Jeanne Pratt, Canada’s interim commissioner of competition, has recently published an open letter calling on provincial and territorial ministers to restrict the widespread use of non-compete agreements in an effort to make the country’s labour markets more competitive.
According to findings from the Organization for Economic Co-operation and Development’s (OECD) surveys of Canada’s workers and companies, employers are increasingly utilizing non-compete clauses and applying them to roles where they are less justifiable.
Specifically, the OECD survey results revealed that non-compete clauses might govern between 29 percent and 39 percent of Canada’s private sector employees.
Impact of non-compete agreements
Non-compete agreements prevent workers from accepting a job with a competitor or establishing a competing business for a certain period after leaving their previous employer, generally for the purpose of safeguarding sensitive information or client relationships.
According to the Competition Bureau’s news release, non-compete clauses limit job opportunities and entrepreneurship for millions of private sector workers across the country.
The Competition Bureau added that such clauses affect a wide range of workers, including those under fixed-term contracts, those in jobs with lower pay, and those in roles without access to confidential information.
The Competition Bureau noted that, even if non-compete agreements are often legally unenforceable, they can end up deterring workers from searching for jobs with better compensation or from beginning their own businesses.
Stressing the importance of labour mobility, the Competition Bureau explained that giving workers the freedom to move from one job to another or to launch a business would foster an environment of higher pay, bigger talent pools, better conditions for workers, and support for entrepreneurship.
Jurisdictions taking a stand against non-compete clauses
The Competition Bureau acknowledged the Ontario and federal governments’ steps to limit non-compete agreements.
Since 2021, Ontario has banned most employment non-compete agreements, subject to some exceptions.
Meanwhile, the federal government intends to amend the Canada Labour Code through Bill C-31, which would generally prevent non-compete clauses in federally regulated workplaces, subject to specific exceptions.
In its news release, the Competition Bureau urged the country’s other provinces and its territories to enact similar reforms to their respective labour and employment laws, building on the Canadian and Ontario governments’ momentum.
More Competition Bureau news
On Sept. 28, the Competition Bureau announced the commencement of an investigation into the use of minimum advertised pricing policies within the grocery sector, given that Canadians might not know that stores could not always advertise their lowest prices in flyers, apps, or online promotions.
On Jan. 12, the Competition Bureau shared that it had launched a market study delving into the state of competition within the financing sector for small and medium-sized enterprises (SMEs) in Canada.
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