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:
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.
Even though Bill 27 is specific to Ontario, startup’s in other provinces should review any of these clauses with legal counsel.
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.
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:
Currently employers will have some flexibility to design their policies on disconnecting from work to suit their particular work environment and culture, however this may change in the future if the Ontario government comes out with more prescribed regulations.
We also note that the written policy on disconnecting from work must apply to all of the employer’s employees in Ontario, even employees who are generally excluded from other provisions of the ESA (e.g. managers, salespersons, IT professionals, etc.), however an employer may choose to have multiple disconnecting from work policies for different groups of employees or differentiate between groups of employees in a single disconnecting from work policy.
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.
The author would like to thank Norton Rose Fulbright Canada associate Samantha Cass for her assistance in preparing this article.