independent contractor non compete ontario
Start here. WWA allows employers to enter into non-competes even after October 25, 2021 with Executives, which the Act defines as "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.". This is because employers know independent contractors have no employment law protections. The new statutory prohibition codifies and re-enforces important common law principles regarding non-competition covenants in employment agreements. February 12, 2020 Rahul Soni Employee Rights 0 Comments The growing gig economy in Canada was once limited to more temporary arrangements, such as ride-sharing and informal assignments with freelancers. The Ontario Superior Court of Justice refused to enforce the clause. Learn how to navigate the coming changes. For example, if my law firm hires someone to just set up a server in the office, he or she is obviously an independent contractor. As shown above, the non-compete clauses failed because the employer had no legitimate proprietary interest worth protecting. It is important to note that non-solicit, confidentiality and ownership rights provisions are unaffected by the changes to the lawalthough that doesnt mean that any particular provision will necessarily be enforceable by the courts even if they are not automatically void. Think of this like a building that no longer complies with certain zoning by-laws. 11 January 2021. by James R.G. WebHow Our Non Compete Lawyers Can Help. Bill 27 amends and impacts the Employment Standards Act, 2000 (the ESA) with two important changes: a ban on non-competition or non-compete agreements and upholding an employees right to disconnect from work. Subsequently Dr.Park went on a maternity leave. The court will look for the existence of a proprietary or other legitimate interest which can only be protected by a non-compete clause. Will the noncompete be enforceable against the independent contractor? Or because they were part of an expired agreement. [3] See Employment Standards Act, 2000, SO 2000, c 41, s 1(1). In such a scenario, a non-compete agreement may be entered into between the purchaser as employer, and the seller as employee. While we cannot say for certain absent a tribunal/court decisions or further clarity by way of regulation , it is our view that there is a good argument that this exception ought to be interpreted to include any employee who performs the duties and has the level of responsibility typically associated with the enumerated executives. DCY Professional Corporation Chartered Professional Accountants. Fast forward: Navigating change in Canada's new age of employment. Non But in this case, the words current or prospective customers was overly broad and imprecise. Normally, this is more than one business which is why non compete agreements cannot I have more than 25 years experience as an employment lawyer with satisfied, repeat clients. Readers are cautioned against making any decisions based on this material alone. Aside from the exceptions described above, non-compete agreements are prohibited, and in violation of the ESA;there is no "grandfathering" or transition period. Create My Document. Therefore, the clause went beyond what was reasonably required to afford adequate protection to IRIS existing trade connections. If you are an employee, youll get a W-2, and you are not an independent contractor. The Court concluded (at paragraph 46) that: there is no conclusive test which can be universally applied to determine whether a person is an employee or an independent contractor. If you would like to discuss this article further or have any questions, please contact the authors or a member of our Employment, Labour & Equalities Group. [27] Control and dependency, in other words, are a function not only of whether the worker receives immediate direction from, or is affected by the decisions of others, but also whether he or she has the ability to influence decisions that critically affect his or her working life. Contractors need to seek legal advice to determine if they are legally bound by non-competes, or if they are actually employees for legal purposes who could be re-classified and, therefore, entitled to various legal protections under the ESA. dont try to take customers with you when you leave!) On December 2, 2021, it became law. Non Compete WebLitigating Across Ontario. As a business owner, you dont enjoy the same presumption of an unequal playing field that underpins policy around non competes and similar restrictive agreements. On October 25, 2021, the Ontario government introduced Bill 27, the Working for Workers Act, 2021 (Act). The Act is ambitious in scope, and certainly welcome, as it attempts to address some important legal problems currently facing employees and contractors. Waterloo Region, Nicole Hilliard Ontario Introduces Employee-Friendly Legislation Which Executives are exempt from the prohibition. In the seminal case of Lyons v. Multari,13 the Ontario Court of Appeal found that a 3-year and 5-mile non-compete clause between a principal oral surgeon and his junior associate was unenforceable because: The same legal principles discussed in the cases above would apply in a purely associate/principal relationship. The employer sued and tried to enforce the non-compete before the trial (by bringing a mini-trial called a motion for an interlocutory injunction). The Court noted the difficulties which have emerged from the application of each of these