In a recent post, we talked about Ontario’s then-proposed and now law ban on non-compete agreements in employment contracts under Bill 27, Working for Workers Act, 2021 (“Bill 27”). The ban was effective as of October 25, 2021. Initially, there was some confusion about the enforceability of non-compete agreements or clauses entered into prior to the introduction of Bill 27. The Superior Court of Justice has recently released its decision for Parekh et al. v. Schecter et al., which clarifies that enforceable non-compete clauses entered into before October 25, 2021 will not be impacted by the ban and can be upheld.
The decision in Parekh et al. v. Schecter et al. revolves around the enforcement of a non-compete clause restricting a dentist from practicing dentistry within a 5 km radius of the dentistry practice for 2 years following the end of the Associate Agreement. The dentistry practice was purchased by the plaintiffs in 2020. An associate dentist at the practice resigned shortly after and began to work at another dentistry practice within a 5 km radius, which culminated in the plaintiffs bringing an interlocutory injunction motion to enforce, amongst other restrictive covenants, the non-compete provision. Justice Sharma applied the common law with respect to restrictive covenants and granted the plaintiffs’ interlocutory injunction enforcing the non-compete provision.
Unlike in Waksdale v. Swegon North America Inc., a decision we have discussed extensively, employers should be less inclined to worry about the retroactive application of Bill 27 on their existing non-compete clauses. We understand that some employees would never have been hired under their current terms of employment had they not agreed to refrain from competing with the company at their next job. So long as a non-compete provision entered into prior to October 25, 2021 is reasonable and necessary in the circumstances, it can be grandfathered in and will not be impacted by Bill 27’s amendments to the Employment Standards Act, 2000 with respect to non-competes.