We have provided key takeaways from the legislation below, along with next steps for employers, as they relate to Bill 27's prohibition of non-competes and employee rights to disconnect from work. Please see our earlier blog for details on the other provisions of the Bill.
1. Prohibition of Non-Compete Agreements
Bill 27 has amended the Ontario Employment Standards Act, 2000 (the "ESA") such that employers are now prohibited from entering into "an agreement or part of an agreement" that prohibits an 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 between the employee and the employer ends.
The prohibition of non-competes is deemed to have come into effect on October 25, 2021. This means that if an employer has contravened the new provision in respect of any non-compete agreements entered into as of October 25, 2021, the non-compete will be void and unenforceable. Bill 27 does not render void non-compete agreements entered into prior to October 25, 2021.
As we noted in our previous blog, the agreements captured by Bill 27 are broad and not limited to employment agreements and could cover other agreements that contain non-competes (for example, standalone restrictive covenant agreements or incentive compensation and equity plans).
Notably, Bill 27 contains exemptions for non-compete agreements entered into (i) in the context of a sale of business and (ii) with a chief executive. For the purposes of the second exemption, a chief executive is defined as "any person who holds the office of chief executive officer, president, chief administrative officer, chief operating officer, chief financial officer, chief information officer, chief legal officer, chief human resources officer or chief corporate development officer, or holds any other chief executive position."
Going forward, employers would be well advised to review their employment agreements with new hires, remove non-competes for employees in non-chief executive positions, and carefully consider the protections afforded in their intellectual property, confidentiality, and non-solicitation provisions with a view to assessing whether these provide adequate protection for their business or could be strengthened.
Employers may also wish to consider job descriptions and titles for new hires, to assess whether new hires may fit into "chief executive" roles, per the exemption.
As to employment agreements entered into with employees after October 25, 2021 containing non-compete provisions, employers may wish to circulate amending letters or agreements to affected employees advising that these provisions will be unenforced and/or struck in light of the new legislation. To this end, employers should carefully review any requirements in respect of contractual amendments (e.g. written consent requirements) to ensure that any changes to existing agreements are appropriately implemented.
2. Written Policy on Disconnecting from Work
Bill 27 requires that employers that employ 25 or more employees as of January 1 of any year will be required to have a written policy with respect to disconnecting from work. The term "disconnecting from work" is defined in the Bill to mean "not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work."
Employers have until June 2, 2022 to put in place their policy with respect to disconnecting from work.
We are waiting for more guidance on the policy content requirements as these are not contained in Bill 27 but may be prescribed. We expect that regulations to the Bill will contain more information, and we will be updating our clients and readers accordingly. In the meantime, employers should begin to consider what a disconnecting from work policy could reasonably look like for their workplace taking into account, for example, the nature of work arrangements (e.g. in-person, remote, hybrid), the composition of the workforce (e.g. hourly or salaried/professional etc...), and the nature of the business.
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.