Non-Compete Clauses in Canada: Province-by-Province Guide

The Canadian Approach to Non-Compete Clauses

Non-compete clauses restrict employees or contractors from working for competitors or starting competing businesses after their employment ends. In the United States, non-competes are common and broadly enforceable in most states. Canada takes a fundamentally different approach. Canadian courts view non-competes as restraints on trade that limit an individual's ability to earn a living, and will only enforce them in narrow circumstances where they're demonstrably necessary to protect legitimate business interests.

The result is that most non-compete clauses in Canadian employment contracts are unenforceable. Courts apply a strict reasonableness test, examining whether the non-compete is necessary to protect the employer's interests, and whether its duration, geographic scope, and activity restrictions are no broader than required. If a non-compete fails this test, courts will strike it down entirely rather than modifying it to make it reasonable. This "all or nothing" approach means that overreaching non-competes provide no protection at all.

Ontario: Non-Competes Banned for Most Employees

Ontario took a dramatic step in 2021 by effectively banning non-compete clauses for most employees. The Working for Workers Act prohibits employers from entering into employment contracts that include non-compete agreements, with limited exceptions. This ban applies to employment contracts entered into or amended after October 25, 2021.

Who Is Covered by Ontario's Ban?

The ban applies to all employees in Ontario, with two narrow exceptions. Non-competes are still permitted for executives (defined as employees with policy-making authority over the entire business or a substantial part of it), and for situations involving the sale of a business where the seller is an employee. For everyone else—including senior managers, salespeople, and technical staff—non-compete clauses are void and unenforceable.

Importantly, the ban does not apply to independent contractors. If you engage contractors in Ontario, you can still include non-compete clauses in contractor agreements, though they remain subject to the common law reasonableness test. The ban also doesn't affect non-solicitation clauses (which prohibit soliciting customers or employees) or confidentiality obligations—these remain enforceable for all employees.

What Happens to Existing Non-Competes?

Non-compete clauses in employment contracts signed before October 25, 2021 are grandfathered and remain subject to the previous common law rules. However, if you amend an existing employment contract after that date, the non-compete becomes void. Even minor amendments (like a salary increase or title change) can trigger the ban if they constitute a new contract. To preserve existing non-competes, avoid amending employment contracts unless absolutely necessary.

British Columbia: Strict Reasonableness Test

British Columbia has not banned non-competes, but BC courts apply one of the strictest reasonableness tests in Canada. To be enforceable, a non-compete must protect a legitimate proprietary interest (trade secrets, confidential information, or customer relationships), be reasonable in duration and geographic scope, and be no broader than necessary to protect that interest.

What BC Courts Consider Reasonable

BC courts rarely enforce non-competes longer than 6-12 months, and even shorter periods may be struck down if not justified. Geographic restrictions must be tied to where the employee actually worked or had customer relationships—a province-wide or national restriction is almost never enforceable for regular employees. Activity restrictions must be specific to the employer's actual business, not broadly prohibiting "any competitive activity."

BC courts also consider whether the employee received something valuable in exchange for the non-compete. For new employees, the job itself is sufficient consideration. For existing employees, you must provide new consideration (a promotion, raise, or other benefit) when adding a non-compete to an existing employment relationship. Simply continuing employment is not enough.

Practical Limits in BC

In practice, non-competes in BC are difficult to enforce for anyone below senior management. For junior employees or those without access to truly confidential information, courts will strike down non-competes as unnecessary. Even for senior employees, you're better off using non-solicitation clauses (prohibiting soliciting customers or employees) combined with strong confidentiality obligations. These are much more likely to be enforced and provide meaningful protection.

Alberta: More Employer-Friendly, But Still Strict

Alberta courts are somewhat more willing to enforce non-competes than other provinces, but still apply a strict reasonableness test. The key difference is that Alberta courts may "blue pencil" overly broad non-competes by striking out unreasonable portions while enforcing the rest. This is more favorable to employers than the "all or nothing" approach in other provinces.

The Alberta Reasonableness Test

Alberta courts examine three factors when assessing non-competes: whether the restriction is reasonable between the parties (considering the employee's role, compensation, and what they gave up), whether it's reasonable in the public interest (not unduly restricting competition or the employee's ability to work), and whether it's clear and unambiguous (vague restrictions won't be enforced).

For duration, Alberta courts have upheld non-competes of 12-24 months for senior employees with access to confidential information or customer relationships, but rarely longer. Geographic restrictions must be tied to the employee's actual territory or the employer's market area. Industry restrictions must be specific—prohibiting work for "any competitor" is too broad, but prohibiting work for specific named competitors or in a specific market segment may be enforceable.

Blue Penciling in Alberta

Alberta's willingness to blue pencil means that a non-compete that's somewhat too broad may still provide partial protection. For example, if you include a 24-month restriction but the court finds only 12 months reasonable, it may enforce a 12-month restriction by striking the excess. However, you cannot rely on blue penciling—if the clause is fundamentally unreasonable or poorly drafted, courts will strike it entirely.

Quebec: Civil Law Approach

Quebec operates under a civil law system rather than common law, which affects how non-competes are analyzed. The Quebec Civil Code explicitly permits non-compete clauses but requires them to be reasonable in time, place, and scope. Quebec courts apply a strict interpretation, focusing on whether the restriction is necessary to protect the employer's legitimate interests.

