Should a family business succession plan include a non-competition clause for children who don't take over?

It's worth considering, but a non-competition clause needs to be drafted carefully to actually hold up. Ontario employment law now restricts the use of non-compete clauses for employees generally, though an exception typically applies where the clause is tied to the sale of a business, which is often exactly the situation in a succession plan, where a child stepping back gets bought out of their ownership interest. Whether a particular clause falls inside or outside that exception can depend on how the succession is structured, so this is a detail worth confirming with a lawyer rather than assuming either way.

Beyond that threshold question, courts generally scrutinize non-competition clauses closely and will only enforce ones that are reasonable in scope, geography, and duration — an overly broad clause risks being struck down entirely rather than just narrowed. For a family business, a non-compete aimed at a child who's leaving the business, rather than staying on as an owner, can help protect the value of what the remaining family members are keeping, but it should be paired with fair compensation for that child and clear, limited terms, not used as a blanket restriction.