By Saba J. Khan
On November 30, 2021, the Ontario government passed Bill 27, otherwise known as the Working for Workers Act, 2021 (the “Act”).
Among a few other changes, the Act introduces the following notable amendments to employment law in Ontario:
- Employers with 25 or more employees must develop a written “right to disconnect” workplace policy; and
- Non-competition agreements are now prohibited (with some exceptions).
The “Right to Disconnect”
The legislation introduces a “right to disconnect” for employees outside of regular work hours. What does “disconnecting from work” really mean? According to the Act, disconnecting from work is “not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work”.
Employers who have 25 or more employees are now required to produce a written policy that outlines an employee’s right to disconnect from work. Employers are required to have this policy in effect by March 1st of each year and must provide new employees with a copy of same within 30 days of hiring. However, these policies need not be in effect until six months after the Act received Royal Assent. Rather unhelpfully, the Act does not delineate any specifics in terms of what an employer’s “right to disconnect” policy should include. That is left to the employer’s prerogative, at least for now.
The “right to disconnect” has been the topic of significant commentary in the last few weeks with many employment lawyers debating the true utility of such an initiative. For many, “work-life balance” and “disconnecting from work” have been no more than platitudes thrown around in the course of recruiting and retaining talent. Other employers who take these ideas more seriously seemed to already have policies in effect realizing its valuable effect on employee retention and profitability. It’s a valid question then as to what real impact mandating employers to have such a policy will have in terms of shifting employer attitudes.
Restriction on Non-Competition Agreements
Non-Competition Agreements Generally:
Non-competition provisions have been a hot topic for quite some time amongst employment lawyers. Long before Bill 27 was introduced, it was certainly not unusual to have employer clients question the efficacy of such clauses (or, on the flip side, employee clients question the enforceability of same). Often, our advice to both employer and employee clients was that the enforceability of such clauses depends on the reasonableness of the clause. In essence, the question would boil down to whether the clause would be perceived as reasonable by courts, based on its temporal and geographical scope. This often left clients (employers and employees alike) in the dark about whether the clause in their agreement would actually hold up until the clause was actually litigated (which would rarely occur). Nevertheless, enforceable or not, non-compete clauses inevitably struck fear amongst employees who were looking to resign from employment or who had been terminated when it came to finding new employment.
The Ban:
The Act has now prohibited non-competition agreements entered into after October 25, 2021 (when the Act was first introduced), unless the following two exceptions apply:
- The non-competition agreement is entered into in the context of a sale of business; or
- The employee is an “executive”.
An “executive” as defined by the Act is “any person who holds the office of chief executive officer, president, chief administrative officer, chief operating officer, chief financial officer, chief information officer, chief legal officer, chief human resources officer, or chief corporate development officer, or holds any other chief executive position”.
It remains to be seen how the definition of an “executive” will be interpreted by Ontario courts. Some have speculated that courts may offer a broad interpretation such that employees who may not necessarily have “executive-like” terms in their job title, may still be classified as an “executive” depending on the nature of their role. Others suggest that the definition of “executives” will be applied narrowly and that even in situations where an individual holds an executive title, courts will go a step further to ascertain the nature of that individual’s role to determine whether they were truly an “executive”. It is likely that when non-compete provisions are now being assessed by employers, employees and their respective counsel, the discussion will shift from the reasonableness of the clause to the true essence of the employee’s job.
For employer clients, the Act does not entirely strip your ability to protect your business and place appropriate limitations on an employee. For example, other forms of restrictive covenants such as confidentiality agreements and non-solicitation clauses are still permissible.
When Are the Changes Introduced by the Act in Effect?
The ban on non-compete clauses is effective retroactively as of October 25, 2021. This means that non-compete clauses that were executed even between October 25, 2021 and December 2, 2021 (when the Bill received Royal Assent) will likely be unenforceable unless one of the exceptions apply.
Non-compete clauses executed prior to October 25, 2021 are not caught by the Act and the abovementioned implications therefore do not apply. However, given the dim view that courts have historically taken respecting non-compete provisions generally – now coupled with the policy rationale behind the prohibition implemented by the Act – suggest that courts may view such clauses with enhanced scrutiny even if executed prior to October 25, 2021.
With respect to the “right to disconnect”, employers with 25 employees or more have until June 2, 2022, to comply with the mandate of having a “right to disconnect” workplace policy.
Employers are to take note of this Act and ensure that any obligations arising as a result of this legislation are met.
For employers requiring assistance with how to comply with the Act or drafting a “Right to Disconnect” policy, please contact us at saba@sabalaw.ca or at 647-905-5087.