tests. There are thousands of other types of businesses that operate this sort of sham relationship. [3] Bill 27, Working for Workers Act, 2021, 2nd Sess, 42nd Leg, Ontario, 2021, at Part XV.1 s 67.2(5) (assented to 30 November 2021). In Crawford Packaging Inc. v. Dorata,6 a salesperson employee signed an employment agreement that included an 18-month non-compete clause covering a geographic area within any sales territory where the employee worked. The employee resigned to join a competitor business. principal/associate context) non-competes are generally unenforceable except in exceptional circumstances (more on that below). The employee resigned to start his own competing business. activity that is in competition with the employers business after the employment relationship between the employee and the employer ends, unless: Unless one of these exceptions applies, the new statutory prohibition precludes non-competition clauses in agreements entered into with employees on or after October 25, 2021. This website uses cookies to improve your experience while you navigate through the website. My drivers can pick up any other stranded car not dispatched from the automobile association, but they never do. Ontario Bans Employee Non-Competition Agreements: What Does This Mean for Trade Secret Protection? Fasken has extensive experience with advising and assisting clients, across a wide variety of industries, regarding how to protect their business interests, including, where appropriate, through injunctions and other extraordinary remedies. Copyright 2023 McMillan LLP. The foregoing provides only an overview and does not constitute legal advice. Summary of amendments to Canada Environmental Protection Act introduced by Bill S-5, Strengthening Environmental Protection for a Healthier Canada Act. In both employment and commercial contexts, express contractual provisions remain one of the most effective and proactive ways to protect trade secrets, confidential information and other legitimate business interests. For more information or to discuss a particular matter please contact us. Any such non-compete agreement will be void. On November 30, 2021, the Ontario legislature passed Bill 27, Working for Workers Act, 2021[1] an omnibus bill introduced by the Progressive Conservatives which amends a number of employment-related statutes. On May 24, 2023, Minnesota Governor Tim Walz signed into law a bill banning nearly all post-termination non-compete agreements with employees and independent contractors. Gowling WLG International Limited promotes, facilitates and co-ordinates the activities of its members but does not itself provide services to clients. Accordingly, the message seems clear: broadening a non compete clause by the addition of words of association such as in conjunction with or concerned with or related to or associated with will not necessarily improve the clause and in fact may very well lead to precisely the opposite result, which seems to have happened in this case. These cookies will be stored in your browser only with your consent. A recent Ontario court decision has stymied creditors' efforts to fine-tune the process. This category only includes cookies that ensures basic functionalities and security features of the website. The exceptions to the new statutory prohibition are also consistent with the common law. Even most independent contractor agreements for professionals who are in sales or maybe at the executive level. The employer sued to and tried to enforce the non-compete clause by bringing a motion for an interlocutory injunction. Rather, the Employment Standards Act defines employee, which helps differentiate but does not define independent contractor: Section 1(1) of the Employment Standards Act defines an employee and employer as: (a) a person, including an officer of a corporation, who performs work for an employer for wages. WebLior explains why independent contractors may actually be employees, and owed severance. If youre thinking about selling, contact Michael at michael@dentistlawyers.ca or 647.680.9530. This bulletin will address: 1) the prohibition against non-competes and 2) the policy on disconnecting from work. Fourth, the clause purports to restrict the employee from accepting work from his personal contacts who may have had nothing to do with the employer at any time. Employers have 6 months from December 2, 2021 (i.e., June 2, 2022)to complete its policy. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the workers opportunity for profit in the performance of his or her tasks. As the IRIS and Ceridian cases make clear, such language may only serve to introduce an element of ambiguity and broaden the scope of the non-compete clause beyond what is intended to be covered, and thus in the end risk achieving no protection at all. No. It would be unlikely that a Employee + Non-Compete = Unenforceable The fact my drivers are obliged to work a minimum number of 12-hour shifts in one week, with the threat of penalties, is persuasive in finding an independent contractor relationship. Unfortunately, if youre an independent or dependent contractor, the non-compete in your contract may not be illegal since the ESA only applies to employees. WebJanuary 2018 Employment and Labour Bulletin 5 minute read. Bill 27 amends the Employment Standards Act, 2000 (the "ESA"), prohibiting employers from binding an employee to any form of non-compete agreement. No. Necessary