office of president. A VP of Sales, a sales director, or a senior account executive is not on that list, and courts read the exception narrowly, so a big title alone will not qualify.

Is a non-solicitation clause the same as a non-compete?

No, and the difference matters. A non-compete tries to stop someone from working in your field at all. A non-solicitation clause only stops them from going after specific clients or prospects. Non-solicits and confidentiality clauses are still legal in Ontario and are the practical way to protect a sales book.

Are non-competes signed before October 2021 still valid?

They can be. The prohibition is not retroactive, so a pre-October 25, 2021 non-compete is judged under the common law rather than the ESA (Parekh v. Schecter, 2022 ONSC 302). The common law still treats these clauses as presumptively unenforceable unless the employer can prove they are reasonable.

If a non-compete is void, can I ask a court to fix it?

Generally not. In Shafron v. KRG (2009), the Supreme Court of Canada declined to rewrite an overbroad covenant to make it enforceable. If the clause is ambiguous or too broad, it usually fails as written rather than being narrowed by a judge.

Work with Ashley

Ashley Wesley (MA, CHRL, CIM) is a Fractional Sales and HR Executive and retained-search partner based in Guelph, Ontario. he helps owners and CEOs hire, comp, and lead professional sales and leadership talent, and build the sales-leadership structure that keeps a book of business intact. Services: fractional sales executive, fractional HR executive, sales recruiter, and retained and executive search. Learn more at ash@wesleycapital.ca .

References

Angus Reid Institute. (2023, September). Labour mobility: By two-to-one margin, Canadians support banning non-compete clauses.https://www.google.com/url?q=https://angusreid.org/canada-ontario-non-compete-clauses-labour-contracts-law/&source=gmail&ust=1789726206761000&sa=E

Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 S.C.R. 916.

Government of Ontario. (n.d.). Non-compete agreements: Your guide to the Employment Standards Act.https://www.google.com/url?q=https://www.ontario.ca/document/your-guide-employment-standards-act-0/non-compete-agreements&source=gmail&ust=1789726206761000&sa=E

Parekh v. Schecter, 2022 ONSC 302 (CanLII).

Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, [2009] 1 S.C.R. 157.

Torys LLP. (2021, December). Ontario passes Working for Workers Act, 2021.https://www.google.com/url?q=https://www.torys.com/our-latest-thinking/publications/2021/12/ontario-passes-working-for-workers-act-2021&source=gmail&ust=1789726206761000&sa=E

*Verification note: The ESA definition, prohibition date, and the executive and sale-of-business exceptions are verified against the official Government of Ontario ESA guide. Case holdings are verified against law-firm reporting of the decisions (McCarthy Tetrault for Parekh v. Schecter; McMillan LLP for Shafron). Survey figures are self-reported Angus Reid Institute poll data, not audited.*

In short:

In Ontario, non-compete agreements with employees have been prohibited since October 25, 2021 under the Employment Standards Act (as amended by the Working for Workers Act, 2021), so for most workers the clause is void. Two narrow exceptions remain: genuine C-suite executives and someone who sells a business and stays on as the buyer's employee. Non-competes signed before October 25, 2021 are still judged under the common law, which already treated them as presumptively unenforceable. What actually protects a sales team's customers and confidential information is a well-drafted non-solicitation clause plus a confidentiality clause, both of which remain legal.

This content is general HR information, not legal advice.