Working for Workers Legislation

Ontario’s Bill 27, touted as the Working for Workers Act, has received much media attention over the right of employees to disconnect. This legislation now requires companies with more than 25 employees to maintain a written policy that grants employees the right to be free from work-related emails, texts and telephone communications after business hours. Less talked about but of significant concern to certain businesses is the section of the Bill that amends the Employment Standards Act to outlaw non-competition agreements in employment contracts.

Essentially, the new law prohibits employers from inserting non-competition provisions into employment contracts, with the exception of the most senior officers (i.e. CEO, president, senior VP etc). This raises concerns for many businesses. Non-comp provisions are standard in most industries with trade secrets, who operate in niche markets, or where the employee in question has access to particularly sensitive information. These contracts are also standard in professional services firms and in real estate, mortgage and insurance brokerages. And it does not matter if the employee is called an independent contractor. Courts have long held that the test of whether one is an employee, or a true independent contractor is not based on what the relationship is called but on its true nature. In other words, in most cases, all but the most senior partners in these firms will be deemed to be employees.

So should employers in these industries be worried about this new legislation? In short: No. There are two reasons for this: (i) the courts have routinely struck down all but the most circumscribed non-comp clauses; and (b) there are more important clauses an employer can require the employee to sign, which will have more import.

For a number of years now, Ontario courts have not hesitated to strike down non-comp clauses, deeming them a restraint of trade. The courts have stated that an employer cannot preclude an employee from the ability to earn a living. Thus, the standard sort of clause preventing the employee from working in the same industry for 2 years in the same geographic area typically do not survive judicial scrutiny. Presently, only those clauses which are very narrow would be upheld. So not much is really lost. In fact, I have been telling employer clients for years now that non-comp provisions will generally be difficult to enforce and I have been successful acting for employees in getting these clauses tossed out.

Employers who really want to protect their trade secrets, client lists and the like are better to ensure well-crafted non-solicitation and confidentiality clauses.

A confidentiality provision in an employment can preclude an employee from using any trade secrets or other sensitive information obtained during their term of employment.

A non-solicitation clause is designed to prevent a former employee from directly or indirectly communicating with or contacting any customers or clients of the firm. Courts will not hesitate to enforce those clauses, not just against the former employee but also against any new employer who is seen as encouraging or enticing the former employee to engage in attempts to steal clients.

Of course, every case will turn on its own particulars, including how long the employee as at the company, the nature of the employee’s role, the actual wording of the clause in question. If you have a departing employee and are concerned about them trying to steal clients or information, always consult a lawyer.