cookies are absolutely essential for the website to function properly. Will Your Non-compete Hold Up? BC and Ontario It happens daily. that a persuasive approach to the issue is taken by Cooke J. inMarket Investigations, supra[Market Investigations Ltd. v. Minister of Social Security[1968] 3 All. But are these non-compete clauses legal and enforceable in Ontario? Employees vs. Independent Contractors in Ontario The agreement means the contractor cannot work for a competitor or work independently in the same exact field. the employee sold or leased the business to the employer but, immediately following the sale or entering into the lease, became an employee of the business; or. Ontario courts have long differentiated between commercial (e.g., sale of a business) and employment contexts concerning non-competition provisions, and have long taken a much less tolerant view of non-competition covenants in employment agreements. We know that many businesses are not sole proprietorships, but rather are owned by shareholders who may have other layers of corporate status, and many companies offer equity to regular employees as part of their total compensation packages. In these contexts, the buyer/employer and seller/employee have equal bargaining power at the time of entering into the non-compete and the buyer/employer requires extra protection to help preserve the goodwill that they just bought.15. The amendment defines "non-compete agreement" as an "agreement, or any part of an agreement, between an employer and an 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."[2]. Under Ontario corporate laws, every corporation must have a president and secretary, but there is no requirement that a business employ executives using the title "Chief", and we know that many employers do not use those titles even for their top employees. The [employers] evidence is, at turns, speculative, exaggerated, unsupported, or not forthright.. [2] See Employment Standards Act, 2000, SO 2000, c 41, ss 67.1, 67.2(1)(5). Be sure to ask your clients for all employment agreements and policies prior to giving legal advice on hiring and firing to determine if there are illegal non-competes in existence. No. The fact my drivers are controlled by a rating system and had to follow my automobile associations rules is also persuasive in finding an independent contractor relationship. I permit the drivers to take the car home at night and use it for other purposes. Also, employees would be wise to review with a lawyer any employment contract, agreement or job offer they signed in the past with their present employer to see if they contain actual non-compete provisions that are now void. It is significant to note, however, that this does not mean that all non-competition agreements entered into prior to October 25, 2021 will be enforced. Given that the legislation imposes no specific requirements, employees may perceive a disconnect between the title of the provision and what is actually inserted into the policy by the employer if there are still requirements to answer emails after core hours or to work on a weekend. Manifestly, there is a lower likelihood of a power imbalance existing between the parties in such a context as compared to the employment context. Should you require legal advice for your particular situation then please feel free to contact us to arrange for a consultation for a legal matter, or learn more here about booking a mediation. To the contrary, non-competition agreements/provisions remain unlikely to be enforced absent exceptional circumstances, and must still pass the usual scrutiny of our courts. The employee eventually resigned to work at a competitor business. These employers may unknowingly, and perhaps undeservingly, be sitting on a ticking time bomb. Among its many features, Bill 27 has created a new statutory prohibition of non-competition agreements between employers and employees under the Employment Standards Act, 2000 (Ontario). The fact I supply the equipment and am responsible for insurance and maintenance is also persuasive in finding an independent contractor relationship. 2. The more the work life of individuals is controlled, the greater their dependency and, consequently, their economic, social and psychological vulnerability in the workplace: . I have signed a licensee All my calls come in from the automobile association. There may be one further wrinkle, which involves historical non-competes remaining intact. Interestingly, the court commented on the non-compete clause in the original employment agreement, stating that it was noteworthy that it contained the simple restriction that an optometrist could not practice optometry within 5 kilometres of the IRIS location for 3 years. All rights reserved. These are the ex-employee legal obligations that should concern most employers, as opposed to working for a competitor (except in the sale of a business, or a departing executive scenario). If employers plan to continue to incorporate non-compete provisions for executives or as part of a transaction, we strongly recommend that such provisions be included in an entirely separate agreement, and certainly not incorporated directly into the main employment agreement. The community involved and whether there were clientele yet to be exploited by anyone. Michael Carabash, BA, LLB, JD, MBA, CDPM is a founding partner of DMC LLP, Canadas largest dental-only law firm that helps dentists prepare, market