Open this photo in gallery: Extending the ban on non-compete agreements to more businesses will ‘promote labour mobility’ and ‘strengthen competition,’ the Liberals said in the budget this week. Fred Lum/ The federal government is aiming to limit non-compete agreements for workers at federally regulated companies. This decision comes after Ontario revised its labour laws and prohibited contracts that stop individuals from working for competing firms. In Canada, employment regulations are divided between provincial and federal levels, meaning Ontario’s 2021 restrictions only applied to some businesses. Importantly, it did not affect employees at federally regulated banks, telecoms, and airlines, even if those companies operate in Ontario. As a result of this gap, many of Canada’s major firms can still intimidate staff with potential legal action if they attempt to leave their jobs. Hena Singh, a partner at Singh Lamarche LLP in Toronto, noted that non-compete agreements “are still used as a sword.” Even when a judge may likely dismiss these agreements, the process of legal disputes complicates job changes significantly. “How much is the employee going to have to go through in terms of cost, in terms of time, in terms of emotional wear down, to go through that process?” Ms. Singh said. On Tuesday, the federal Liberals revealed plans to modify the Canada Labour Code and “restrict” the use of non-compete agreements within employment contracts for federally regulated businesses. This initiative was included in Prime Minister Mark Carney’s inaugural budget presentation, with discussions about these legal modifications set to begin early next year. Opinion: After all the hype, Carney’s first budget fails to meet the moment Non-compete agreements have traditionally been reserved for high-level executives since these individuals have access to confidential information and strategic plans that competitors might exploit. However, their usage has surged recently across various levels within companies. Lower-level employees began experiencing consequences from these contracts as well, with durations preventing them from joining rival firms extending up to one year. When Ontario enacted its ban on such agreements, officials claimed it would enable workers to advance their careers and increase earnings while also making the province more attractive for global talent acquisition. Federal budget 2025: Eight ways the budget affects your wallet from vacant homes to student loans Ironically, Canadian judges already tend toward rejecting non-compete agreements according to Michael Wright an employment lawyer at Wright Henry LLP. “Courts have generally taken the position that these were unenforceable,” he stated. Yet this hasn’t been enough. “Everyone seemed to know that but it still created complications,” he added. Thus legislation could act as a strong deterrent against such practices. However it won’t apply universally as senior executives frequently face non-compete clauses due to their exposure to sensitive information. Additionally executives encounter other challenges when changing positions like losing supplemental retirement benefits or deferred compensation tied up in company stocks. Past a certain level of seniority most employees recognize that some restrictions on their movement are expected. On Bay Street “ gardening leaves ” which refer often refer occur frequently , stated Leah Mc Gillivray Palko , partner & leader financial services practice executive search firm Glass Ratner. Taking everything into account , for senior leaders “ short-term pain from a non-compete is manageable ” she remarked.
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