New Guidance on Ontario's Disconnect from Work Policy and Ban on Non-Competes

February 23, 2022

Written By Madison Stemmler, Talia Bregman and Carl Cunningham

As we discussed in our previous blog, Ontario Bill 27: Working for Workers Act, 2021 is Now the Law, the Ontario government amended the Employment Standards Act, 2000 (the ESA) on December 2, 2021 to include a prohibition on non-competition agreements between employers and Ontario employees and to introduce a requirement that workplaces with 25 or more employees in Ontario create a "disconnect from work" policy.

On February 18, 2022, Ontario's Ministry of Labour, Training and Skills Development (the Ministry) released further guidance to aid employers and employees in their understanding of what is required of them under these new laws.

The Disconnect From Work Policy

Disconnecting from work is defined as "not engaging in work related communications, including emails, telephone calls, video calls or sending or reviewing other messages, to be free from the performance of work."

Any employer that employs 25 or more employees across any of their locations in Ontario as of January 1, 2022 will be required to have a written policy on disconnecting from work in place by June 2, 2022. Beginning in 2023, and each year thereafter, employers that employ 25 or more employees in Ontario on January 1 of that year must have a written policy on disconnecting from work in place before March 1 of that year.

When determining whether the 25-employee threshold is met, each individual who is employed by the business is considered to be "one" employee regardless of the number of hours the individual works or if they are full or part-time. Probationary employees, employees on layoff, leave of absence, strike, or employees who are trainees are to be counted as well. Employees employed outside of Ontario are not to be taken into account.

The Ministry has clarified that this new rule does not require that an employer provide their employees with the right to disconnect from work over and above the limits on working hours that are already prescribed by the ESA. The policy may give an employee the right to not perform work when the rules in the ESA would otherwise allow work to be performed, however this is not required. The policy simply needs to include:

1. information on the employer's expectations on disconnecting from work;
2. the date that the policy was prepared; and
3. the date of any changes made.

Employers must determine the content of the policy themselves. The Ministry's examples of topics that the policy could address include:

• an employer's expectations regarding reading or replying to work related emails after an employee's regular shift is over;
• different expectations that may arise depending on (a) the time of day of the communication, (b) the subject matter of the communication or (c) who is contacting the employee; and
• expectations surrounding the use of out of office notifications or voicemail messages.

If the 25-employee threshold is met, then every employee of the employer in Ontario must be covered by a disconnect from work policy, although one policy does not need to be applied to all groups of employees. An employer may have multiple disconnect from work policies that are tailored to different factions of their workforce.

Employers must provide employees with the written policy within 30 calendar days of the policy being prepared or changed, and must provide it to new hires within 30 calendar days after hire.  The policy can be provided as a printed copy, an attachment to an email if the employee can print it, or as a link to the policy online, if the employee has a reasonable opportunity to access the document and a printer (and knows how to use the computer and printer).

Employers also have record-keeping requirements under this new rule. Employers must retain a copy of every written policy on disconnecting from work for three years after the policy is no longer in effect.

The Ban on Non-Competition Agreements

The ESA defines a non-competition agreement as "an agreement, or any part of an agreement, between an employer and employee 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-competition agreement that is entered into by an employer and Ontario employee on or after October 25, 2021 (whether entered into before, during or after the employment relationship) is deemed void, unless one of two exceptions apply.

The first exception is the sale of business exception. This exception applies when:

1. there is a sale or lease of a business or a part of a business that is operated as a sole proprietorship or a partnership;
2. immediately following the sale, the seller becomes an employee of the purchaser; and
3. as part of the sale, the purchaser and seller enter into an agreement that prohibits the seller from engaging in any business, work, occupation, profession, project or other activity that is in competition with the purchaser's business after the sale.

The second exception is the executive exception. This exception allows an employer to enter into a non-competition agreement with an employee who holds any of the following titles: Chief Executive Officer, President, Chief Administrative Officer, Chief Operating Officer, Chief Financial Officer, Chief Information Officer, Chief Legal Officer, Chief Human Resources Officer, Chief Corporate Development Officer and any other chief executive position.

The Ministry's guidance still leaves several important questions unanswered. First, is this an exhaustive or closed list of executive positions? While the exception appears open by including "any other chief executive position" (e.g., Chief Legal Officer), other than President the exceptions are limited to those with "chief" in their title. This would seem to exclude for example senior executives who have the title of Executive Vice President. 

Second, and related to the first question, will the Ministry conduct any substantive analysis of the job in determining whether an employee properly falls under the executive exception? While it might be reasonable to expect the answer to that question is "yes," the Ministry's guide is silent on this point. In addition, the fact that the Ministry's guide expressly states that in determining whether an agreement is a non-compete agreement, the Ministry will look at the substance of the agreement and not the words, similar statements regarding the substance of the position were not included in the executive exception, inferring this exception may be applied narrowly. 

The ESA does not prohibit  non-competition agreements that were entered into before October 25, 2021. However, employers should note that these agreements may still be vulnerable to challenge at common law. The ESA also does not prohibit the use of non-disclosure or non-solicitation agreements, so long as these agreements are not, in substance, non-competition agreements.

Employees are able to file a claim with the Ministry if they believe that they have entered into a prohibited non-competition agreement or if they believe they have been penalized for refusing to do so.

Key Takeaways

• Employers with 25 or more employees in Ontario as of January 1, 2022 should start considering what their "Disconnect from Work" policy will look like ahead of the June 2, 2022 deadline and whether or not they wish to create a greater right than what is required by the ESA by allowing their employees to completely disconnect from work outside of normal working hours.
• No employer should be entering into a non-competition agreement with an Ontario employee that prohibits the employee from engaging in competitive activities post-employment, unless the employee falls under the sale of business or executive exemption. Permissible non-competition agreements should still be reviewed by employment counsel for possible common law enforceability issues.

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