Changes to the Employment Standards Act - The Right to Disconnect and the Rule Against Non-Compete Agreements

Bill 27: Changes to the Employment Standards Act

The Right to Disconnect was added to the Employment Standards Act, 2000, S0, c. 41 (“ESA”) on December 2, 2021, as part of the Working for Workers Act, 2021, S.O. 2021, c. 35 – Bill 27 (The “Act”).

Bill 27 made numerous changes to the ESA, including provisions about the right to disconnect Ontario, and also changes to the enforceability of non-compete clauses within an employment agreement. 

It is important to understand these changes as the changes affect both employers and employees. 

What is the Right to Disconnect?

The Right to Disconnect Ontario is not a right in and of itself. It is a minimum standard that requires employers with 25 or more employees to have a written policy on an employee’s ability and right to disconnect Ontario from the workplace. The guiding principle of the legislation is to set clear boundaries on when and how employees are able to disconnect from their work duties. Employers operating in Ontario must have a written policy that must be distributed to their employees. 

With the recent passing of the legislation, employers have great flexibility in how they can prepare their policies. While stricter formalities and requirements are expected in the near future, employers currently have free reign on what the policies can include. However, employers must make certain that any written policy does not violate the ESA and provide less than the minimum benefits found under the ESA. 

What is a non-compete agreement?

A non-compete clause is a term of an employment contract used to restrict employees from competing with their former employer following the cessation of employment. 

Prior to beginning an employment relationship, an employer may subject their employees to agree to a non-compete clause as part of the employment agreement. The employer’s goal of having a non-compete clause is to be able to protect their business from having their former employees working for their competitors. 

Since the passing of the Act, non-compete clauses are now prohibited except where the employee in question is an executive. 

What is the rule against non-compete agreements?

Under the ESA non-compete agreements are no longer enforceable in employment law. This means that employers can no longer subject prospective employees to employment agreements that contain non-compete clauses. Even if an employee has agreed to enter a non-compete agreement, such a contract will be held void under the ESA

Non-compete agreements became unenforceable with the passing of the Act. However, because the Act was passed on October 21, 2021, non-compete agreements that were entered into prior to this date may still be enforceable. Where there is any uncertainty as to whether a specific non-compete agreement is enforceable it is always prudent to seek legal advice.

The rule against non-compete agreements is not absolute. There are several exceptions where a non-compete agreement entered into after October 21, 2021, may still be enforced. 

Are there any exceptions to the rule against non-compete agreements?

There are two situations in which the rule against non-compete agreements does not apply. 

The first situation involves the sale of a business. If a business is sold in part or wholly, and the seller subsequently becomes a partner or an employee of the buyer then the rule may not apply. Specifically, if as part of the sale the seller agrees to a non-compete agreement then they are restricted from engaging in certain business activities that may be in competition with the buyer. 

The second situation involves employees with executive roles. The ESA defines an executive role as including the following titles: 

  • President
  • Chief Executive Officer
  • Chief Financial Officer
  • Chief Operating Officer
  • Any other Chief Executive role

An employee that has entered into a non-compete agreement prior to starting any of the mentioned roles or titles may be restricted in engaging in certain business activities upon the cessation of their employment. These business activities may include starting a business that competes with their former employer or subsequently working for a competing business.

Contact Achkar Law

If you are unsure about the implications of the Act on your workplace, our team of experienced employment and human rights lawyers at Achkar Law can help.

Contact us by phone toll-free at 1 (800) 771-7882 or email us at [email protected], and we will be happy to assist.

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