Bill 27 – The Working for Workers Act, is making its way through the Ontario legislature and is now on the cusp of becoming law in Ontario. Below, learn how it could impact your business.
After being debated and considered by the Standing Committee on Social Policy, Bill 27 was amended to adjust some of the bill’s effects on non-compete agreements and other items.
As a brief recap, Bill 27, or the Working for Workers Act, changes several pieces of legislation to:
- Ban non-compete agreements in employment contracts except in certain circumstances,
- Create additional protections for foreign nationals working in Ontario,
- Create a new requirement for a disconnect from work policy for employers with 25 or more employees,
- Except in certain circumstances, restricting regulated professions from requiring Canadian experience,
- Provide mandatory access to washrooms to persons making delivers to or from the workplace with limited exemptions,
- Changes to recruiter and temporary help agency licencing requirements,
- Some adjustments to the Workplace Safety and Insurance Act, 1997, in respect of insurance fraud.
Non-Compete Changes
The original Bill 27, before amendments, banned non-competes across the board except in the sale of business circumstances. The new amendments have added another exception: non-competes can still be included in executive contracts.
To that end, the new amendments also define what constitutes an “executive” (for the purposes of a non-compete) as: any person who holds the office of “president” or any other C-Level executive office such as the CEO, COO, CFO, etc., is exempt from the ban.
Parliamentary Debate
Statements from the Minister, the Hon. Monte McNaughton, in committee debates, indicates that the government is concerned about labour market mobility and protecting vulnerable workers.
He gives the example of a fast-food worker asked to sign a non-compete agreement by his employer and likened this to a form of intimidation of workers.
As most employment lawyers will say, non-compete are generally unenforceable unless reasonably necessary to protect legitimate business interests. Certainly, one part of the appeal of the non-compete for employers is the ability to include them even if they are unenforceable to discourage departing employees from competing. However, such tactics rely on the employee either not knowing or not making inquiries regarding the effect of their non-competes.
In parliamentary debates, the Minister brought up examples of other jurisdictions that banned non-competes. For example, he noted that California banned non-competes and “Silicon Valley has flourished”; meanwhile, Hawaii did the same and experienced an “11% increase in labour mobility and a 4% increase in new-hire salaries.”
The Minister also mentioned the frivolous litigation that comes along with the general permissibility of non-competes but noted that, in some circumstances, such as executive contracts, non-competes are appropriate and useful.
Likelihood of Passing
Given the support from the majority Progressive Conservative Party going into an election, and generally broad support for this change among labour groups, and the fact that the bill has already reached third reading in the legislature, Bill 27’s passage is almost assured.
The legislature has eight more days left to sit in 2021 before the year-end holidays, and there is a good chance that the bill will pass by the end of the year or early in 2022.
What Action Should You Take?
If you currently have non-competes in your employment agreements, reviewing the risk stemming from their invalidation is a good first step. Haven’t reviewed your employment agreements in a while? Now is a good time to get started, especially with the upcoming changes to minimum wage and server salaries.
If you don’t have time, or need expert advice, contact Bridge Legal & HR Solutions to find out how we can assist. Our as-needed HR and Legal services have saved our clients stress and time dealing with employment contracts and more.
