Legally reviewed by Joseph Mayo, Principal Attorney (Ontario and New York).
Ontario banned most employment non-competes in 2021, and plenty of contracts in the province still contain one. If yours does, the clause is very likely void, which means the protection you believe you have is not there. A non-compete agreement Ontario employers signed with staff on or after October 25, 2021 is prohibited by the Employment Standards Act, 2000 unless it fits one of two narrow exceptions. This guide sets out what the statute actually says, which agreements survive, what an Ontario employer can use instead, and why a clause drafted for New York staff will not do the same job north of the border.
Quick answer
Most non-compete agreements in Ontario are prohibited. Section 67.2 of the Employment Standards Act, 2000 bars employers from entering into a non-compete with an employee, and any such agreement made on or after October 25, 2021 is void. Two exceptions remain: certain business sales, and executives holding a named chief office.
Are non-compete agreements legal in Ontario?
No, not for most employees. Part XV.1 of the Employment Standards Act, 2000 says that no employer shall enter into an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement. That is section 67.2(1). Section 67.2(2) goes a step further and states that where an employer contravenes the prohibition, the non-compete agreement is void.
The distinction matters more than it first appears. A void clause is not a clause a court weighs and declines to enforce. It has no effect at all, so an employer relying on it is relying on nothing. Employers who assume a judge might still trim the restriction back to something reasonable are describing the pre-2021 world.
The timing has a wrinkle that catches people out. Part XV.1 was added by the Working for Workers Act, 2021, which received Royal Assent on December 2, 2021. The Ministry of Labour, Immigration, Training and Skills Development explains in its ESA policy and interpretation manual that Part XV.1 was deemed to have come into force on October 25, 2021, the day the bill was introduced in the Legislature. So the operative date is October 25, 2021, not the Royal Assent date, and agreements entered into from that day forward are caught. (All statutory references in this article are current as of September 2026.)
What counts as a non-compete agreement under the ESA?
Section 67.1 defines a non-compete agreement as an agreement, or any part of an agreement, between an employer and an employee 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. Three features of that definition do real work.
Time limits and geographic limits do not save it
The ministry’s guide to the ESA is explicit that an agreement may be a non-compete whether or not it is time-limited or geographically restricted. A six-month restriction is a non-compete. A restriction with no end date is a non-compete. A restriction limited to 100 kilometres of the workplace is a non-compete, and so is one with no geographic boundary at all. Narrowing the clause does not move it outside the prohibition.
It reaches candidates and former employees, not just current staff
Section 67.1 defines employee to include an applicant for employment, and employer to include a prospective employer. The ministry confirms the prohibition applies before the employment relationship begins, during it, and after it ends. A restrictive covenant tucked into an offer letter sent to a candidate is therefore caught, as is one presented to a departing employee as part of an exit package.
Substance governs, not the heading
The ministry states plainly that when determining whether an agreement falls within the definition, the substance of the agreement is what matters, not the words used. Its own worked example runs the other way from what most employers expect: a clause headed “Non-Competition” that actually stops the employee from contacting former customers is, in substance, a non-solicit, and does not fall into the definition. The heading did not decide it. The obligation did. That cuts both ways, so relabelling a genuine competition restraint as a non-solicit will not rescue it either.
Which non-compete agreements are still allowed in Ontario?
Two, and both are narrower than they sound.
The executive exception
Section 67.2(4) says the prohibition does not apply to an employee who is an executive. Section 67.2(5) then defines executive exhaustively by office held: 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.
This turns on the office a person holds, not on seniority, pay, or how much competitive damage they could do. A vice president of sales with the entire client list in her head is not an executive for this purpose. Giving someone a grander title in order to reach the exception is a strategy that depends on the title being real, and an employment standards officer looking at substance over form is a foreseeable problem.
The sale-of-business exception
Section 67.2(3) permits a non-compete where there is a sale of a business or a part of a business, the purchaser and seller agree that the seller will not compete with the purchaser’s business after the sale, and, immediately following the sale, the seller becomes an employee of the purchaser. Section 67.2(5) adds that sale includes a lease.
Here the statute and the ministry’s plain-language guide are worded differently, and the difference is worth flagging rather than glossing over. The statute says only “a sale of a business or a part of a business”. The ministry’s guide describes the exception as applying where there is a sale or lease of a business or part of a business “that is operated as a sole proprietorship or a partnership”. The statute names no business structure. What the statute does require is that the seller personally becomes an employee of the purchaser, which is a condition an individual can satisfy and a corporate vendor cannot. Whether a share sale of a corporation can fit the exception is exactly the question to put to counsel before signing, not one to resolve from a template. If you are working through a transaction, the structure is usually settled well before closing, at the letter of intent stage.
| Situation | ESA position | Statutory source |
|---|---|---|
| Non-compete with a regular employee, signed on or after Oct 25, 2021 | Prohibited and void | s. 67.2(1), 67.2(2) |
| Non-compete with an executive holding a named chief office | Not prohibited by the ESA | s. 67.2(4), 67.2(5) |
| Non-compete on a business sale where the seller becomes the purchaser’s employee | Not prohibited by the ESA | s. 67.2(3) |
| Non-compete signed before Oct 25, 2021 | Not prohibited or voided by the ESA | Part XV.1, per the ministry manual |
| Non-solicit or confidentiality clause | Not prohibited by the ESA | ESA is silent; common law applies |
A point the ministry repeats after each exception, and which employers skip at their peril: an employee may have greater rights under the employment contract or at common law. Falling outside the ESA prohibition is not the same as being enforceable.
