Courtesy Of MARS Discovery District
The Working for Workers Act, 2021 (“Bill 27”), which became law in Ontario on December 2, 2021, introduced two key amendments to employment-related legislation that might impact employers in the startup space:
- Prohibition on non-competition clauses: Companies are prohibited from including non-competition provisions in any agreement with their employees, subject to certain exceptions discussed below. This applies to agreements entered into on or after October 25, 2021.
- Right to disconnect: Written “disconnecting from work” policies meant to limit work-related communications outside of normal working hours are mandated for employers with 25 or more employees, effective June 2, 2022.
Prohibition on non-competition clauses
Amendments to the Ontario Employment Standards Act, 2000 (the “ESA”) prohibit employers from entering into employment contracts or other agreements with employees that include non-compete provisions. This prohibition applies to agreements entered into on or after October 25, 2021.
The legislation defines “non-compete” as any agreement “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.” Any non-compete agreements entered into on or after October 25, 2021 are void by operation of the ESA, subject to the exceptions below.
Importantly, the ESA’s statutory prohibition on non-competes does not apply to C-suite executives. Further, Bill 27 does not void non-compete clauses in employment agreements entered into before October 25, 2021. However, whether a pre-existing non-compete clause or a non-compete in an employment contract is legally enforceable depends on the particular facts of each case, as Ontario courts have traditionally taken a narrow view of the enforceability of non-compete clauses.
Bill 27 also carves out an exception to the prohibition on non-competes in a mergers and acquisitions (M&A) context where, as part of the transaction, the seller agrees not to compete with the purchaser’s business post-sale and, immediately following the sale, becomes an employee of the purchaser.
- In light of these legislative changes, companies should remove non-compete clauses from any future employment agreements, except for C-suite executive contracts.
- It might also be prudent to have legal counsel review any non-solicitation language intended for use in future agreements to ensure such clauses do not inadvertently tread into the sphere of impermissible non-compete clauses under the ESA.
- Non-competition clauses (where permitted, such as in executive contracts) and non-solicitation clauses should be drafted in the least restrictive way possible to meet the company’s objectives. For this reason, it is advisable to have legal counsel review non-competition clauses and non-solicitation clauses to ensure they are consistent with existing jurisprudence.
- In recent years, there have been a number of court cases on the enforceability of other provisions in employment contracts, such as termination and bonus provisions. Given the new legislative requirements, this might be a good time for employers to have counsel review their employment agreement templates to ensure enforceability in other respects as well.
Right to disconnect
Bill 27 amends the ESA to require employers with 25 or more employees (as of January 1 in any year) to implement a written policy on “disconnecting from work” by March 1 of that same year. However, transitional provisions allow for a six-month grace period from the enactment of Bill 27. This means employers who presently employ 25 or more employees are not required to have a policy in place until June 2, 2022.
The legislation defines “disconnecting from work” as “not engaging in work-related communications, including e-mails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work.”
Unfortunately, there is little additional guidance on what a disconnecting from work policy should look like. The legislation does say a disconnecting from work policy must contain “such information as may be prescribed,” which suggests the government might pass regulations outlining the required content for these policies. However, as of now, no regulations have been announced. Given that employers have until June 2, 2022 to create the required policies, it might be prudent to take a wait-and-see approach, in the event regulations are forthcoming.
Other jurisdictions, including France, Spain, and Italy, have implemented similar legislation to promote the ability of employees to disconnect from work. These European jurisdictions do not generally prescribe exact parameters on the “right to disconnect,” but require employers to negotiate such parameters with unions and/or individual employees.
Examples of elements that might be included in a disconnecting from work policy include:
- Establishing that employees are not expected to respond to work-related communications outside of core working hours or while on scheduled vacation (except in certain exigent circumstances)
- Providing a definition of “core working hours”
- Setting expectations for response times and the use of out-of-office notifications
- Addressing the appropriate means of communication for work-related purposes; for example, prohibiting text messages or calls to personal cell phones
- Setting specific expectations for different classes of employees (e.g., there might be different expectations for management or supervisory employees)
Again, Ontario might prescribe regulations that address these types of elements. However, we expect employers will have some flexibility to design their policies on disconnecting from work to suit their particular work environment and culture.
We also note that, in other cases, the ESA has specifically exempted certain employees from specific benefits under the ESA. For example, individuals employed in some regulated professions, such as accountants, lawyers, engineers, and doctors, are exempt from parts of the ESA, including minimum standards for hours of work, overtime, and vacation.
In terms of enforcement, the ESA does not prescribe a specific enforcement mechanism if an employer fails to create a disconnecting from work policy, or if an employer fails to comply with such a policy. However, the ESA generally provides that an employee may file a complaint with the Ministry of Labour for an alleged contravention of the ESA, which might result in a compliance order. Additional enforcement mechanisms might also be included in regulations, although no such regulations have yet been announced.
- Companies with 25 or more employees are required to establish a policy on disconnecting from work by June 2, 2022.
- These employers should begin to consider what types of parameters would promote disconnecting from work in the context of their businesses and look out for government regulations in the coming months that might prescribe specific policy requirements.
- It might be advisable to seek legal advice when drafting a right to disconnect policy to ensure it is compliant with ESA requirements (if any), and also to ensure consistency with other workplace policies and procedures.
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The author would like to thank Norton Rose Fulbright Canada associate Samantha Cass for her assistance in preparing this article.