Non-Compete Agreements in Ontario: Are They Enforceable After the 2022 Ban?

The Key Exception: Sale of a Business

Non-compete agreements are still enforceable when:

• They are part of the sale of a business
• The seller becomes an employee of the purchaser immediately after the sale

This protects the buyer’s investment and goodwill.

This is known as the “sale-of-business exception.”

Are Non-Competes Enforceable Under Common Law?

Before the ESA ban, courts already treated employment non-competes with skepticism.

Courts would only enforce a non-compete if it was:

• Reasonable in duration
• Reasonable in geographic scope
• Necessary to protect legitimate business interests

Even today, commercial (non-employment) non-competes may still be enforceable if they meet strict legal standards.

Are Non-Competes Legal in Ontario for Executives?

The ESA ban does not automatically exempt executives.

However, courts may treat restrictive covenants differently in commercial transactions involving:

• Shareholders
• Partners
• Owners selling their businesses

Whether a clause is enforceable depends on substance, not title.

Are Pre-2021 Non-Compete Agreements Still Valid?

Ontario’s ban is not retroactive.

Non-competes signed before October 25, 2021:

• Are not automatically void
• May still be challenged under common law reasonableness standards

Many older agreements fail due to overly broad restrictions.

What About Independent Contractors?

Independent contractor agreements are not automatically protected by the ESA.

However:

• Courts may analyze the true nature of the relationship.
• If the contractor is effectively an employee, the ban may apply.

Misclassification is common in these cases.

Can an Employer Enforce a Non-Compete Against Me?

In most employment situations today:

• The answer is likely no.

Employers are more likely to rely on:

• Non-solicitation clauses
• Confidentiality agreements
• Fiduciary duty obligations

Those may still be enforceable.

What Happens If You Breach a Non-Compete?

An employer may attempt to:

• Seek an injunction
• Claim damages
• Threaten litigation

However, many employment non-competes are unenforceable and used primarily as deterrents.

Legal review is critical before assuming the clause is valid.

Should You Be Worried About a Non-Compete Clause in Ontario?

If you signed a non-compete:

• Check the date it was signed
• Confirm whether it relates to a business sale
• Assess whether it is employment or commercial
• Evaluate whether it is overly broad

Many non-compete clauses in Ontario are not enforceable.