Federal Budget Proposals Affecting Employers

As part of the Government of Canada's 2025 budget released on November 4, 2025 (the Budget), the federal government announced an intention to revise the Canada Labour Code to restrict the use of non-compete clauses in employment agreements for federally regulated employees subject to the Canada Labour Code.

The Budget did not provide details of the proposed non-compete ban, but we can anticipate that it will likely be a broad ban with limited exceptions similar to the ban in Ontario's Employment Standards Act, 2000, given the rationale behind proposing such changes is to reduce barriers to labour mobility. As you may recall, Ontario introduced restrictions on non-competes in the employment context  in October 2021 (more details can be found in our previous blog. As a result, in Ontario, non-competes are prohibited for employees except for chief level positions and in limited circumstances related to the sale of a business.

The federal government intends to engage in consultations in early 2026 with regards to the proposed changes to the Canada Labour Code.

In addition to the restrictions on non-competes, the Budget also indicated that the federal government intends to introduce legislative and regulatory changes to crack down on two other employment related matters:

• Misclassification of Workers (i.e., classifying someone as an independent contractor when they should be classified as an employee); and
• Wage Theft (i.e., employers that do not pay workers the wages they have earned).

To address these issues, the federal government proposes to (among other things):

• provide funding to the Canada Revenue Agency (CRA) to implement a program that addresses non-compliance related to personal services businesses;
• amend the Income Tax Act and the Excise Tax Act to allow the CRA to share information with the Department of Employment and Social Development Canada for the purpose of addressing worker misclassification; and
• substantially increase the penalties imposed on federally regulated employers who commit wage theft.

We will continue to monitor these developments and provide updates. Federally regulated employers that want to have a say in the potential revisions to the Canada Labour Code should watch for information on the consultations in the new year.