Non-Competes, Non-Solicits & Confidentiality Explained
Restrictive covenants are promises that limit what someone can do after a working relationship ends—think non-compete, non-solicit, no-poach, and confidentiality clauses. They’re powerful tools when drafted properly and risky dead weight when they’re not. This guide covers what still works in Ontario, what’s banned, and how to design covenants that hold up.
TL;DR
Non-competes are banned for most Ontario employees (with narrow exceptions). Use non-solicit, non-deal, and confidentiality instead.
Courts enforce covenants only if they’re reasonable in activity, time, and scope—and clear. Ambiguity kills.
Post-hire covenants need fresh consideration (something new of value) to be enforceable.
Senior fiduciary employees can face stricter duties even without a contract.
Separate point: No-poach pacts between different employers (e.g., franchise networks) risk criminal exposure under Canada’s Competition Act—don’t do it.
Sale-of-business deals are judged more generously than employment contracts, but still must be reasonable.
The main covenant types (and when to use them)
Confidentiality (NDA). Protects trade secrets and truly confidential business info. This is your baseline; it should be specific (what is confidential), include carve-outs (what isn’t), and last indefinitely for trade secrets.
Non-solicitation (customers). Stops a departing person from actively approaching your clients or prospects for a period (often 6–12 months). Usually the most enforceable post-employment restraint.
Non-dealing / non-acceptance. Bars the person from doing business with named clients even if the client approaches them. More restrictive than a non-solicit, so draft narrowly.
Employee non-solicit (no-poach of staff). Prevents targeted raiding of your team for a reasonable period (often 6–12 months).
Non-compete. A blanket ban on competing. In Ontario employment contracts, these are largely prohibited (see below). In sale-of-business deals, carefully tailored non-competes can still be enforceable.
Ontario’s non-compete ban (employment)
For employees in Ontario, non-competes are void if signed on or after October 25, 2021, unless:
the person is a true executive (e.g., CEO, President, CFO, COO, CIO, CLO/CHRO or another “Chief … Officer” role), or
the non-compete is part of a sale-of-business arrangement.
Non-competes signed before Oct 25, 2021 aren’t automatically void, but they still face the common-law reasonableness test.
The ban applies to employees. It doesn’t directly cover independent contractors—but if a “contractor” is really an employee (misclassification), the ban can apply.
Practical takeaway: For employees, use non-solicit + confidentiality (and, where needed, a narrowly framed non-deal) instead of a non-compete.
The reasonableness test (what courts look for)
Courts start with a presumption against restraints of trade, then ask:
Legitimate interest: What are you protecting (e.g., near-permanent client relationships, trade secrets)?
No broader than necessary:
Activity: Focus on soliciting or servicing your customers, not “working in the industry.”
Time: Keep it short. 6–12 months is common; longer needs strong justification.
Scope: Define the who carefully—e.g., “clients the person had material dealings with in the last 12 months.” Geography is less important when you tie the restraint to specific customers.
Clarity: Vague terms sink covenants. Courts won’t re-draft sloppy clauses. “Blue-pencil” severance is rare and only trims clearly separable bits; judges won’t rewrite breadth or fill gaps.
Post-hire changes need fresh consideration
If you introduce restrictive covenants after someone starts work, they’re usually unenforceable unless you give new value (raise, bonus, promotion, grant, paid training, etc.). “Continued employment” alone typically isn’t enough. Get the paper signed before Day 1, or pair later covenants with real consideration.
Fiduciary duties (even without a contract)
Some senior, trust-laden roles carry fiduciary obligations—e.g., not to exploit confidential strategic knowledge or actively divert key business opportunities—even without a covenant. Courts can award injunctions and heavy profits-based remedies for breaches. Don’t assume that “no contract” = “no restraint.”
Sale-of-business vs. employment covenants
Courts are more willing to enforce robust covenants when they’re tied to a business sale (protecting goodwill the buyer just paid for) than when they’re tucked into an employment contract. Longer durations or wider territories can be justified in sale deals—if they’re still reasonable for the specific business and market.
Competition Act alert: no-poach between companies
Separate from employment law, agreements between different employers to not hire/solicit each other’s employees (or to fix wages/terms) can be a criminal offence in Canada. Franchise and JV networks must take special care.
Key point: An employee’s own non-solicit of co-workers is different and generally fine; employer-to-employer no-poach pacts are the problem.
Drafting tips that actually work (employers)
Start narrow and only widen if you can justify it.
Prefer non-solicit over non-compete; add a non-deal only where necessary.
Name the protected group: “clients the employee serviced or supervised in the 12 months before departure,” plus active prospects on a dated list.
Carve out: general advertising and public RFPs not aimed at your clients.
Pick the right clock: 6–12 months is typical; justify longer on evidence (sales cycle length, relationship stickiness).
Define solicitation (direct/indirect; via any medium), but don’t bar passive inbound calls.
Align with the job: senior sales roles may justify a broader client list than back-office roles.
Use consideration for any post-hire paper.
Don’t rely on severability to save overbreadth—it rarely does.
Pair covenants with strong confidentiality, IP assignment, and return-of-property clauses.
Leaving? A quick checklist (employees)
Read exactly what you signed (offer letter, later add-ons, incentive plans).
Map the limits: which clients, how long, what activities?
Stick to confidentiality—don’t take documents, lists, or code.
Tread carefully on “no-deal” clauses; even if a client calls you, the clause may restrict you.
If you never got fresh consideration for post-hire covenants, or if terms are ambiguous/overbroad, you may have leverage. Get advice before contacting clients.
FAQs
Are non-competes ever enforceable now?
For employees: rarely—only for executives or in sale-of-business contexts (and still must be reasonable). For contractors and vendors: possible if reasonable (and no misclassification).
Is a “cascading” clause (multiple time/territory options) smart?
Usually not. Courts can see cascades as ambiguous or oppressive. Draft once, narrowly, and defend it.
Can we stop a former employee from joining a competitor at all?
Not for most employees in Ontario. Focus on protecting clients, staff, and secrets, not someone’s right to work.
Does wrongful dismissal kill my covenants?
An employer’s material breach can jeopardize enforcement. Survival wording helps, but the safer route is a fair, lawful termination.
Bottom line
In Ontario, non-competes are mostly out; targeted non-solicits + confidentiality are in. Keep covenants clear, narrow, and supported by real consideration. In sales of business, you get more room—but you still have to be reasonable. And never forget the Competition Act trap: no employer-to-employer no-poach deals.
This article is legal information, not legal advice. For advice on your specific situation, contact Vanguard Law.