Are non-solicitation clauses still allowed in Ontario after the non-compete ban?

The ban does not reach them. Ontario’s Employment Standards Act, 2000 prohibits an employer from entering into an agreement with an employee that is, or includes, a non-compete agreement, and the Act defines that term. A clause that only stops someone soliciting customers or staff is a different clause. This page covers Ontario only; if the business or its employees are elsewhere, check the rules where they are.

What the ban covers

The Act defines a non-compete agreement as an agreement, or any part of one, between an employer and an employee that prohibits the employee from engaging in any business, work, occupation, profession, project or other activity that is in competition with the employer’s business after the employment relationship ends. Under section 67.2(2), a non-compete made in breach of the ban is void. The Ontario government’s guide adds that the substance of an agreement is what matters, not the words that are used.

What the guide says about non-solicits

The guide describes a non-solicit as prohibiting an employee from soliciting, or actively pursuing, clients, customers, vendors, business partners or other employees of the employer. It describes a non-disclosure agreement as prohibiting the sharing of confidential company information and processes. It says the Act prohibits non-compete agreements and does not prohibit non-solicit or non-disclosure agreements. Its worked example is a clause headed “Non-Competition” that bars contacting customers for two years; the guide says the substance is about soliciting rather than competing, so it is not a non-compete agreement.

Enforceability is a separate question

For non-solicit and non-disclosure agreements, the guide tells readers with enforceability questions to talk to a lawyer. In Mason v. Chem-Trend (2011 ONCA 344), an employee-covenant case decided before the ban, the Court of Appeal for Ontario listed as one factor whether the covenant is overly broad in the activity it proscribes because it prohibits competition generally and not just solicitation of the employer’s customers. It held the prohibition overly broad on those facts, and noted that a separate covenant already protected the employer’s confidential information. The court said a covenant’s validity can be determined only on an overall assessment of the clause, the agreement it is in and all the surrounding circumstances.

In a business sale

The Act’s exceptions are a sale of a business or part of a business where, as part of the sale, the purchaser and seller agree the seller will not compete and, immediately following the sale, the seller becomes an employee of the purchaser (section 67.2(3)), and executives (section 67.2(4)). On the guide’s reasoning, a clause that is only a non-solicit falls outside the definition, so it does not depend on either one. Read the wording, though: a clause that goes beyond soliciting may be a non-compete in substance. See the prohibition in the glossary, non-compete vs non-solicit and how the ban applies when a business is sold.