Non-compete prohibition (Ontario employment)

This is an Ontario employment rule. It is separate from the non-compete a seller gives a buyer, though the two meet when the seller stays on as an employee. A non-compete agreement is, in the Act’s terms, an agreement between an employer and an employee that prohibits the employee from competing with the employer’s business after the employment relationship ends. Where it applies, a contravening agreement is void.

The two exceptions

• Sale of a business: there is a sale of a business or part of one; as part of it the purchaser and seller agree the seller will not compete with the purchaser’s business after the sale; and immediately following the sale the seller becomes an employee of the purchaser (s. 67.2(3)). “Sale” includes a lease (s. 67.2(5)), and the ministry guide describes this exception as applying to a business operated as a sole proprietorship or a partnership.
• Executives: the prohibition does not apply to an executive, which the Act defines by a list of chief offices and any other chief executive position (s. 67.2(4)).

Other provinces and what to check

This entry covers Ontario’s Act only; confirm which province’s law governs each agreement. The ministry guide says the prohibition took effect on October 25, 2021. Check whether every condition of the sale exception is met, in particular that the seller becomes an employee immediately following the sale. See how the non-compete ban applies when a business is sold and non-compete.