Non-Solicitation and Non-Competition Clauses for Ontario Employees: What Employers Need to Know

When a key employee leaves your business, what stops them from calling your best clients or going to work for your direct competitor the next Monday morning? Ontario employers have historically relied on restrictive covenants — non-solicitation and non-competition clauses — to protect their legitimate business interests after employment ends. The law in this area changed significantly, and employers need to understand what is still available and what is not.

As of writing: Ontario's Employment Standards Act, 2000 includes provisions that affect the enforceability of non-competition agreements for employees. You should verify the current status of these provisions and how they apply to your situation, as this area of law continues to evolve.

The ESA and Non-Competition Agreements

The ESA was amended to address non-competition agreements entered into with employees (as distinct from business-to-business arrangements such as the sale of a business). As of writing, the ESA prohibits employers from entering into agreements with employees that are, in whole or in part, non-competition agreements — with a specific exception.

The exception: The prohibition does not apply to a non-competition agreement that is entered into in connection with the sale of a business or the sale of a person's interest in a business, where the seller becomes an employee of the purchaser after the sale.

This means that if you are a typical employer and you ask a regular employee to sign a non-competition clause in their employment contract, that clause may be unenforceable under the ESA as of writing — regardless of how narrowly it is drafted or how reasonable it seems.

Verify this: The law in this area is developing. Courts and tribunals are still working through the implications of the ESA amendment. Some questions remain about how the amendment interacts with common-law enforceability principles for agreements entered into before the amendment came into force. Consult a lawyer before drafting or relying on any non-competition clause in an employment agreement.

Non-Solicitation Clauses: Still Available (With Conditions)

A non-solicitation clause is different from a non-competition clause. Rather than barring an employee from working in the same industry, a non-solicitation clause restricts the former employee from:

• Soliciting your clients (approaching them to do business elsewhere)
• Soliciting your employees (poaching your staff)

The ESA prohibition described above targets non-competition agreements specifically. Non-solicitation clauses are not captured by the same prohibition and can still be used in Ontario employment agreements — but they must satisfy the common-law test for enforceability.

The Common-Law Test for Restrictive Covenants

Even before the ESA amendment, Ontario courts applied a demanding test to any restrictive covenant in an employment contract. A clause is only enforceable if it is:

1. Reasonable Between the Parties

The clause must protect a legitimate proprietary interest — your confidential information, trade secrets, client relationships, or goodwill — not simply prevent competition. A clause that is broader than necessary to protect that interest will be struck down.

2. Reasonable as to Scope

The clause must be limited in three dimensions:

• Duration: a short, defined period (as of writing, six to twelve months is more commonly upheld; longer periods face more scrutiny — verify with legal advice)
• Geography: limited to the area where the employer genuinely operates and where the employee had real contact with clients
• Activity: limited to the specific activities the employee was engaged in, not all work in the industry

3. Not Contrary to the Public Interest

Courts will not enforce a clause that functions as a general restraint of trade or that prevents an employee from earning a living.

Protecting Confidential Information and Trade Secrets

Even where non-competition clauses are off the table and non-solicitation clauses require careful drafting, employers still have a powerful tool: confidentiality obligations. Employees have both a common-law and a contractual duty not to use or disclose confidential employer information — client lists, pricing models, business strategies, proprietary processes.

A well-drafted confidentiality clause:

• Defines what constitutes confidential information (with examples)
• Confirms the obligation continues after employment ends
• Specifies that returning or destroying confidential information is required on termination
• Addresses electronic data, copies, and notes — not just physical documents

Confidentiality obligations are generally easier to enforce than non-solicitation or non-competition clauses and can be just as effective for many employers.

Practical Advice for Employers

1. Know what you are actually trying to protect. Before drafting any restrictive covenant, identify the real risk. Is it clients walking out the door? Employees being poached? Proprietary business methods being disclosed? Match the remedy to the risk.

2. Use non-solicitation, not non-competition, for most employees. For the vast majority of employees, a non-solicitation clause — with confidentiality — gives you meaningful protection. Reserve more aggressive restrictions for senior executives or truly unique situations, and understand the current ESA landscape before including a non-compete.

3. Draft narrowly. Courts have consistently refused to "blue-pencil" (rewrite) overbroad clauses to make them reasonable. An unenforceable clause is void. A too-broad clause does not become enforceable just because you hoped it would. Draft narrow and specific from the start.

4. Secure the clause properly. A restrictive covenant must be introduced before or at the start of employment, or accompanied by fresh consideration if added later. An employee who signs a non-solicitation clause mid-employment without receiving anything in return (a raise, a promotion, a bonus) may later challenge it.

5. Review existing agreements. If your current employment agreements include non-competition clauses that were signed before the ESA amendment, the enforceability of those clauses against current employees is an open question. Review your template with a lawyer.

Frequently asked questions