Non-Compete Clauses in Canada: What Bill C-31 Changes in 2026

What Happened — and Why It Matters Right Now

You've just received a job offer. The contract looks reasonable — until you reach the final page and notice a clause saying you cannot work for a competitor for two years after leaving. You wonder: is this even legal?

If you work in Ontario, the answer is almost certainly no. Since October 2021, Ontario's Employment Standards Act, 2000 has prohibited most employers from including non-compete clauses — contract terms that restrict where you can work after a job ends — in employment agreements. And now, in June 2026, Canada is on the verge of extending that same protection to millions more workers across the country.

Bill C-31, the federal government's Budget 2025 Implementation Act, No. 2, proposes to bring a near-identical ban to every federally regulated workplace in Canada. That means workers at major GTA employers — banks, airlines, telecom companies — may soon have the same protection Ontario employees have had for years.

This article explains what is already law in Ontario, what Bill C-31 would add at the federal level, who is exempt from both bans, and what you should do right now — whether you are an employee reviewing a contract or a small business owner updating your templates. If you have questions about your specific situation, an Ontario employment lawyer can review your agreement and advise you on your rights.

Which Rules Apply to You — Pick Your Situation

The rules that apply to you depend on whether your employer is regulated by the province of Ontario or by the federal government. The quickest way to figure this out is to look at what your employer does.

Questions about federally regulated employees in Ontario — such as whether your employer falls under provincial or federal jurisdiction — can be surprisingly complex. The federal-versus-provincial distinction is based on the nature of the employer's primary business activity, not the province where you work.

Ontario's Ban: What the ESA Has Said Since 2021

A non-compete clause is a contract provision that stops you from working for a competitor, starting a competing business, or otherwise engaging in competitive work after your employment ends. For years, Ontario courts were skeptical of these clauses and often refused to enforce them. Then, in October 2021, Ontario went further: it banned them outright.

On October 25, 2021, Ontario's Working for Workers Act, 2021 (Bill 27) amended the Employment Standards Act, 2000 by adding Part XV.1. That section makes it illegal for Ontario employers to enter into a non-compete clause with an employee. It does not matter how narrowly the clause is written, how short the time period is, or how limited the geographic scope. If a non-compete clause appears in an employment contract signed on or after October 25, 2021, it is prohibited under Ontario law — with two narrow exceptions discussed below.

Contracts signed before October 25, 2021, are not automatically void. Those agreements are still subject to the common law reasonableness test, meaning a court would assess whether the clause is reasonable in scope, duration, and geography. Many pre-2021 non-competes were already being struck down by courts before the ESA ban came into effect. If you have an older contract containing a non-compete, you may still have grounds to challenge it — but the analysis is more fact-specific.

The ESA protection applies to "employees" as defined in the Act. This generally covers individuals working for wages, including those being trained, and homeworkers. If you believe you may have been misclassified as an independent contractor rather than an employee, that is a separate but important question — one worth reviewing with a lawyer, as it affects your rights under Ontario employment contracts more broadly.

The real-world consequences of ignoring this law are significant. In a 2026 Divisional Court decision, ITCAD Tech Inc. v. Patel, a Toronto-area tech employer was ordered to pay a former employee more than $46,000 after attempting to enforce a 12-month non-compete clause that the court found to be contrary to public interest and prohibited under the ESA. The case is illustrative — not every situation will produce the same result — but it shows that Ontario courts are taking the ban seriously.

Bill C-31: The Proposed Federal Ban Explained

While Ontario has had its non-compete ban for almost five years, Canada's federal government has only recently moved to follow suit. On May 6, 2026, the federal government introduced Bill C-31 — the Budget 2025 Implementation Act, No. 2 — which, if passed, would add Division XI.1 to the Canada Labour Code and prohibit most non-compete clauses in federally regulated workplaces.

As of June 2026, Bill C-31 has passed second reading in the House of Commons (June 3, 2026) and has been referred to the Standing Committee on Finance. The bill has not yet received Royal Assent and is not yet law. Its provisions may change before it is enacted. The language used throughout this section reflects that status: "would," "proposes to," and "if enacted."

If Bill C-31 passes in its current form, it would prohibit federally regulated employers from entering into, imposing, or inducing employees to agree to a non-compete clause or related employment restriction. The prohibition would apply to employers in industries such as:

• Banking (e.g., TD Bank, RBC, BMO, Scotiabank)
• Telecommunications (e.g., Rogers Communications, Bell, Telus)
• Air transport (e.g., Air Canada, WestJet)
• Railway and interprovincial road transport
• Broadcasting
• Other industries subject to federal jurisdiction under the Constitution

Together, these industries employ hundreds of thousands of workers in the GTA alone. Many of those workers currently have non-compete clauses in their employment agreements. Under Bill C-31, most of those clauses would become unenforceable once the law comes into force.

The federal government has stated that banning non-competes for these workers would allow Canadians to change jobs more easily, reduce worker exploitation, and improve competition in the labour market. The proposed federal ban closely mirrors Ontario's existing model under Bill 27 — though with some differences in how the exemptions are defined, as explained below.

Employees who are dismissed for refusing to sign a non-compete clause already have recourse under Ontario law. If a similar situation arises in a federal workplace after Bill C-31 is enacted, the new law would also prohibit retaliation — including dismissal, demotion, or discipline — against employees who refuse to agree to a prohibited clause. For context on what dismissal without cause may involve, see our article on wrongful dismissal in Ontario.

Ontario ESA vs. Bill C-31: Side-by-Side Comparison

The table below compares the two regimes across the dimensions that matter most to employees and employers in the GTA. Use this as your reference when reviewing a contract or updating your employment templates.

The most important practical difference between the two regimes is the transition period. Ontario employers had no grace period: the ESA ban applied to new agreements from October 25, 2021, and pre-existing clauses remained subject only to common law. Federally regulated employers, by contrast, would have one full year after Bill C-31 comes into force before their existing non-compete clauses are rendered void. That window is a planning opportunity — but it will close.

The Two Exceptions: When a Non-Compete Can Still Be Enforced

Both the Ontario ESA and the proposed federal regime under Bill C-31 allow non-compete clauses in two narrow situations. These exceptions are far more limited than most people — including many employers — assume.

Exception One: C-Suite Executive Positions

A non-compete clause may be enforceable if the employee holds a genuine executive position. Under Ontario law, and under Bill C-31 as currently drafted, the exemption covers a CEO and certain named executives who report directly to the CEO: President, Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Human Resources Officer (CHRO), Chief Information Officer (CIO), Chief Technology Officer (CTO), and Chief Legal Officer (CLO).

Two conditions must both be met for this exemption to apply. First, the person must hold one of those specific titles or perform equivalent functions. Second, they must be the only employee in that position at the organization. A company with two Co-COOs, for example, may not meet the second requirement.

Directors, Vice Presidents, Senior Managers, and Team Leads do not automatically qualify. This is one of the most common and costly misconceptions employers have. A contract that imposes a non-compete on someone with "VP" in their title, without confirming they genuinely occupy a sole C-suite position, is likely still prohibited. If you are unsure whether the executive exemption applies to your role, understanding your broader employee rights in Ontario is a good starting point.

Exception Two: Sale of a Business

A non-compete clause may also be valid when it is entered into as part of the sale, lease, merger, or transfer of a business — but only if two conditions are met. The seller and purchaser must enter into the agreement that includes the non-compete, and the seller must immediately become an employee of the purchaser as part of that transaction.

The rationale here is straightforward: when you sell a business, the buyer is entitled to protection against you immediately competing against the business they just paid for. That protection has a legitimate commercial purpose that ordinary employment relationships do not.

This exemption does not extend to other employees who happen to work at the business being sold. Only the person who sold the business and became an employee of the purchaser can be subject to a valid non-compete under this exception. A general manager or senior engineer who was not a party to the sale transaction cannot have an enforceable non-compete simply because their employer was acquired.

