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Protecting a business’s client relationships, intellectual property, and competitive position is a key concern for many employers—especially when a valued employee departs. It’s not uncommon for employers to include non-compete or non-solicitation clauses in employment contracts with the aim of limiting the employee’s ability to harm the business after leaving. However, in Ontario, the enforceability of these clauses is a complex legal issue, and recent legislative changes have made it even more important for employers to tread carefully.
Many business owners assume that a non-compete clause offers a blanket shield against competition from former employees, but Ontario courts have consistently taken a cautious and often critical view of such restrictions. Worse yet, if drafted improperly, restrictive covenants can be struck down entirely—leaving the employer with no post-employment protections at all.
In this blog, we explain the difference between non-compete and non-solicitation clauses, explore recent legal developments that affect their enforceability in Ontario, and outline practical steps employers can take to protect their legitimate business interests. We also highlight how AMAR-VR LAW can help you develop enforceable, strategic post-employment restrictions tailored to your business needs.
Understanding Restrictive Covenants: What’s the Difference?
Non-competition clauses and non-solicitation clauses are both types of restrictive covenants. They aim to restrict an employee’s conduct after their employment ends—but they do so in different ways.
A non-compete clause prevents a former employee from working for or starting a business that competes with their former employer, usually within a specific geographic area and for a limited period of time. These clauses are considered highly restrictive because they limit the former employee’s ability to earn a living in their field.
A non-solicitation clause, on the other hand, is generally more limited in scope. It prohibits a former employee from actively soliciting the employer’s clients, customers, or employees for their own benefit or the benefit of a competitor. Non-solicits are considered less severe because they do not prevent the individual from working elsewhere, only from targeting the former employer’s business relationships.
Courts have long preferred non-solicitation clauses over non-competes due to their more reasonable approach to balancing the interests of employers with the rights of employees. That preference has now been reinforced by changes to Ontario’s employment legislation.
The Working for Workers Act and the Ban on Non-Compete Clauses
In 2021, the Ontario government introduced the Working for Workers Act, 2021, which made significant amendments to the Employment Standards Act, 2000 (ESA). One of the most consequential changes was the introduction of a statutory prohibition on non-compete agreements for most employees in Ontario.
Under the amended ESA, non-compete clauses are prohibited in employment agreements signed on or after October 25, 2021, with very limited exceptions. Specifically, the prohibition does not apply in two situations:
- Executives: Non-compete agreements may still be used for employees who hold an executive position (such as CEO, CFO, or President). The law defines “executive” narrowly, and it’s essential to seek legal advice to determine whether an employee qualifies.
– - Sale of a Business: If a person sells their business (or a substantial part of it) and, as part of the sale, agrees not to compete with the buyer, the non-compete clause is enforceable—provided the individual becomes an employee of the purchaser immediately after the sale.
Outside these exceptions, non-compete clauses in employment agreements are void and unenforceable, regardless of whether they are reasonable.
This change represents a significant shift in Ontario employment law. Employers must now focus more than ever on carefully drafted non-solicitation and confidentiality clauses to safeguard their business interests.
The High Legal Standard for Enforceability
Even when non-solicitation or permissible non-compete clauses are used, courts apply a high standard when assessing whether they are enforceable. The leading principle is that restrictive covenants must be reasonable in scope, and must protect a legitimate business interest. Courts will not enforce a clause that is overly broad, vague, or designed primarily to stifle competition.
To be enforceable, a restrictive covenant must be:
- Reasonable in geographic scope: A clause that restricts the employee from soliciting clients “anywhere in the world” is unlikely to hold up unless the employer can justify that scope. The territory should reflect where the business actually operates or has a significant customer base.
– - Reasonable in duration: Restrictions that last for several years are likely to be struck down. Generally, a period of 6 to 12 months is considered acceptable, depending on the employee’s role and access to sensitive information.
– - Clearly worded: Vague language can render a clause unenforceable. For example, a non-solicit clause that prohibits soliciting “anyone the employee dealt with” may be considered too ambiguous unless it defines terms like “solicit” and specifies the group of clients or employees it covers.
– - Tied to a legitimate business interest: This could include protection of confidential information, client relationships, or goodwill. Employers must be able to demonstrate that the restriction is necessary—not just convenient or punitive.
