December 9, 2021

Bill 27 Passes – Right to Disconnect, Non-Competes Banned

On November 17, 2021, we wrote about Bill 27 – proposed legislation to amend the Employment Standards Act, 2000 (“ESA”). The bill was passed on November 30th and received Royal Assent on December 2, 2021.  

Two key changes are notable.

Right to Disconnect

Employers that employ 25 or more employees as of January 1st in any year must have a written policy with respect to “disconnecting from work”, before March 1st of that year.  “Disconnecting from work” means not engaging in work-related communications including emails, telephone calls, video calls or text messages.  

Despite the March 1st deadline, employers will have six (6) months from December 2nd (June 2, 2022) to implement the policy.  

A copy of the policy must be provided to employees within 30 days of preparing it. New employees must receive the policy within 30 days of starting employment.  

The legislation does not provide additional guidance in relation to the content of the policy, which affords employers some degree of flexibility. The ESA does not specify allowable exemptions, which suggests that the employer can create reasonable exemptions based on the nature of their operations. Such exemptions may include emergency situations and carve outs for management staff. 

Non-Compete Agreements Banned

The ESA now prohibits employers from preventing employees from working in a competitive business after the employment relationship ends.  

This particular ESA amendment replicates existing common law prohibitions against non-compete provisions. Even before the legislative change, courts were unlikely to enforce non-compete restrictions against employees on the basis that they represented an unreasonable restraint of trade. 

The ESA identifies 2 exceptions to the restriction.

First, where the non-compete restriction arises in relation to a sale of business and the seller becomes employed by the purchaser. If employment ends with the purchaser, the employee may be restricted from accepting employment with a competitor.  

The second exception is with respect to C-suite executives. Non-compete restrictions with respect to such employees would not be prohibited under the ESA.

Critically, non-compete provisions that fit either exception are still subject to challenge under existing common law rules (more on this below).  

The prohibition against non-compete restrictions would not apply to non-solicitation (of clients and employees) or confidentiality agreements.  

Other Changes

Bill 27 creates a number of additional changes relevant to Ontario employers. Most notable among these changes:

  • The ESA is amended to prohibit temporary help agencies from operating without a license;
  • An amendment to the Employment Protection of Foreign Nationals Act to prohibit employers from using an agency that has charged a fee to a foreign national; 
  • An amendment to the Occupational Health and Safety Act requiring a workplace to provide washroom access to delivery persons.  
  • Amendments to the Workplace Safety and Insurance Act in relation to the distribution of surplus WSIB premiums.

The Upshot

Employers with more than 25 employees are well advised to prepare or update their policies to comply with the ESA’s right to disconnect. The failure to do so in compliance with the deadlines set out in the ESA could result in compliance orders and fines.  

The new prohibition against non-competes is arguably redundant given existing common law prohibitions. However, some may interpret the exceptions in relation to sale of business situations and C-Suite employees as an acknowledgment of the legality of non-competes, in those limited circumstances. However, the common law restrictions against non-competes still apply. As such, non-compete restrictions must be reasonable in terms of duration, geography and overall reasonableness. As well, non-compete restrictions, even if the 2 exceptions apply, will likely remain unenforceable if a non-solicitation provision would suffice to protect the employer’s interests.   

Contact us today to discuss these important legislative changes and what they mean for your workplace policies and employment agreements.