Non-compete Ontario: The old rules are dead. Here’s how to protect your business now

For years, the non-compete agreement was a standard tool in an employer’s toolkit. But for Ontario businesses, the game has changed completely. Relying on old contracts isn’t just outdated—it’s illegal and leaves your business exposed.

This isn’t a reason to panic. It’s a mandate to get smarter. The old rules are dead, but your need to protect your client lists, trade secrets and top talent is more critical than ever. This guide is your new playbook. It’s a straightforward plan to help you understand the new landscape and use the powerful, legal tools you still have to keep your business secure.

Ontario’s non-compete ban: What every employer must know

The ground has shifted for Ontario employers. Bill 27, also known as the Working for Workers Act, 2021, made most non-compete agreements illegal. This was a major change and understanding it is the first step to protecting your business properly. This isn’t about a loss of control; it’s about adapting to a new reality.

Understanding Bill 27 and the Working for Workers Act

The Ontario government enacted this legislation for a clear reason: to boost the economy by increasing labour mobility. The goal was to stop employers from unfairly restricting an employee’s ability to earn a living and find new work in their field. It was a decisive move to empower workers and shift the balance.

When the ban took effect: October 25, 2021

This date is critical. The ban on non-compete agreements is not retroactive. It applies to any employment agreement entered into on or after October 25, 2021. Any non-compete clause you’ve included in a new hire’s contract since that date is void and unenforceable, with only a couple of very specific exceptions.

So what exactly counts as a non-compete in the eyes of the law?

What exactly is a non-compete agreement under Ontario law?

Simply put, a non-compete agreement is any clause in an employment contract that tries to prohibit an employee from working for a competitor or starting a similar business for a set period of time after they leave your company. The government’s definition is intentionally broad to capture any attempt to limit an employee’s future work opportunities.

Time and location limits don’t save you

This is a point many employers miss. In the past, you might have been able to enforce a “reasonable” non-compete clause—one with tight restrictions on time, geography and the type of work. That is no longer the case. Under the new law, even a perfectly reasonable non-compete agreement is banned for most employees. The old tests for reasonableness are now irrelevant.

While the ban is sweeping, it’s not absolute. There are two very narrow exceptions.

The two exceptions: When non-competes are still allowed

The law provides two specific and limited situations where a non-compete agreement can still be valid. These aren’t loopholes for you to exploit; they are explicit exceptions for unique circumstances.

Exception #1: In the sale of a business

If you are buying a business, you are also buying its value and goodwill. To protect that investment, you can require the seller of the business—who may continue on as your employee for a time—to sign a non-compete agreement. This prevents them from immediately turning around and opening a competing business across the street, destroying the value of what you just purchased.

Exception #2: For the C-suite

The law also provides an exemption for true “executives.” The legislation defines an executive as any person who holds the office of chief executive officer, president, chief financial officer, chief operating officer or any other chief executive position. This exception is for the highest level of leadership only. It does not apply to senior staff or mid-level managers, no matter how important their role is.

With non-competes off the table for over 99% of your team, you need a new strategy.

The new playbook: Your alternatives to non-competes

The non-compete is gone, but your need to protect your business isn’t. The good news is that the legal tools you should have been using all along are still powerful and effective. These aren’t weaker options; they are the smarter, more enforceable options.

The Non-Solicitation Agreement: Your first line of defence

This is your new go-to clause. A non-solicitation agreement prevents a former employee from actively poaching your clients or your other employees for a reasonable period. This is your key tool for protecting your revenue streams and preventing a departing employee from gutting your team. When drafted correctly, these clauses are perfectly legal and enforceable in Ontario.

The Confidentiality and Non-Disclosure Agreement (NDA): Your vault

Your NDA is arguably your most powerful protective tool. It prevents employees from ever—during or after their employment—sharing or using your confidential information, trade secrets and proprietary data. This is what protects the “secret sauce” of your business, from client lists and pricing models to marketing plans and software code. A well-drafted confidentiality clause has no expiration date.

The critical difference: Compete vs. Solicit

Think of it this way:

• A non-compete says, “You can’t play in the same league as us after you leave.” (Now banned).
• A non-solicit says, “You can play in the league, but you can’t try to steal our specific players or our dedicated fans.” (Still legal and your best strategy).

The first option is gone. The second is how you protect your business now. 

Protecting your IP and client lists post-ban

Legal documents are just one part of the equation. You also need strong internal controls to protect your most valuable assets.

Strengthen your confidentiality clauses

Be explicit in your employment agreements about what you consider “confidential information.” Don’t be vague. List concrete examples like customer and supplier lists, financial information, pricing strategies, marketing plans, business processes and internal reports.

Protect client relationships with a strong non-solicitation clause

To make your non-solicitation clause enforceable, it must be reasonable. That means it should be limited in time (e.g., 6-12 months after employment ends) and scope. For example, you might restrict the employee from soliciting only the clients they personally worked with or had access to confidential information about.

Lock down your trade secrets

Practical steps are just as important as legal ones. Use password protection and tiered access controls on sensitive digital files. Mark important documents as “Confidential.” And, critically, conduct exit interviews where you remind departing employees—in a positive and professional way—of their ongoing confidentiality obligations.

So, what should you do right now?

Best practices for every Ontario employer

Here is your immediate action plan to ensure you are compliant and protected in 2026.

Step 1: Audit all your existing employment contracts

Pull up your standard offer letter and employment agreement templates immediately. If they contain a non-compete clause, you must remove it for all future hires (unless they fall into one of the two narrow exceptions). Leaving it in, even by accident, can create legal complications.

Step 2: Beef up your non-solicitation and confidentiality clauses

Simply deleting the non-compete isn’t enough. You must proactively strengthen the clauses that are still legal and enforceable. Review your non-solicitation and confidentiality clauses. Are they clear? Are they specific? Are they reasonable? This is the moment to make them ironclad.

Step 3: Train your managers

Your managers are on the front lines of protecting your business. They need to understand what’s changed. Train them on the importance of protecting confidential information and make sure they know never to ask candidates in an interview about non-compete agreements they may have signed with former employers.

What’s next? 

Relying on outdated, illegal documents is a risk you can’t afford to take. It’s time to adapt your strategy and protect your business the right way. 

Take command of your contracts, protect your hard-earned assets and move forward with the confidence that comes from knowing your business is secure.

Ready to future-proof your business?