2025 Playbook: Update Canadian Employment Contracts for Non-Competes and Contractor Misclassification

Canadian employers face two fast-moving risks in 2025: non-compete clauses that won’t hold up, and costly contractor misclassification. This guide shows what to change now, why it matters, and how to roll it out across provinces without slowing the business.

Insight: In Ontario, most employee non-competes are void. Across Canada, enforcement is tightening on misclassification, with back pay, taxes, CPP/EI, WSIB and penalties in play.

 

What changed and why it matters

Non-competes. Ontario prohibits employee non-competes except for certain executives and sale-of-business scenarios. Courts elsewhere scrutinize scope, geography, duration, and necessity. Expect more audits and challenges. See provincial guidance like Ontario’s ban on non-competes.

Contractor status. Governments are increasing enforcement. