Written by Katelyn Weller, Carl Cunningham and Sara Parchello
As you may have heard or read in our earlier blog, Ontario Introduces Employee-Friendly Legislation Which Includes Prohibition on Non-Competes, the government introduced Bill 27: Working for Workers Act, 2021 in late October 2021. Bill 27 has now passed and received Royal Assent on December 2, 2021.
Bill 27, as originally introduced, included a prohibition on non-compete agreements between employers and employees except in the context of a sale of business. However, prior to the Bill being finalized and becoming law, it was amended to include an additional exception for executives. This means that for certain "chief executive positions," post-employment non-competes may be permissible under the Employment Standards Act, 2000 (the ESA). Bill 27 defines executive as "any person 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 or chief corporate development officer, or holds any other chief executive position." The government has not yet issued any further guidance with regards to the interpretation of "executives," but in the interim we would expect that Employment Standards will likely take a substantive view of "executive" and may look at the actual duties of an employee rather than basing it on titles alone (e.g., putting "chief" in an employee's title may not be enough to permit the use of a non-compete if their duties do not reflect that of a "chief executive position," as defined).
While the added exception for executives in the ESA is positive news for employers, employers still need to draft their non-compete provisions in a focused manner and be mindful that non-competes for executives may still be challenged at common law as potentially being a restraint of trade.
As reported in Ontario Introduces Employee-Friendly Legislation Which Includes Prohibition on Non-Competes, Bill 27: Working for Workers Act, 2021 included many other employee-friendly changes to various pieces of employment-related legislation, besides the ban on non-competes, including:
- requiring employers with 25 or more workers to have a "Disconnect from Work" policy;
- requiring recruiting and temporary help agencies to be licensed;
- prohibiting certain regulated professions from including a Canadian experience requirement as a qualification for an internationally trained professional to obtain a license;
- requiring businesses to allow for washroom access for delivery workers; and
- using Workplace Safety and Insurance Board (WSIB) surpluses to assist with COVID-19 recovery as well as streamlining employer remittances.
While the ban on non-competes is effective retroactively as of October 25, 2021, in general the changes contemplated under Bill 27 came into effect upon Royal Assent on December 2, 2021. However, employers with 25 or more employees do have until June 2, 2022 to become compliant with the "Disconnect from Work" policy requirement. We understand that the government will issue more guidance on this policy requirement in early 2022.
- No employer should now enter into a non-compete with an employee unless the employer is entering into the non-compete as part of a sale of a business or with an executive. As such, employers may wish to review their non-solicitation and related provisions to ensure that they are likely to be enforceable. Non-competes for executives should also still be reviewed by employment counsel for enforceability issues.
- Employers with 25 or more employees may wish to start considering what a "Disconnect from Work" policy will look like for their organization, but should likely wait to draft such a policy until further guidance is issued in early 2022 about particular requirements of that policy. Currently, we do not believe that such guidance will require "Disconnect from Work" policies to prohibit work outside of regular work hours, but instead simply state what the employer's expectations are regarding working outside of regular working hours. However, until further guidance is issued, we cannot be certain of what will need to be covered in the policy.
- Employers who use recruiting and temporary help agencies will need to ensure their compliance with licensing requirements.