Quebec's Specific Requirements

Under Quebec law, non-competes must be in writing, limited in time and territory, and necessary to protect the employer's legitimate interests. Legitimate interests include trade secrets, confidential information, and customer relationships, but not simply preventing competition. The restriction must be proportionate to the interest being protected—you cannot use a sledgehammer to crack a nut.

Quebec courts rarely enforce non-competes longer than 12 months, and often find even shorter periods excessive for employees without significant access to confidential information. Geographic restrictions must be limited to areas where the employee actually worked or had customer contact. Province-wide or national restrictions are almost never upheld.

Consideration Requirements in Quebec

Quebec law requires that the employee receive something of value in exchange for a non-compete. For new employees, the job offer is sufficient. For existing employees, you must provide new consideration when adding a non-compete—a promotion, raise, bonus, or other tangible benefit. Simply continuing employment or providing standard annual raises is not enough.

How to Draft Enforceable Non-Competes

If you're in a province where non-competes are still permitted (or fall within Ontario's exceptions), follow these principles to maximize enforceability. First, only use non-competes for employees who truly need them—senior executives, employees with access to trade secrets, or those with significant customer relationships. For everyone else, use non-solicitation and confidentiality clauses instead.

Duration: Keep It Short

Limit non-competes to the shortest period necessary to protect your interests. For most employees, 6-12 months is the maximum defensible duration. Consider what you're actually protecting: if it's customer relationships, how long does it take for those relationships to become stale? If it's confidential information, how long until that information loses its value? Use that analysis to justify your chosen duration.

Geography: Be Specific

Tie geographic restrictions to where the employee actually worked or had customer relationships. If an employee only worked in Toronto, don't prohibit them from working anywhere in Ontario. If they had customers in three provinces, limit the restriction to those provinces. Avoid blanket restrictions like "anywhere in Canada" unless you can demonstrate that the employee had truly national responsibilities.

Scope: Define the Prohibited Activity Narrowly

Don't prohibit "any competitive activity" or "working for any competitor." Instead, specifically describe the prohibited activities or name specific competitors. For example, "providing software development services to companies in the healthcare analytics industry" is more defensible than "working in technology." The more specific you are, the more likely a court will find the restriction reasonable.

Provide Consideration

For new employees, the job offer is sufficient consideration. For existing employees, provide something valuable when adding a non-compete: a promotion, salary increase, bonus, or other benefit. Document this consideration clearly in the agreement. Without proper consideration, the non-compete is unenforceable.

Include Severability Clauses (Outside Alberta)

In provinces that don't allow blue penciling, include a severability clause stating that if any provision is found unenforceable, the remaining provisions remain in effect. This won't save an unreasonable non-compete, but it prevents the entire employment agreement from being voided if the non-compete fails. In Alberta, severability is less critical because courts may blue pencil.

Better Alternatives to Non-Competes

Given how difficult non-competes are to enforce in Canada, consider these alternatives that provide meaningful protection with much higher enforceability.

Non-Solicitation Clauses

Non-solicitation clauses prohibit former employees from soliciting your customers, clients, or other employees for a specified period. These are much more enforceable than non-competes because they don't prevent the employee from working—they just prevent them from stealing your customers or staff. Courts view non-solicitation as a reasonable protection of legitimate business interests.

Effective non-solicitation clauses specify who cannot be solicited (customers the employee worked with, employees they supervised), what constitutes solicitation (direct contact, indirect contact through third parties), and the duration (typically 12-24 months). Be specific about which customers are covered—"any customer of the company" may be too broad if the employee only worked with a subset of customers.

Confidentiality and Trade Secret Protection

Strong confidentiality obligations and trade secret protections are enforceable in all provinces and provide meaningful protection without restricting where employees can work. Clearly define what information is confidential, require employees to return all confidential materials upon termination, and prohibit disclosure or use of confidential information for any purpose other than performing their job.

Unlike non-competes, confidentiality obligations can last indefinitely for true trade secrets. They don't prevent employees from working for competitors—they just prevent them from disclosing your confidential information or using it to compete against you. This is often all the protection you actually need.

Garden Leave

Garden leave is a practice where you continue paying an employee's salary for a period after they resign or are terminated, but they don't work and cannot work for competitors during that period. This is enforceable because you're compensating the employee for not working. Garden leave of 3-6 months is common for senior employees, giving you time to protect customer relationships and confidential information without relying on a non-compete.

The Bottom Line

Non-compete clauses in Canada are difficult to enforce and, in Ontario, banned for most employees. If you're relying on non-competes to protect your business, you're probably not as protected as you think. Courts will strike down unreasonable non-competes, leaving you with no protection at all. The better approach is to use non-solicitation clauses, strong confidentiality obligations, and garden leave provisions—these are much more likely to be enforced and provide meaningful protection.

If you do use non-competes, keep them narrow, short, and specific. Only use them for employees who truly need them—senior executives and those with access to trade secrets or significant customer relationships. For everyone else, non-solicitation and confidentiality are sufficient and much more defensible. By taking a realistic approach to restrictive covenants, you can protect your business interests without wasting time and money on unenforceable clauses.