Non-Compete and Non-Solicitation Clauses in Canada

A non-compete clause tells a departing employee they cannot go work for a competitor, or start a competing business, for some period of time after they leave. A non-solicitation clause is narrower. It only stops a departing employee from actively pursuing the old employer's clients or staff. Employers in Canada use both, often in the same contract, but whether either one actually holds up if challenged depends heavily on which province the employee works in and what kind of clause is at issue.

This matters because Canada does not have one national rule on non-competes. Ontario has banned them outright for most employees. Every other common law province and territory treats them as presumptively unenforceable unless the employer can prove they are reasonable. Quebec regulates them through the Civil Code rather than through employment standards legislation or common law doctrine. This article walks through each regime, explains why non-solicitation clauses tend to fare better than non-competes, and looks at a federal proposal that could add a fourth layer for employees of federally regulated businesses.

Non-Competes Are Not Governed the Same Way Across Canada

Employment law in Canada is mostly a provincial matter, and non-compete clauses show how much that varies. Three frameworks operate side by side. Ontario has a statutory ban. The rest of the common law provinces and territories, including British Columbia, Alberta, and every Atlantic province, rely on a judge-made reasonableness test that goes back decades. Quebec applies its own Civil Code provisions instead.

A federally regulated employer, such as a bank, airline, telecommunications carrier, or interprovincial transportation company, sits somewhat apart, since the employment relationship is federally regulated even though the employee physically works in a particular province. A bill before Parliament would add a fourth non-compete regime for those employers specifically, covered further below.

Ontario Has Banned Non-Compete Agreements

Ontario is currently the only province with an outright statutory ban. Part XV.1 of the Employment Standards Act, 2000, added by the Working for Workers Act, 2021, prohibits an employer from entering into an employment contract or other agreement with an employee that is, or includes, a non-compete agreement. The prohibition took effect October 25, 2021, and a non-compete agreement entered into on or after that date is void.

The Ontario government's guidance defines a non-compete agreement broadly: any agreement, or part of one, that prohibits an employee from engaging in any business, work, occupation, profession, project, or other activity competing with the employer's business after employment ends. That broad definition means the ban is not limited to clauses labelled non-compete. A restrictive clause that functions the same way can be caught under a different heading.

There are two exceptions. The first applies where a business, or part of one, is sold or leased and the seller becomes an employee of the purchaser as part of that transaction, since the non-compete there is tied to the sale rather than an ordinary employment relationship. The second applies to named senior executive roles: chief executive officer, president, and other chief officer positions (administrative, operating, financial, information, legal, human resources, and corporate development officers, or any other chief executive position). Outside those two carve-outs, a non-compete entered into after October 25, 2021 with an Ontario employee is void, and an employee, applicant, or former employee asked to sign one can bring a claim to the Ministry of Labour.

A non-compete signed before October 25, 2021 is not automatically voided by this law. It can still be challenged, but under the common law reasonableness test described next, not the statutory ban.

Outside Ontario: The Common Law Reasonableness Test

Everywhere else in Canada outside Quebec, a non-compete clause is governed by common law, and the starting position is skeptical. Courts treat a covenant restraining a former employee from competing as a restraint of trade, which is presumptively unenforceable unless the employer can show it is reasonable. The employer carries the burden of proof.

The leading modern authority is the Supreme Court of Canada's decision in Shafron v KRG Insurance Brokers (Western) Inc. The Court held that if a restrictive covenant is ambiguous or drafted more broadly than necessary to protect the employer's legitimate business interest, in scope of activity, geography, or duration, a court will generally not save it by rewriting it down to something reasonable. So-called notional severance, where a court mentally substitutes a narrower term for the one the parties actually wrote, is not an available fix for an employment restrictive covenant. Blue-pencil severance, simply deleting an offending phrase, is only available in the rare case where what is removed is a trivial part of the clause, not central to what it does. In practice, this means a vaguely worded or overreaching non-compete is much more likely to be struck down in its entirety than trimmed into something a court will enforce.

The underlying reasonableness test traces back further, to the Supreme Court of Canada's decision in Elsley v J.G. Collins Insurance Agencies Ltd. That case set out the analysis courts still use: first, whether restricting competition at all is even necessary to protect the employer's legitimate interest, or whether a less restrictive tool, such as a non-solicitation clause, would do the job. Second, if a non-compete really is needed, whether its scope in time, territory, and restricted activities goes no further than necessary. A legitimate interest generally means confidential client relationships, trade connections, or specialized know-how built up at the employer's expense, not simply a wish to keep a trained employee from competing.

