Federal Budget 2025: Key Changes Impacting Employers
The federal government’s 2025 Budget introduces major reforms aimed at strengthening worker protections and increasing employer accountability. Two measures in particular will affect employers in Ontario and British Columbia: a $77 million investment to tackle worker misclassification and wage theft, and a plan to restrict non-compete clauses in federally regulated workplaces.
$77 Million to Address Worker Misclassification and Wage Theft
Starting in 2026–27, the Canada Revenue Agency (CRA) will receive $77 million over four years, plus $19.2 million annually, to enhance compliance efforts against employers who misclassify workers as independent contractors.
According to Budget 2025, misclassification, often used to avoid income tax, Canada Pension Plan (CPP), and Employment Insurance (EI) contributions, denies workers key legal protections and benefits. The government also plans to increase penalties for wage theft, defined as the failure to pay workers compensation they are lawfully owed.
The trucking sector is a major focus. The budget lifts the moratorium on reporting fees for services and proposes amendments to the Income Tax Act and Excise Tax Act to allow CRA to share information with Employment and Social Development Canada (ESDC) to identify and address worker misclassification.
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Restrictions on Non-Compete Agreements
The federal government will amend the Canada Labour Code to restrict non-compete clauses for federally regulated employers, including those in banking, telecommunications, and interprovincial transportation. Consultations on the proposed changes are set to begin in early 2026.
The budget states that non-compete clauses “reduce competition and undermine labour market efficiency.” Limiting their use is expected to increase worker mobility, support fair competition, and boost wages and productivity.
This change aligns with recent trends in Ontario, where most non-competes are already prohibited under the Working for Workers Act, 2021, and B.C., where courts take a narrow view of restrictive covenants.
As Christopher Achkar, employment lawyer and founder of Achkar Law, explains:
“With every federal budget comes new compliance challenges for employers. Understanding these changes early, and getting the right legal advice, can help your business stay compliant, competitive, and protected from costly mistakes.”
What Employers Should Do
Employers in Ontario and B.C., particularly those operating across provinces or in federally regulated sectors, should take proactive steps now to prepare for these changes:
- Review contractor arrangements to confirm proper worker classification.
- Audit payroll records to ensure CPP, EI, and tax compliance.
- Update employment contracts to remove or revise non-compete clauses.
- Stay informed on upcoming consultations and proposed penalty increases.
- Seek legal guidance before restructuring contractor or employment relationships.
Moving Forward
These initiatives mark a significant shift in how the federal government enforces employment standards and regulates workplace practices. Employers who act early to review their policies, contracts, and classifications will be best positioned to stay compliant and reduce risk.
Contact Achkar Law
Achkar Law advises employers across Ontario and British Columbia on employee classification, employment contracts, and compliance matters.
Contact us to discuss how these Budget 2025 measures may affect your organization.
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©