On May 6, 2026, the Government of Canada introduced Bill C-31 which proposes amendments to the Canada Labour Code. Specifically, the proposed amendments, if passed, would prohibit the use of non-compete clauses in employment agreements and prohibits federally regulated employers from imposing non-compete clauses on employees in general.
Non-compete clauses are defined to mean a term or condition of employment, or a clause in an agreement, that prohibits an employee from engaging in any business, work, occupation or trade, profession, project or other activity that is in competition with the employer’s federal work, undertaking, or business after the employee ceases to be employed. Historically, the courts have taken a strict view of non-compete clauses and only permitted enforceability when the clause is reasonably restricted by term, geographic region, specific description of work, or limited to specific clients within a limited time frame. The proposed amendments to the Canada Labour Code go further to propose an absolute prohibition on the use of non-compete clauses by federally regulated employers.
The proposed amendments do provide for limited exceptions, which include:
- Sale of business transactions, where the seller and purchaser enter into an agreement that contains a non-compete clause and the seller becomes an employee of the purchaser; and
- Senior executive roles, including chief executive officer and those employees who report directly to the chief executive officer, including: chief operating officer, chief financial officer, chief human resources officer, chief information officer, chief technology officer, or chief legal officer.
The proposed amendments go further to prohibit an employer from dismissing, suspending, laying off, demoting, or disciplining an employee because the employee has refused to agree to or comply with a non-compete clause.
A transition period for the application of the proposed amendments is contemplated for existing agreements that include non-compete clauses.
The proposed amendments align with the legislation in force in Ontario. While Alberta has not moved to such legislation, federally regulated employers in Alberta are subject to the Canada Labour Code and these amendments. It will also be prudent to monitor activity in Alberta and other provinces for adoption of similar prohibitions on employers.
If adopted, federally regulated employers are advised to review existing employment agreements and terms of employment to address any non-compete clauses.Walsh LLP has expertise in assisting employers who are federally regulated and our employment law team is available to assist you with any questions you may have regarding this proposed amendment to the Canada Labour Code or any other employment law matters.