Non-Solicitation Clauses Are Usually Easier to Enforce

A non-solicitation clause only stops a departing employee from actively pursuing the former employer's clients, customers, or staff for a defined period. It does not stop the employee from working in the same industry, for a competitor, or from starting a competing business, as long as they are not soliciting people connected to the old employer.

Because a non-solicitation clause restricts far less of an employee's ability to earn a living, Canadian courts applying the Elsley framework will often refuse to enforce a broader non-compete where a non-solicitation clause would have adequately protected the employer's client relationships. That does not make every non-solicitation clause automatically valid. It still has to be reasonable in what it covers and how long it lasts, and the employer still bears the burden of showing that. As a category, though, non-solicitation clauses face a lower bar than non-competes everywhere outside Ontario's flat statutory ban, and Ontario's ban itself does not extend to non-solicitation clauses, which remain assessed under ordinary common law principles even for Ontario employees.

Quebec's Civil Code Approach

Quebec does not rely on the common law restraint-of-trade doctrine used elsewhere in Canada. Non-competition clauses in employment contracts are instead governed by articles 2089 and 2095 of the Civil Code of Québec.

Article 2089 allows an employer and employee to agree, in writing and in express terms, that the employee will not compete with the employer, or participate in a competing enterprise, even after the contract ends. The stipulation must be limited as to time, place, and type of employment to what is necessary to protect the employer's legitimate interests, and the burden of proving the clause is valid rests on the employer, the same allocation used in the common law provinces.

Article 2095 adds a limit specific to Quebec: an employer cannot rely on a non-competition clause if it terminated the employee without a serious reason, or if it itself gave the employee such a reason to resign. An employer that ends the relationship without cause, or pushes the employee out through its own conduct, generally cannot then enforce a non-compete against that employee.

A Federal Ban Is Being Considered

As of mid-2026, a bill before Parliament would extend something close to Ontario's approach to federally regulated employers. A division of Bill C-31, the Budget 2025 Implementation Act, No. 2, would amend the Canada Labour Code to prohibit a federally regulated employer from agreeing to, or imposing, a non-compete clause or similar restriction on an employee, subject to exceptions that track Ontario's, for a business sale and for senior leadership roles including the chief executive officer.

The bill passed second reading in the House of Commons in June 2026 and is currently before a House committee. It still needs committee review, a possible report stage, third reading in the House, three readings in the Senate, and royal assent before becoming law. It is not in force, and nothing about the current federal non-compete rules has changed yet. Anyone working for a federally regulated employer should watch for updates rather than assume the ban already applies.

Non-Competes Are Not the Same as Confidentiality Obligations

It is worth separating non-compete and non-solicitation clauses from confidentiality and trade secret obligations, a different kind of promise. A confidentiality clause does not stop a former employee from working anywhere. It stops them from using or disclosing the employer's confidential information, such as client lists, pricing, proprietary processes, or trade secrets, after they leave.

Because a confidentiality obligation does not restrain where someone can work, it is not treated as a restraint of trade the way a non-compete is, and it is generally enforceable across Canada, including in Ontario after the non-compete ban and in Quebec, regardless of whether an accompanying non-compete clause would hold up. An employer that cannot enforce a non-compete against a former employee may still be able to act if that employee takes confidential files, client data, or trade secrets to a new job.

What This Means in Practice

A garden-variety non-compete, one that simply tries to keep a former employee out of the same line of work, is often unenforceable outside a business sale or senior executive context, whether because Ontario bans it outright or because a court elsewhere finds it broader than necessary. A well-drafted, narrow non-solicitation clause protecting real client relationships has a much better chance. A confidentiality or trade secret clause stands on its own footing regardless of any non-compete in the same document.

Whether a specific clause will actually be enforced depends on its exact wording, the province, the role, and how the employment ended, which is why a general overview cannot predict how a particular clause will come out. For related topics, see Canada employment law and Canadian law by province.

Disclaimer

This article provides general information about non-compete and non-solicitation clauses in Canadian employment law. It is not legal advice and does not create a lawyer-client relationship. Whether a specific clause is enforceable depends on its exact wording, the province or territory involved, the nature of the role, the circumstances of termination, and other case-specific facts. Legislation and pending bills referenced here can change. Anyone who has signed, or is being asked to sign, a non-compete or non-solicitation clause, or who is considering leaving a job where one applies, should speak with a licensed employment lawyer in their province before relying on any general information in this article.