What happens to a non-compete signed before October 25, 2021?
The ESA does not prohibit it and does not void it. The ministry’s manual is direct on this: Part XV.1 does not prohibit or void non-compete agreements entered into prior to October 25, 2021. Older clauses in long-serving employees’ contracts therefore sit outside the statutory ban entirely.
That is not the same as saying they work. Those clauses live or die by the common law, where restrictive covenants in employment contracts have long faced a stricter standard than covenants given on the sale of a business, and where the party seeking to enforce carries the burden. The ministry’s own position is that employees may have greater rights under the common law, and it directs readers with questions about a pre-October-2021 clause to talk to a lawyer.
The practical consequence for an employer is a split file. Contracts signed before October 25, 2021 need a common-law assessment. Contracts signed after it need a statutory one. Running both through the same template review is how stale clauses survive for years, which is one reason a periodic contract review of the employment templates is worth scheduling rather than leaving to the next dispute.
What can an Ontario employer use instead of a non-compete?
The ESA prohibits non-competes. It does not prohibit non-solicitation agreements or non-disclosure agreements, and the ministry says so in terms. Those remain available, along with several protections that never depended on a restrictive covenant at all.
| Tool | Prohibited by the ESA? | What it actually protects | Drafting caution |
|---|---|---|---|
| Customer non-solicit | No | The client relationships the employer paid to build | Define the customer group by real contact, not the whole book |
| Employee non-solicit | No | The team, against being recruited out as a group | Keep the period and the covered employees specific |
| Confidentiality / NDA | No | Pricing, methods, client data, know-how | Define confidential information; perpetual catch-alls invite argument |
| Trade secret protection | No | Information that derives value from being secret | Depends on real secrecy measures, not the clause alone |
| IP assignment | No | Work product and inventions created on the job | Assign at the outset; do not rely on implied terms |
| Notice and garden leave | No | Time, by keeping the person off the market lawfully | Must be paid and must respect ESA minimums |
Two of those deserve emphasis because they carry the weight a non-compete used to. Confidentiality and trade secret protection restrain the use of information rather than the person’s right to earn a living, which is why they sit comfortably where a non-compete now does not. They also depend on what the business actually did to keep the information secret, so the clause is the last step rather than the whole plan. If a departure has already happened and information has walked out with it, the analysis shifts to trade secret misappropriation and the remedies are different from contract enforcement.
The other point is the substance-over-form rule from earlier, applied in reverse. A non-solicit drawn so widely that it stops the former employee from working in the industry is, in substance, a restraint on competition. The heading will not protect it. Ontario employers who respond to the ban by writing an aggressive non-solicit are rebuilding the same problem with different wording. The same discipline applies to arbitration clauses in employment contracts, where the drafting rather than the label determines what survives.
How is the ban enforced, and what does a void clause cost an employer?
Enforcement runs through the Ministry of Labour, Immigration, Training and Skills Development. Employees, applicants for employment and former employees can file a claim if they believe they entered into a prohibited non-compete on or after October 25, 2021. They can also file if they were penalised for refusing to sign one, which the ESA treats as a reprisal. The prohibition reaching applicants means a candidate who was never hired can still complain about the clause in the offer they turned down.
The ESA does not close the courthouse either. Nothing in Part XV.1 stops employers and employees from resolving disputes about the enforceability of non-compete agreements in the courts, whenever the agreement was made.
The cost of a void clause is usually not a penalty. It is the discovery, at the worst possible moment, that the restriction the business was relying on never existed. A senior salesperson leaves for a competitor, the employer reaches for the non-compete, and the clause is void because the person was not a chief anything. Whatever protection the business needed had to come from the confidentiality, non-solicit and IP terms sitting beside it, and if those were left thin because the non-compete was doing the work, there is nothing to fall back on. That is the review worth doing before a departure, not after one.
Does the Ontario ban apply to a company’s New York staff?
No. The Ontario ESA governs employment in Ontario. New York employees are governed by New York law, and the two are not close to each other. Cross-border employers who run one template across both offices tend to get this wrong in both directions: an Ontario clause that is void, and a New York clause drafted to Ontario instincts that gives away more than it needed to.
New York has no statutory ban on employee non-competes. Its courts apply a common-law reasonableness test set out in BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999) and restated by the New York Court of Appeals in Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364 (2015): a restraint is reasonable only if it is no greater than required to protect the employer’s legitimate interest, does not impose undue hardship on the employee, and is not injurious to the public. A violation of any prong renders the covenant invalid, and in New York the employer must prove all three prongs.
