- within Employment and HR topic(s)
- with readers working within the Insurance industries
- within Food, Drugs, Healthcare, Life Sciences, Cannabis & Hemp, Litigation and Mediation & Arbitration topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
As part of the 2025 Federal Budget, released on November 4, 2025, the Government of Canada announced plans to amend the Canada Labour Code (the Code) to restrict the use of non-compete agreements in employment contracts for federally regulated businesses. This includes sectors such as banking, transportation, and telecommunications.
In its news release, the government stated that the proposed restriction aims to protect workers' rights, promote labour mobility, and strengthen competition. Specifically, the measure is intended to "empower workers to move more freely to a higher-paying career, or start their own business." Formal consultations on the proposed legislative changes are expected to begin in early 2026.
What We Know So Far
While details of the proposed amendments to the Code have not yet been released, we can look to Ontario's recent experience with non-compete bans for insight. In 2021, the Ontario government amended the Employment Standards Act, 2000 (the ESA) to prohibit employers 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. While the prohibition is very broad, the ESA includes two exceptions where non-competes are still permitted:
- When an employee sells or leases a business to the employer and then becomes an employee of that business; or
- When the employee holds the position of president or any "chief executive" role within the organization.
We also note that Ontario's prohibition does not affect other restrictive covenants such as non-solicitation or confidentiality clauses.
Impact and Legal Context
The non-compete ban in the ESA and the proposed federal ban in the Code align with the longstanding common law presumption that non-compete clauses in employment agreements are generally unenforceable and contrary to public policy. As a result, the Ontario ban has had limited practical impact, as non-competes were already rare outside of business sale transactions or executive-level agreements. If the federal amendments to the Code include similar exceptions for executives and sale of business covenants, the impact of these changes for federal employers is likely to be the same—primarily reinforcing existing legal principles rather than introducing sweeping changes.
What's Next?
We will continue to monitor developments and provide updates as the government releases more details on the proposed amendments to the Code.
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.
