Ontario Introduces Employee-Friendly Legislation Which Includes Prohibition on Non-Competes

Bennett Jones LLP

Bennett Jones LLPThe Ontario government introduced legislation on October 25, 2021, which if passed, will prohibit non-competes in employment agreements, mandate that employers have a "disconnect from work" policy and require temporary help agencies and recruiters to be licensed, amongst other changes.

Bill 27: Working for Workers Act, 2021 includes proposed amendments to various pieces of employment-related legislation as outlined below. The proposed changes stem from recommendations made by experts on the Ontario Workforce Recovery Advisory Committee.  While the Committee consulted with a range of workers, employers and unions throughout 2021, Bill 27 is very "pro-worker."

If Bill 27 is passed, amendments to the Employment Standards Act, 2000 will include the following:

  • Banning Non-Competes: Employers will be prohibited from entering into non-compete agreements with their employees. Non-compete agreements are intended to prevent employees from pursuing other work opportunities that are in competition with their previous employer's business after the termination of employment (e.g., 12 months following the end of employment). The amendments will not prohibit: (1) an employer from prohibiting an employee from competing with the employer's business during employment; or (2) the use of a non-compete agreement tied to the sale of a business.

    The amendments will also not prohibit an employer from protecting their confidential information, intellectual property and client relationships through the use of narrower clauses, including non-solicitation clauses prohibiting the solicitation of employees and customers.

    As it is currently drafted, the prohibition on non-competes appears to be effective as of October 25, 2021 and does not appear to retroactively apply to non-competes entered into prior to that date. However, as the proposed legislation has only been carried through first reading, it remains subject to potential change.

  • "Disconnect From Work" Policy: Employers with 25 or more employees (as of January 1 each year) will be required to develop a "disconnecting from work" policy by March 1 of that year. This policy will relate to the practice of not engaging in work-related communication such as telephone calls or emails, past a certain hour of the day, in order to allow the employee to be free from the performance of work. The details on the information to be included in the policy will be included in a Regulation that has not yet been released.

    The policy will be required to be in written form and a copy of the policy will need to be provided to all employees within 30 days of the preparation of the policy. An employer will also be required to retain a copy of every written policy on disconnecting from the workplace for three years after the policy ceases to be in effect.

  • Licensing Requirements: Temporary help agencies and recruiters will be prohibited from acting as such without first procuring a license from the Director of Employment Standards. The amendments will also prohibit persons or companies from using the services of an unlicensed agency or recruiter.

    Licenses will have to be renewed yearly and will be non-transferrable. A public database that lists all active, revoked or suspended licenses will also be available.

    The amendments also include a prohibition against any possible act of reprisal by a recruiter against an employee due to an employee complying with the Employment Standards Act, 2000 or asking that a recruiter do the same.

    The government's press release indicates that this portion of the Bill may not come into effect until 2024.

The proposed amendments to the Workplace Safety and Insurance Act, 1997 include the following:

  • Surpluses: The Workplace Safety and Insurance Board (WSIB) will be permitted to distribute surpluses in its insurance fund among Schedule 1 employers in order to alleviate some of the impacts of COVID-19.
  • Streamlining Services: WSIB will be permitted to work with entities like the Canada Revenue Agency in order to streamline remittances for businesses. This will allow businesses to have a more efficient way to submit premiums and payroll deductions.

Some of the other notable amendments to other pieces of legislation also include:

  • Washroom Access: Businesses will be required to provide washroom access to delivery workers who are either picking up or delivering anything to the business, with limited exemptions.
  • Internationally-Trained Professionals: Regulated professions will be prohibited from including a Canadian experience requirement as a qualification for an internationally trained professional to obtain a license to practice in the profession. Certain exemptions to this prohibition are included for public health and safety reasons.
  • Agri-Food Industry: The Ministry of Agriculture, Food and Rural Affairs will be allowed to collect information related to the agri-food workforce to ensure that the government can enhance the coordination of services such as vaccination and COVID-19 testing.

Key Takeaways:

  • Many employers have historically included non-competition provisions in their standard employment agreements in an effort to protect their business, understanding that given case law there was a risk a court might not enforce the non-compete. Employers should review their template employment agreements to consider whether they will continue to use non-compete clauses. Although Bill 27 has not passed and therefore is not yet the law, it is likely to pass given the majority government in Ontario and the effective date for the prohibition on entering non-compete agreements would then be October 25, 2021. In addition, employers may want to review and update their non-solicitation provisions to ensure they are likely to be enforceable and may provide some protection in the absence of a non-compete.
  • Employers with 25 or more employees may wish to begin considering what any "Disconnect From Work" Policy could look like for their organizations. Some employers already have policies about after-hours communication, but for those that do not, if Bill 27 passes, it may require a cultural shift in the organization's approach to after-hours work and early consideration by management will make the transition smoother.
  • If Bill 27 passes, employers will have an obligation to ensure that the temporary help agencies and recruiters that it engages have the proper licenses to operate. Employers should consider how it will track this information to ensure compliance.

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