Example Scenario:
A sales manager at a Toronto-based software company signs an employment agreement with a non-solicitation clause prohibiting her from contacting any former clients for one year post-employment. After resigning, she joins a competitor and reaches out to several long-time clients. The company sues to enforce the clause. Because the clause is limited in time and scope, and the manager had close client relationships, a court may find it enforceable. If the company had used a non-compete clause instead, the outcome could have been very different—especially post-2021.
Best Practices for Employers
Given the evolving legal landscape, employers should approach restrictive covenants strategically. Here are some best practices to consider when drafting post-employment restrictions:
- Avoid non-compete clauses unless clearly permitted under one of the ESA exceptions. Over-reliance on these clauses can backfire.
– - Focus on non-solicitation and confidentiality agreements as your primary tools to protect client relationships and sensitive business information.
– - Tailor each clause to the employee’s specific role. A generic, one-size-fits-all restriction is less likely to be enforceable. Consider the employee’s seniority, access to proprietary information, and direct client contact.
– - Ensure the language is specific, clear, and reasonable. Define who qualifies as a “client” or “customer,” what actions are considered “solicitation,” and ensure time and territory limits are justifiable.
– - Update your employment agreements regularly to reflect changes in the law and business operations. What was enforceable five years ago may no longer meet legal standards today.
– - Have new hires sign contracts before they start working. If a restrictive covenant is introduced after employment has begun, it must be supported by new consideration (such as a promotion or bonus) to be enforceable.
How AMAR-VR LAW Can Help
At AMAR-VR LAW, we advise Ontario employers on how to effectively and legally protect their business from unfair competition and client poaching—without relying on unenforceable clauses.
Our legal services include:
- Drafting and reviewing employment contracts with enforceable non-solicitation and confidentiality clauses
– - Advising on compliance with the Working for Workers Act and the ESA
– - Developing customized restrictive covenants based on role, industry, and risk level
– - Reviewing existing agreements and updating outdated or unenforceable language
– - Providing strategic advice when employees leave and there are concerns about solicitation or misuse of information
We take a proactive, business-oriented approach that balances enforceability with employee relations and legal compliance.
Conclusion
In today’s competitive market, Ontario employers are understandably concerned about protecting their client base, confidential information, and workforce from disruption when key employees depart. But the tools used to manage these risks—particularly non-compete and non-solicitation clauses—must be used with care.
With the Ontario government’s prohibition on most non-compete clauses now in effect, employers must rely more heavily on carefully drafted non-solicitation and confidentiality provisions. These clauses, when properly designed, can provide strong protection without running afoul of the law
At AMAR-VR LAW, we help employers navigate these complexities with tailored contracts and enforceable safeguards. Contact us today for a consultation if you’re reviewing your employment agreements or responding to a recent resignation to ensure your business is protected.
Frequently Asked Questions (FAQs)
- Are non-compete clauses still legal in Ontario employment contracts?
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As of October 25, 2021, Ontario’s Working for Workers Act prohibits most non-compete clauses in employment agreements. The only exceptions are for executive-level employees and in the context of a business sale where the seller becomes an employee of the buyer. Any non-compete clause outside these exceptions is void and unenforceable, even if it appears reasonable.
– - What is the difference between a non-compete and a non-solicitation clause?
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A non-compete clause prevents a former employee from working for or starting a competing business, typically within a geographic area and time period. A non-solicitation clause, by contrast, allows the employee to work elsewhere but prohibits them from soliciting the former employer’s clients, customers, or staff. Ontario courts strongly favor non-solicitation clauses due to their narrower scope and reasonableness.
– - How do courts determine if a non-solicitation clause is enforceable in Ontario?
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Ontario courts will enforce a non-solicitation clause only if it is reasonable in scope, duration, and geography, clearly worded, and tied to a legitimate business interest, such as protecting client relationships or confidential information. Vague or overly broad clauses—such as those with global reach or indefinite duration—are unlikely to be upheld.
– - Can I use a non-compete clause for a senior manager or sales executive?
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Only if the individual qualifies as an “executive” under Ontario law. Titles like “senior manager” or “sales executive” may not meet the legal definition, which is limited to roles such as CEO, CFO, or President. In most cases, a well-crafted non-solicitation and confidentiality clause is a safer and more enforceable alternative.
– - How does AMAR-VR LAW help employers draft enforceable post-employment restrictions?–
AMAR-VR LAW advises Ontario employers on designing strategic, enforceable non-solicitation and confidentiality clauses tailored to specific roles and industries. We help you stay compliant with the Employment Standards Act and recent legal developments, update outdated agreements, and protect your business from client poaching and misuse of sensitive information—all while minimizing legal risk.