On November 4, 2025, amidst a period of subdued economic growth and international trade friction, the Minister of Finance and National Revenue François-Philippe Champagne tabled the federal budget (“Budget 2025”) entitled Building Canada Strong. Notably, Budget 2025 outlines proposed measures in respect of non-compete agreements and worker classification that will impact employers.
Budget 2025
Budget 2025 introduces two employment-related initiatives: (1) proposed amendments to the Canada Labour Code (the “Code”) that would, if implemented, prohibit the use of non-compete agreements in federally regulated workplaces; and (2) enhanced information-sharing mechanisms between the Canada Revenue Agency (“CRA”) and Employment and Social Development Canada (“ESDC”) aimed at addressing worker misclassification.
Restricting Non-Compete Agreements
The federal government has announced its intention to amend the Code, specifically targeting the use of non-compete agreements in employment contracts for federally regulated businesses. Prior to doing so, the Federal government will hold consultations with stakeholders in early 2026.
Information Sharing – Worker Misclassification
Worker misclassification – where employees are incorrectly labeled as independent contractors – remains a persistent issue in Canada’s labour market. Recognizing these challenges, Budget 2025 introduces measures to strengthen enforcement and oversight by proposing to improve information sharing between federal agencies.
Specifically, Budget 2025 proposes amendments to the Income Tax Act and the Excise Tax Act, enabling the CRA to share relevant data with ESDC for the administration and enforcement of the Code, specifically as it relates to worker classification. This change is expected to enhance inspections and enforcement. These legislative amendments will come into force upon royal assent.
Key Takeaways for Employers
Employers should be aware that Budget 2025 signals important changes in both the use of non-compete agreements and the enforcement of worker classification rules.
Federally regulated employers will need to review and potentially revise employment contracts, as upcoming amendments to the Code are expected to restrict non-compete clauses.
It will also be crucial for employers to ensure proper classification of employees and contractors, given that inspections and enforcement measures are expected to increase in tandem with the Budget 2025 proposals.
These developments underscore the need for employers to stay informed, proactively update workplace policies, and seek legal guidance to remain compliant with evolving federal regulations.
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