and sell practices in Ontario. Independent contractors have more freedoms than traditional employees but also have fewer employment-related benefits and protections. Posted on Published: June 12, 2020- Last updated: April 14, 2023. The 8th Circuit recently addressed this question in Ag Spectrum Co. v. Elder. As did the BC Court of Appeal, the Ontario Superior Court emphasized that a covenant not to compete in the employment context is a restraint of trade and thus prima facie void as a general rule. You also have the option to opt-out of these cookies. Meet the Authors. Per the Court: I am not satisfied on this record that the [employer] is at risk of loss of market share, substantial loss of revenue, or damage to its business reputation. Free Independent Contractor Agreement. In other words, if an employer changes, after October 25, 2021, any material term of employment, which may include salary, incentive compensation, termination provisions, work location, etc., of an existing employee's employment and/or requires an existing employee to sign/acknowledge/accept/or receive a notice of a change in terms, and the employer still intends to rely on the balance of the existing terms entered into prior to October 25, 2021, there is significant risk that WWA is triggered, and the non-compete provision in the pre-October 25, 2021 will be deemed void, and therefore, risk the enforceability of other provisions in the agreement. Are non-compete clauses outlawed in Canada? | KCY at LAW 5 years). Unfortunately, if youre an independent or dependent contractor, the non-compete in your contract may not be illegal since the ESA only applies to employees. All rights reserved. Rather, specific legal advice should be obtained. This is a blog by Jeff Dutton. Well, this takes us back to the beginning of this article: when its a purely associate/principal relationship (no purchase and sale involved), Ontario Courts have taken the same approach as an employer/employee relationship. Waterloo Region, Sign up to receive insights on the latest legal changes and developments. In the commercial context, a purchaser of a business may also use a non-solicitation covenant to restrain the vendor from later improperly taking away the businesses potential customers, existing clients, and employees. The Act automatically amends the ESA so that no employer shall enter into an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement (defined as an agreement, or any part of an agreement, between an employer and an employee that prohibits the employee from engaging in any business, work, occupation, profession, project or other activity that is in competition with the employers business after the employment relationship between the employee and the employer ends.) as well as those from that date and beyond. This blog is for educational purposes only and is not intended as legal or other professional advice. By accepting this notice and continuing to browse our website you confirm you accept our Terms of Use & Privacy Policy. No. Now Wait Just a Second Non On May 24, 2023, Minnesota Governor Tim Walz signed into law a bill banning nearly all post-termination non-compete agreements with employees and independent contractors. In other words, if a seller of a business is a corporation whose shares are held by several individuals, those individuals who hold a substantial percentage of the shares, will fall under this exception, if they become employees of the purchaser following the sale. If Youre an Employment Lawyer or Paralegal. Importantly, the prohibition does not apply to commercial agreements (i.e., outside the employment context), nor does it apply to agreements with independent contractors (or other individuals who are not employees under the ESA).[3]. Employee + Non-Compete = Unenforceable An area that has received less attention is the impact of classifying a worker as an independent contractor to a noncompetition agreement (noncompete). Or because the employer couldnt establish damages (and regardless of whether the employment agreement said they needed to or not). These confidentiality covenants allow businesses and employers to exercise control over the dissemination and use of their trade secrets and confidential information by setting out express terms regarding what constitutes confidential information and the manner in which such information may be used and disclosed. 34 (January 12, 2005) (cited inProfessional Recovery Equipment Inc. v. Mootoo, supra),the Ontario Labour Relations Board commented on the intention of the parties concerning independent contract status: Finally, it is important to note that whether or not an individual is an employee or independent contractor is a question of law to be determined after consideration of all the relevant factors. In Camino Modular Systems Inc. v. Kranidis,5 a VP for a raised flooring business signed an employment agreement that prohibited him from competing within North America for a period of 12 months after leaving. Notably, the enforceability of the second of these, confidentiality covenants, has not been changed by the new legislation and so can continue to be used by employers, and also in a variety of commercial contexts, to prevent the misuse and disclosure of trade secrets and other confidential information. [28] While control and dependency define the essence of an employment relationship for purposes of human rights legislation, this does not mean that other