Restrictive Covenants Since Non-competition Prohibition

As most employers operating in Ontario are already aware, as of October 25, 2021, the Ontario Employment Standard Act, 2000 (the ESA) prohibits employers from entering into post-employment non-competition covenants with employees, except for “executives” (as defined in the ESA) and in certain circumstances related to the sale of a business (the Ontario Prohibition). Subsequent jurisprudence confirms that the Ontario Prohibition does not have retroactive effect,¹ and that restrictive covenants that are not prohibited by the ESA remain subject to existing common law principles regarding enforceability.² This means that Ontario contracts containing post-employment non-competition agreements entered into before the Ontario Prohibition should be approached carefully when being updated or amended, so as to ensure the continued potential application of the restrictions therein.