Federal Government Proposes Non-Compete Prohibition And Publishes Final Equal Pay Regulations Under The Canada Labour Code

In recent weeks, the federal government has advanced two significant initiatives affecting employers governed by the Canada Labour Code ("Code").

On May 6, 2026, the federal government introduced Bill C-31, Budget 2025 Implementation Act, No. 2 ("Bill C-31"), which proposes to prohibit non-compete clauses and certain other employment-related restrictions for most federally regulated employees. Separately, the federal government published the final Regulations Amending Certain Regulations Made Under the Canada Labour Code (Equal Treatment and Temporary Help Agencies): SOR/2026-75 (the "Equal Pay Regulations"), which set out implementation details for equal pay provisions first enacted in 2018. Those underlying amendments have now been proclaimed into force, effective October 20, 2026.

These developments signal a continued expansion of employee protections under the Code and will require federally regulated employers to review and, where necessary, update their employment practices.

Bill C-31: Ban on Non-Competes

Bill C-31 was introduced for first reading on May 6, 2026. If enacted, the Bill will amend the Code to prohibit employers from entering into, enforcing, or requiring compliance with non-compete clauses that restrict an employee’s ability to seek or accept employment following the end of the employment relationship. The scope of other prohibited employment-related restrictions may be further prescribed by regulation.

The prohibition will be subject to the following exceptions, where a non-compete clause may still be permissible:

• a person who sells their federally regulated business (or whose business becomes a federal business), to the extent the person becomes an employee of the purchasing employer and agrees to a non-compete clause as part of the sale transaction;
• a person who holds the position of Chief Executive Officer (CEO); and
• a person who reports directly to a CEO and holds a specified chief officer position (with additional positions potentially to be prescribed by regulation).

Bill C-31 would also prohibit employers from engaging in reprisals against employees who refuse to agree to or comply with a non-compete clause or other employment-related restriction.

The amendments would come into force on a day to be fixed by proclamation. Notably, under the current drafting of the Bill, existing non-compete clauses and employment-related restrictions will not be preserved. Bill C-31 provides a one-year transition period from the coming-into-force date before such agreements would be rendered void, including for employers who become federally regulated during that period.

Equal Pay Regulations

Background

On May 6, 2026, the federal government also published the Equal Pay Regulations. These regulations support “equal pay” provisions that were enacted as part of Bill C-86, Budget Implementation Act, 2018, No. 2, and which have now been proclaimed into force, effective October 20, 2026.

Effective October 20, 2026, Bill C-86 amends the Code to prohibit employers from paying different wage rates to employees based on employment status where those employees:

1. perform substantially the same kind of work;
2. apply substantially the same skill, effort and responsibility;
3. under similar working conditions;
4. in the same establishment.

Where an employee requests a review of their wage rate, the employer will be required, within 90 days, to complete the review and provide a response indicating either that the wage rate will be increased or that the existing wage rate is compliant, together with supporting reasons. Exceptions apply for bona fide systems based on seniority, merit, or quantity or quality of production.

Bill C-86 also addressed temporary help agencies, prohibiting them from charging employees certain fees and requiring them to pay equal wages subject to similar exceptions.

What’s New?

The Equal Pay Regulations set out further implementation details with respect to the Bill C-86 amendments, including clarifications on the following key topics:

• Employment status: The regulations clarify the meaning of "employment status" by adding definitions of full-time, part-time, permanent and temporary employment;
• Industrial establishment: The regulations clarify the meaning of "industrial establishment" for the purposes of the equal pay provisions, including by taking into account remote work and atypical workers in the transportation industries;
• Seniority, merit and other systems: The regulations clarify that any seniority, merit or similar system used to justify differential pay must apply to all employees whose wage rates are comparable, and the system must be communicated to those employees in writing or be made readily available for review;
• Calculating wage rates: For the purpose of determining whether two employees are paid the same or different rate, only identical types of compensation are comparable (e.g., time-based wage rate, mileage rate, piece rate, pay per load, or commission rate);
• Regulation exceptions: The regulations add several new exceptions to the equal wage requirement, including:
  • red-circling (where a demoted employee retains their previous higher salary);
  • increases in wage rates due to recruitment or retention difficulties during a labour shortage;
  • differences based on the geographic area where an employee works; and
  • travel status pay for employees who travel as opposed to those who do not.
• Record keeping: The regulations add record-keeping requirements, including requiring employers to maintain records describing any system that is the basis for paying one employee at a lower rate than another;
• Notices and penalties: The regulations update the required notices posted under Schedule II of the Canada Labour Standards Regulations, and update the Administrative Monetary Penalties Regulations to reference the new equal pay provisions.

The Equal Pay Regulations will come into force on the same day as the underlying Bill C-86 amendments are proclaimed into force, i.e. October 20, 2026. The Federal Labour Program has published two new Interpretations, Policies and Guidelines regarding equal treatment and temporary help agencies to accompany the coming into force of these amendments. Employers should use the intervening period to assess their pay practices and systems for compliance readiness.

Takeaways for Employers

These developments collectively represent a meaningful expansion of employee protections under the Code, and federally regulated employers should take proactive steps to prepare. The proposed non-compete prohibition and Equal Pay Regulations may require federally regulated employers to review both contractual practices and compensation frameworks.

While both initiatives remain subject to proclamation and, in the case of Bill C‑31, further legislative consideration, they reflect a continued trend toward enhanced employee protections in the federal sector. Early preparation will help employers manage compliance risk and operational impacts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.