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In Budget 2025, the Government of Canada announced plans to amend the Canada Labour Code to restrict the use of non-compete agreements in employment agreements by federally regulated employers. The government indicated that the proposed changes aim to promote a more competitive labour market by removing barriers that prevent employees from moving between jobs.
Consultations on the proposed amendments are scheduled to begin in early 2026 and, if implemented, will only apply to federal works, undertakings, or businesses, as defined in the Canada Labour Code. These include (among others) employers in the banking, broadcasting, interprovincial transportation, and navigating and shipping industries.
While specific details have not yet been released, the federal government's proposal appears to follow the approach taken by the Ontario government in 2021 for employers subject to Ontario's Employment Standards Act, 2000. In Ontario, non-compete agreements are prohibited, except in limited circumstances – such as for certain executive level employees and where an agreement is agreed to by the seller of a business that becomes an employee of the purchaser. We anticipate a push from employers for comparable exemptions in the Canada Labour Code and will keep readers updated on the consultations.
Federally regulated employers should monitor developments in the consultation process and prepare to revise employment agreements if the amendments are implemented. It is also prudent to proactively strengthen other contractual protections, particularly non-solicitation and confidentiality provisions, in advance of the anticipated bar on non-competes.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