indicia that courts and tribunals have developed, such as theCranefactors, are unhelpful in assessing the extent to which control and dependency are present. In these circumstances, a court or labour board would likely conclude that my drivers are employees and not independent contractors (indeed, I argued a very similar case with the same outcome). Top Employment Lawyer: Toronto & North York's Best Staebler Company Limited v. Allan, 2008 ONCA 576 (CanLII), Donaldson Travel Inc. v. Murphy et al, 2016 ONSC 740 (CanLII), reaffirmed in 2016 ONCA 649 (CanLII), See for example: Button v. Jones, [2001] O.J. However, as I set out below, the Act may have unintended consequences for both workers and employers that could take years to resolve while, at the same time, not dealing with other, pressing issues in employment law today. It is mandatory to procure user consent prior to running these cookies on your website. The former employee also had no confidential information about the employers projects that could harm the employer in those 12 months. The documents should then be properly replaced with legal, enforceable provisions that protect you, instead of harming you. Recent court decisions in BC and Ontario provide a cross country lesson to employers about the dangers of overly broad or ambiguous non-compete clauses. Finally, the provision must contain precise language which clearly identifies what the employee may or may not do. The term of the contract was renewed only until 2007. On June 20, 2023 the New The Court dismissed the motion and ordered the employer to pay $29,000 in costs to the former employee. Realizing on real estate to enforce a court award is notoriously hard. First, the Court held that the 1-year time limit was unreasonably long: the employers deals came together in the aluminum scrap industry without hours and the employer didnt need 1 year to solidify relationships with vendors and purchasers. For example, if I run a tow truck company, are my drivers independent contractors or employees? They would prefer to avoid working for or starting competitive businessesoften for a year or longereven though, when working for the competition, they would never breach their actual legal obligations (either in their contract or under the common law, or both) like disclosing trade secrets or customer lists, or actively soliciting the business their former employers clients for a period. A non-compete agreement is a legally binding contract that prohibits an independent contractor from competing with the company who engaged it throughout the term of the contract and, typically, for a certain amount of time afterwards. Are Non-Compete Clauses Legal in Ontario? Service is needed: For a single job Until the work is complete. "Non-compete agreement" is defined in the ESA. by Michael Carabash, BA, LLB, JD, MBA, CDPM. Current or prospective customers was defined in the agreement as an individual or entity with which [the employee] personally had direct or indirect contact, or access to conduct confidential information about, during the last two years of [his employment]. But this would restrict the former employee from accepting work from someone he may never have had contact with EVEN IF he had access to confidential information about them. Jeff is interested in Canadian business, technology and law, and this blog is his platform to share his views and tips in those areas. The second and final exception under WWA deals with situations where there is a sale of all or part of a business, which includes a lease, and the seller becomes an employee of the purchaser immediately following the sale. Also, notably, in2006515 Ontario Inc. (c.o.b. Its not clear how the employee would be able to identify such people. Not much has changed. The intention of the parties is relevant only to the extent that it is reflected in the actual arrangements they have made with each other in structuring their relationship. Our structure is explained in more detail on our Legal Information page. In other words, will non-comp provisions in Shareholder Agreements, where the non-compete provision is tied to holding shares, as opposed to cessation of employment, be deemed to be void? Independent Contractor (Ontario Laws) - Dutton In IRIS The Visual Group Western Canada Inc. (IRIS) v. Hannah Park, Dr. Hannah Park, Optometric Corporation and Affinity Optometry (Dr. There will be a non-compete in any employment agreement. In many cases, an employer will suggest or even order that, in an effort to save money, a person who would otherwise be an employee should be called anindependent contractor. Independent contractors own their business and provide goods or services to businesses or within an industry. Drivers are rated by customers and must maintain a certain rating to work with me. Update on Bill 27: Ontario bans non-competes. WebNon compete agreements state that one party agrees not to work for a competitor or specified industry for a designated period of time and location. However, for several reasons, employers still Non A prohibition against non-compete agreements with employees; The requirement to develop a policy dealing with an employee's right to disconnect from work; Further protections for foreign nationals; Licencing requirements for temporary help agencies, The requirement to allow delivery drivers access to washrooms; and.
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independent contractor non compete ontario