What Employers Can Still Use: Non-Solicitation and Confidentiality Clauses

Losing the ability to enforce a non-compete does not mean employers are without protection. Ontario law still permits three types of post-employment restrictions that are not affected by the non-compete bans:

Non-solicitation clauses (client-focused) prevent a departing employee from approaching the employer's existing clients or customers for a defined period. Courts will enforce these if they are reasonable in scope, geography, and duration — typically no more than 12 to 24 months. The employee can work for a competitor; they simply cannot actively pursue your client list.

Non-solicitation clauses (employee-focused) prevent a departing employee from recruiting their former colleagues to leave. These protect the employer's investment in its team. Courts treat these similarly to client non-solicitation clauses: they must be reasonable to be enforceable.

Confidentiality and non-disclosure agreements (NDAs) protect trade secrets, proprietary processes, client data, and other confidential business information. These are always enforceable, are not time-limited in the same way, and are the most reliable tool available to employers of all sizes.

Intellectual property (IP) assignment clauses confirm that work created during employment belongs to the employer. These are particularly valuable for tech companies, creative agencies, and any business where employees develop proprietary materials.

For many Ontario small business owners, the practical advice is this: remove any non-compete language from your standard employment agreements, and invest the effort instead in carefully drafted non-solicitation and confidentiality provisions. A well-written non-solicitation clause is legally stronger and far less likely to be challenged than a prohibited non-compete.

Action Steps: What to Do Now — Employee or Employer

Whether the relevant ban is already in force for you or is still approaching, the time to review your situation is now. Use the steps below based on your role.

If you signed a contract in another country before moving to Ontario, or if your employment agreement was drafted outside Canada, it is worth having a lawyer review it. Many newcomers to the GTA have employment agreements that contain non-compete clauses that would be unenforceable under Ontario law — but they may not know it. Ontario law applies to the employment relationship in Ontario regardless of where the contract was originally drafted.

Common Mistakes Employees and Employers Make

• ✕Signing a prohibited non-compete under pressure. Some employers still include non-compete clauses in offer letters, hoping employees will sign without questioning them. Signing does not make the clause enforceable — a prohibited clause remains invalid regardless of your signature — but it can complicate your situation. If you are being pressured to sign a non-compete in an Ontario employment agreement, you can simply refuse, and the employer cannot penalize you for doing so under the ESA.
• ✕Employers assuming the executive exemption covers all managers. The exemption is limited to a small number of named C-suite roles where the individual is the sole occupant of that position. A "Director of Operations," a "VP of Sales," or a "Senior Manager" does not qualify simply because they have a senior-sounding title. Applying the exemption too broadly is a common and costly error.
• ✕Confusing a non-solicitation clause with a non-compete. These are different things. A non-compete stops you from working in the same field entirely. A non-solicitation clause only stops you from actively poaching the employer's clients or staff. Non-solicitation clauses are still valid in Ontario. If your contract contains a non-solicitation clause, you may still be bound by it even after the ESA ban on non-competes.
• ✕Ignoring pre-2021 Ontario contracts. Employees sometimes assume their pre-2021 non-compete is automatically void. It is not. Contracts signed before October 25, 2021, are still assessed under the common law reasonableness test. Many will be unenforceable on those grounds — but that requires a legal analysis of your specific clause, not an automatic assumption.
• ✕Ontario ESA rules do not apply to federally regulated employers. The Employment Standards Act, 2000 is a provincial statute. It does not govern employees at banks, airlines, or telecom companies, even if those companies are based in Ontario. If you work for a federally regulated employer, the ESA's non-compete ban does not currently apply to you — though Bill C-31 would change that if enacted.
• ✕Federally regulated employers waiting until Royal Assent to act. If Bill C-31 passes, federally regulated employers will have one year from the coming-into-force date before their existing non-compete clauses become void. That is a reasonable window — but only if you begin reviewing now. Employers who wait until the law is enacted will have less time and may find themselves making rushed changes to sensitive employment agreements.
• ✕Retaliating against employees who refuse to sign. An Ontario employer who dismisses, demotes, or otherwise punishes an employee for refusing to agree to a prohibited non-compete clause may face a claim under the ESA. This anti-reprisal protection has been in force since 2021. If Bill C-31 is enacted, federally regulated employers would face the same exposure. The cost of a wrongful termination claim far outweighs the cost of removing the clause from your template.

