Bill 27: Ontario bans non-competes and creates right to disconnect from work

On November 30, 2021, the Ontario legislature passed Bill 27, Working for Workers Act, 2021^[1] an omnibus bill introduced by the Progressive Conservatives which amends a number of employment-related statutes.  The amendments received Royal Assent on December 2, 2021; however, different parts of the Bill will come into effect at different times. 

The amendments are as follows:

1. A prohibition against non-compete agreements with employees;
2. The requirement to develop a policy dealing with an employee's right to disconnect from work;
3. Further protections for foreign nationals;
4. Licencing requirements for temporary help agencies
5. The requirement to allow delivery drivers access to washrooms; and
6. The WSIB's ability to redistribute amounts from the insurance fund.

This bulletin will address: 1) the prohibition against non-competes and 2) the policy on disconnecting from work.

A) Non-compete agreements: Prohibitions and carve outs

The non-compete provisions came into effect on December 2, 2021.

While several US States have enacted legislation prohibiting non-competes, Ontario is the first of the Canadian Provinces to do so.  Bill 27 amends the Employment Standards Act, 2000 (the "ESA"), prohibiting employers from binding an employee to any form of non-compete agreement. The Government introduced this change as a means to attract and retain global talent and investments in Ontario.

The amendment defines "non-compete agreement" as an "agreement, or any part of an agreement, between an employer and an employee that prohibits the 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."^[2]

There are only two exceptions, allowing employers to enter into non-compete agreements with:

1. Executives, 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."^[3]
2. Sellers of part of all of their business, who become employees of the buyer immediately following the sale.

Non-compete agreements are not permitted in the employment setting under any other circumstance.  The amendment does not affect the use of other forms of restrictive covenants such as non-solicitation, confidentiality and intellectual property provisions.  Aside from the exceptions described above, non-compete agreements are prohibited, and in violation of the ESA; there is no "grandfathering" or transition period.  While there is no indication from the express language of the amendment that the mere inclusion of a non-compete provision will render unenforceable other restrictive covenants, we do recommend that employers review their suite of agreements to remove any language prohibiting competition, and issue a notice to employees who do not fall within the exceptions that any non-compete provisions in their existing agreements will not be enforced by the employer.

B) Right to disconnect from work policy

Bill 27 requires all employers with 25 or more employees to develop a written policy with respect to disconnecting from work. "Disconnecting from work" means "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^[4]." The employer must provide every employee with a copy of the written policy within 30 days after it is prepared. Employers have 6 months from December 2, 2021 (i.e., June 2, 2022) to complete its policy.

The legislation offers no guidance as to what must be included in the policy, and simply provides that the policy must include "such information as may be prescribed." This was apparently intentional as noted in the legislative summary in an effort to offer employers flexibility to develop a policy appropriate to its operational needs. At anytime, however, it is open to parliament to impose specific requirements by regulation. Once a policy on disconnecting from work is rolled out, including any subsequent amendments, copies must be retained for no less than three years after the policy ceases to be in effect.

Given that the legislation imposes no specific requirements, employees may perceive a disconnect between the title of the provision and what is actually inserted into the policy by the employer if there are still requirements to answer emails after core hours or to work on a weekend.  In fact, there has already been an influx of articles and bulletins posted proclaiming that employees no longer have to respond to emails after work....this is not necessarily so....it will depend on the individual workplace, and what the employer elects to include in the policy. Accordingly, we recommend that employers think carefully about balancing the operational needs of the business and the mental health of their employees, perhaps consult with them, in developing the policy, and then engage in educational sessions with employees to review the terms of the policy to avoid misunderstanding and resentment.

If you would like to discuss this article further or have any questions, please contact the authors or a member of our Employment, Labour & Equalities Group.