The difference that matters most in practice is what happens to an overbroad clause. New York courts have expressly recognised the power to sever and partially enforce an overbroad employee restrictive covenant where the employer has not engaged in overreaching or coercion and has acted in good faith to protect a legitimate business interest. An Ontario non-compete caught by section 67.2 gets no such second chance. It is void.
At the federal level in the United States there is currently no rule to plan around. The Federal Trade Commission’s Noncompete Rule is, in the FTC’s own words, not in effect and not enforceable: a district court stopped enforcement on August 20, 2024, and on September 5, 2025 the Commission voted 3-1 to dismiss its appeals and accede to vacatur of the rule. State law governs. That position is stated as of September 2026 and is worth re-checking before relying on it, because it has moved more than once.
One caution on both sides of the border. Ontario is not Canada, and New York is not the United States. Alberta, British Columbia and the other provinces have no equivalent statutory ban and continue to apply common-law reasonableness, while several US states restrict non-competes by statute and others barely restrict them at all. A lawyer licensed in both Ontario and New York can give one answer for both jurisdictions; a template cannot.
Frequently asked questions
Is a non compete agreement Ontario employers signed in 2023 enforceable?
Almost certainly not. Section 67.2 of the Employment Standards Act, 2000 prohibits employers from entering into a non-compete with an employee, and any such agreement made on or after October 25, 2021 is void. The only agreements that survive involve an executive holding a named chief office or a qualifying sale of a business.
Who counts as an executive under the Ontario non-compete exception?
Section 67.2(5) lists the offices exhaustively: 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. Seniority, salary and influence do not qualify someone on their own.
Does the Ontario ban apply to a non-compete in a job offer?
Yes. Section 67.1 defines employee to include an applicant for employment and employer to include a prospective employer, and the ministry confirms the prohibition applies before the employment relationship begins. A candidate who declined the offer can still file a claim about the clause it contained.
Are non-solicitation agreements still allowed in Ontario?
Yes. The Employment Standards Act prohibits non-compete agreements but does not prohibit non-solicitation or non-disclosure agreements. They remain subject to the common law, and a non-solicit drafted so broadly that it prevents the employee from working in the industry may be treated as a non-compete in substance.
What happens to a non-compete signed before October 25, 2021?
The ESA neither prohibits nor voids it. Its fate is decided by the common law, where restrictive covenants in employment contracts face a strict standard and the party seeking to enforce carries the burden. The ministry directs anyone with questions about such a clause to speak with a lawyer.
Can an Ontario employer keep a non-compete when selling the business?
Section 67.2(3) allows a non-compete on a sale of a business or part of a business where, immediately following the sale, the seller becomes an employee of the purchaser. Sale includes a lease. How the exception applies to a share sale of a corporation is a question to put to counsel before signing.
Does the Ontario non-compete ban apply across Canada?
No. The ban sits in Ontario’s Employment Standards Act and governs employment in Ontario. Other provinces have no equivalent statutory prohibition and continue to assess non-competes under common-law reasonableness, so a national employer cannot apply one clause to every Canadian employee.
How does Ontario compare with New York on non-competes?
New York has no statutory ban and applies the three-part reasonableness test from BDO Seidman v. Hirshberg, with the employer bearing the burden on all three prongs. New York courts may partially enforce an overbroad covenant in some circumstances. An Ontario non-compete caught by section 67.2 is simply void.
Conclusion
Ontario’s position is settled and narrow. Non-competes with employees are prohibited and void from October 25, 2021, and only a qualifying business sale or a genuine chief-office executive falls outside the prohibition. The practical work for employers is not finding a way around section 67.2. It is making sure the confidentiality, non-solicitation and intellectual property terms sitting next to the void clause are strong enough to do the job on their own, and that the New York contracts are drafted to New York law rather than copied across.
How Mayo Law can help
Mayo Law is a cross-border firm with offices in Toronto and New York. Joseph Mayo, the principal attorney, is licensed in both Ontario and New York, which means employment documents for staff on both sides of the border can be reviewed against the law that actually applies to each group rather than harmonised toward whichever version the template came from.
For Ontario employers, that usually means an audit of existing employment agreements to identify void non-competes and the gaps they leave, then rebuilding the protection through employment standards compliance work, tighter confidentiality and trade secret protection, and non-solicitation terms drafted to survive scrutiny. Growing businesses in the province can reach the same team through our Toronto corporate practice and small business services, and our wider compliance and risk management practice covers the employment policies that sit around the contract. For US-side staff, the exempt versus non-exempt classification questions tend to arrive in the same review.
Disclaimer
This article is for general information only and is not legal advice. Reading it does not create a solicitor-client or attorney-client relationship. Employment standards legislation and case law change, and the application of any rule depends on the specific facts of your situation. Statutory references and the sources cited in this article were verified against official government and court sources and are current as of September 2026. Anyone relying on a restrictive covenant, or facing one, should obtain advice on their own contract before acting. Legal services are provided by Mayo Law PC in Ontario and by Joseph Mayo PLLC in New York.