Frequently Asked Questions

Is a non-compete clause in my Ontario employment contract enforceable in 2026?

In most cases, no. Under Part XV.1 of the Employment Standards Act, 2000, a non-compete clause in an Ontario employment contract signed on or after October 25, 2021, is prohibited and unenforceable — regardless of how the clause is worded or how short the restriction period is. Two narrow exceptions apply: the clause may be enforceable if you are a qualifying C-suite executive, or if the clause is part of the sale of a business in which you became an employee of the purchaser.

If your contract was signed before October 25, 2021, the clause may still be challenged under the common law reasonableness test. Many pre-2021 non-competes were already being struck down by Ontario courts. A lawyer can assess whether your specific clause would hold up.

Does Bill C-31 affect me if I work at a bank, airline, or telecom company in Canada?

Yes, if Bill C-31 passes in its current form, it would directly affect employees at federally regulated employers such as banks, airlines, and telecom companies across Canada. The proposed legislation would prohibit those employers from imposing non-compete clauses on most of their employees, mirroring Ontario's existing provincial ban.

As of June 2026, Bill C-31 has passed second reading in the House of Commons and is before committee. It has not yet received Royal Assent and is not yet law. The timeline for enactment is uncertain. Until the law comes into force, your existing non-compete agreement at a federally regulated employer is governed by the common law, which means it may or may not be enforceable depending on its specific terms.

What happens to a non-compete I already signed before the new federal law comes into force?

If Bill C-31 passes, federally regulated employers and their employees would have a one-year transition period after the law comes into force. During that year, existing non-compete clauses would remain in effect. After the transition period ends, those clauses would automatically become void — even if you signed them years earlier.

This is different from Ontario's approach. Ontario's ESA ban applies to new agreements going forward and does not include a transition period for the federal model. If you are a federally regulated employee with an existing non-compete, you would not need to do anything to void it — it would expire automatically under the new law, one year after it comes into force, assuming Bill C-31 passes as written.

Can my employer fire me for refusing to sign a non-compete clause in Ontario?

No. Ontario's Employment Standards Act, 2000 prohibits employers from retaliating against employees who refuse to agree to a prohibited non-compete clause. Retaliation includes dismissal, demotion, suspension, or any other adverse action. If your employer takes action against you for refusing to sign, you may have a claim under the ESA's anti-reprisal provisions.

If the dismissal is framed as "without cause" in order to disguise the real reason, that may also give rise to a wrongful dismissal claim. The circumstances matter, and the strength of your claim depends on the specific facts of your situation.

What is the difference between a non-compete clause and a non-solicitation clause?

A non-compete clause prohibits you from working in the same industry, for a competitor, or in a competing role after your employment ends. It is the most restrictive type of post-employment restriction, and it is now prohibited for most employees in Ontario and proposed to be prohibited for federally regulated employees under Bill C-31.

A non-solicitation clause is narrower. It prevents you from actively approaching your former employer's clients or employees to draw them away — but it does not stop you from working in the same field, serving new clients, or competing in general. Non-solicitation clauses remain enforceable in Ontario if they are reasonable in scope, geographic area, and duration. If your employment agreement contains a non-solicitation clause, it may still be binding on you even though non-competes are banned.

I'm a business owner selling my company — can I include a non-compete in the sale agreement?

Yes. The sale-of-business exemption permits a non-compete clause when a business is sold, leased, merged, or transferred, provided the seller immediately becomes an employee of the purchaser as part of the transaction. This exception applies under both Ontario's ESA and under Bill C-31 as currently drafted.

