Bill 27: Non-Competes No More and the Right to Disconnect from Work
On October 25, 2021, the Ontario government introduced Bill 27, Working for Worker’s Act, 2021 (“Bill 27”). Bill 27 amends and impacts the Employment Standards Act, 2000 (the “ESA”) with two important changes: a ban on non-competition or non-compete agreements and upholding an employee’s right to disconnect from work.
What is a Non-Compete Agreement?
A non-compete agreement precludes an employee from competing directly or indirectly with the employer’s business. Courts have generally found a non-compete agreement to be unenforceable because it is contrary to public policy or a restraint on free trade. The onus is on the employer to prove that the agreement is reasonable in the circumstances. In particular, a non-compete agreement may be deemed enforceable if the temporal and geographical limitations are not overly broad and are reasonably required to protect the employer’s proprietary interests.
Ban on Non-Compete Agreements
Upon the passage of Bill 27, employers will be prohibited from including non-compete agreement in their employment contracts. Otherwise, non-compete agreements would be rendered void. As such, the government’s legislation aligns with court rulings that deem non-compete agreements unenforceable.
The only exemption to this prohibition will apply where there is a sale or lease of a business in which a seller-turned-employee is prohibited from competing with the purchaser’s business. It is unclear whether this prohibition will impact the fiduciary duties of senior employees.
If passed, this prohibition will be deemed to have come into force on October 25, 2021. The proposed law does not affect existing agreements entered before October 25, 2021, nor the enforceability of other restrictive covenants such as non-solicitation and confidentiality obligations.
Disconnecting From Work
In an effort to protect worker’s mental health and family time, Bill 27 also imposes a requirement for employers, who on January 1 of any year employs 25 or more employees, to have a written policy enabling employees to disconnect from work. Employers must have a written policy in place before March 1 of that given year. Disconnecting from work is defined as “not engaging in work-related communications” such as emails, telephone calls, video calls, or the sending or reviewing of messages.
Upon the passage of Bill 27, employers will have six months to implement the new policy in their workplaces. Currently, the Bill has not yet prescribed the elements of this mandatory policy, which may be determined by future regulations.
If you have any questions on how these legislative amendments will affect your current or future agreements and policies, consult one of our experienced lawyers for more information.