Ted's Blog

Ontario government bans noncompete clauses freeing up workers to change jobs

The Ontario government is banning non-competition clauses in employment contracts, a move it says will give workers more freedom to change jobs, and also help tech companies lure employees from the U.S.

But critics say the move, announced by Labour Minister Monte McNaughton, is largely symbolic and doesn’t do enough to help workers.

“This is sending the message that the days of using these clauses to intimidate employees are over. This is about rebalancing the scales,” said McNaughton in an interview before unveiling new legislation to change the Employment Standards Act.

While noncompete clauses were once the preserve of CEOs or owners selling their businesses, they have become far more pervasive, said McNaughton. That reduces mobility for workers, and makes it harder for Canadian tech companies to lure highly-skilled employees from other countries including the U.S., McNaughton said.

“These are being used against fast-food workers,” said McNaughton. “That’s just wrong.”

The ban on noncompete clauses includes exceptions for owners who are selling their companies, and for clauses which include the protection of intellectual property.

The change doesn’t apply to federally-regulated workers, including those working in airlines, banks or interprovincial railways. Nor do they apply to workers in the gig economy, such as drivers for food delivery apps.

Ottawa labour lawyer Wassim Garzouzi acknowledged that the change is helpful to workers on its face, but says courts have already decided in several cases that the vast majority of noncompete clauses are invalid.

“Everyone agrees that these things aren’t good for workers. But when it comes to things that would improve workers’ rights, this wasn’t exactly at the top of the list,” said Garzouzi, who works at Ottawa-based Raven Law, and is also president of the Canadian Association of Labour Lawyers.

Garzouzi pointed to bringing gig economy workers under the protection of the Employment Standards Act, improving severance pay, and instituting paid sick days as moves which would help more workers.

“Bringing gig economy workers under the ESA would have helped a lot more people than this,” said Garzouzi.

Still, said labour lawyer David Ragni, banning noncompete clauses will help many vulnerable workers who might not have fully understood their rights, or felt able to stand up for them.

Many employers, said Ragni, continue to include a noncompete clause in contracts, even though courts have repeatedly ruled they’re invalid in the vast majority of cases.

“A lot of people are going to sign that contract as-is, because they want the job,” said Ragni, who works at Koskie Minsky, a firm which frequently represents unions.

And while noncompete clauses are largely unenforceable, people who signed contracts including them simply might not know that, Ragni argued. And that, he said, means workers are less likely to switch jobs.

“If you think a noncompete clause applies to you, you’re not going to come back to your employer saying ‘someone’s offering me more money. Will you match it?,’” Ragni said.

Jerry Dias, president of Unifor, the country’s largest private sector union, slammed the existence of noncompete clauses and praised the move.

“These things are designed to make sure workers can’t move into other jobs. They’re awful. And when a conservative government does something that helps workers, I applaud them,” said Dias, who suggested, however, that there was an ulterior motive for taking what could be seen as a populist, pro-worker step.

“There’s nothing like being less than a year away from an election to turn a conservative into a raging socialist,” Dias said with a chuckle. The next Ontario election must be held by June 2.

Note: This a reprint of an article by Josh Rubin appearing on the Toronto Star web site.