The rationale is that the buyer is paying for the business and its goodwill, and a non-compete protects the value of what was purchased. However, the exemption applies only to the seller-turned-employee — it cannot be used to impose non-competes on other employees who were not part of the sale transaction. If you are negotiating a business sale that involves a non-compete, having a lawyer review the agreement is advisable to ensure the clause falls within the permitted exemption.

Does Ontario's non-compete ban apply to independent contractors, or just employees?

Ontario's ESA non-compete prohibition applies to "employees" as defined under the Act. If you are classified as an independent contractor rather than an employee, the ban may not automatically protect you in the same way. Non-compete clauses in contractor agreements are still subject to the common law reasonableness test rather than the outright ESA prohibition.

However, if you believe you have been misclassified as a contractor when you are actually an employee in substance, that is a separate and important question. Courts and the Ministry of Labour sometimes re-classify workers based on the actual nature of the working relationship, regardless of what the contract says. If you are unsure about your classification, legal advice is worth seeking before assuming you are not protected.

My employment contract says I'm a VP — does the executive exemption protect my non-compete?

Not necessarily. The executive exemption in Ontario's ESA — and in Bill C-31 as currently drafted — is limited to a specific list of C-suite positions: CEO, President, COO, CFO, CHRO, CIO, CTO, and CLO. A Vice President title does not automatically qualify for this exemption, even if the role carries significant seniority or responsibility.

To qualify, the position must match one of those named roles in function, and the individual must be the only person performing that role at the organization. If your organization has multiple VPs, or if your VP title is more of a market title than a true C-suite function, the exemption likely does not apply to you. The best way to know for certain is to have a lawyer review your specific contract and role description.

Talk to an Employment Lawyer in Toronto or Scarborough

Employment law in Canada is changing quickly. Whether you are an employee who found a non-compete clause buried in your contract, or a small business owner who needs to update your employment agreements, getting the right advice now can save you significant trouble later.

At Nihang Law, Qasim Ali and our team work with employees and employers across Toronto, Scarborough, and the GTA to help them understand their rights and obligations under Ontario employment law. We offer practical, plain-English advice on employment contracts, severance, and workplace disputes — without the jargon.

Contact Nihang Law

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Every legal situation is unique — consult a licensed lawyer before making any legal decisions. The information in this article reflects the law and proposed legislation as of June 2026. Bill C-31 is a proposed bill that has not yet received Royal Assent; its provisions may change before enactment.

About the author

Qasim Ali

Principal Lawyer · Nihang Law Professional Corporation · Toronto & Scarborough, Ontario · Law Society of Ontario

Qasim Ali is the Principal Lawyer at Nihang Law Professional Corporation, serving clients across Toronto, Scarborough, and the broader Greater Toronto Area. He provides full-service legal representation across immigration, real estate, family law, criminal law, civil litigation, employment law, wills and estates, and business law.

Nihang Law is particularly recognized for its depth in immigration and real estate law — a combination that serves newcomers and growing families navigating both legal systems simultaneously.

Learn more about Qasim Ali →

Sources & References

1. Ontario Employment Standards Act, 2000, Part XV.1 — ontario.ca/laws/statute/00e41
2. Working for Workers Act, 2021 (Bill 27) — ontario.ca/laws/statute/s21027
3. Bill C-31, Budget 2025 Implementation Act, No. 2, Parliament of Canada — parl.ca/legisinfo/en/bill/45-1/c-31
4. Government of Canada, Budget 2025: Canada Strong — budget.canada.ca/2025
5. Canada Labour Code, R.S.C. 1985, c. L-2 — laws-lois.justice.gc.ca/eng/acts/L-2/
6. Government of Canada, Federal Labour Standards — canada.ca/en/employment-social-development/services/labour-standards.html
7. Ontario Ministry of Labour, Immigration, Training and Skills Development — ontario.ca/page/employment-standards-act-policy-and-interpretation-manual
8. Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6 — foundational Supreme Court of Canada case on non-compete reasonableness at common law
9. Statistics Canada, Labour Force Survey — Employment by industry: statcan.gc.ca
10. Law Society of Ontario — lso.ca