Canada Non-Competition Agreement
Also known as: Non-Compete Agreement · Restrictive Covenant · Non-Compete Clause
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Non-Competition Agreement
Also called: Non-Compete Agreement, Restrictive Covenant
Legal Requirements
Canada Legal Requirements
Key Canada statutes and obligations that apply to your non-competition agreement.
Non-compete clauses are governed by common law principles in all provinces except Quebec (civil law)
Courts require: legitimate proprietary interest to protect, geographical and temporal reasonableness
Ontario Working for Workers Act 2021 (Bill 27): non-competes void for all Ontario employees except C-suite executives
Employment non-solicitation clauses (for clients and employees) are permitted but must be reasonable
Sale-of-business non-competes are held to a higher standard of enforceability (buyer paid for goodwill)
Consideration is required — must be provided at the start of employment or with fresh consideration if added later
Restrictions & Key Considerations
Ontario employees (except executives) cannot be bound by non-compete clauses effective October 25, 2021
Quebec courts apply civil law reasonableness tests; overly broad restrictions are reduced or voided
Courts sever unreasonable clauses — they do not typically rewrite them
Non-solicitation clauses that prevent all contact with former clients are treated like non-competes if they go too far
FAQ
Canada Non-Competition Agreement FAQ
Common questions about the non-competition agreement under Canada law.
Are non-compete agreements legal in Ontario?
No — for most employees. Ontario's Working for Workers Act 2021 made non-compete agreements void for all Ontario employees except those in 'C-suite' positions (executives). Non-solicitation agreements (not restricting competition per se) remain enforceable if reasonable.
What is the difference between a non-compete and a non-solicitation clause in Canada?
A non-compete prevents the former employee from working in the same industry or starting a competing business. A non-solicitation clause prevents them from approaching former clients or colleagues. In Ontario, non-competes are banned for most employees, but non-solicitation clauses remain valid if reasonable.
Are non-competes enforceable in a business sale in Canada?
Yes — courts apply more lenient standards to non-compete clauses in business sales because the seller is being paid for goodwill. Wider geographic scope and longer duration (up to 5 years) may be acceptable. The clause must still be reasonable given the nature of the business sold.
What happens if a non-compete clause is unreasonable in Canada?
Canadian courts will typically strike out the entire clause rather than modify it (unlike some US courts). Courts will not 'blue-pencil' a clause by simply deleting words to make it reasonable — the clause must stand or fall as written.
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Non-Compete Agreement by Country
Laws vary significantly by country. Find the right form for your jurisdiction.
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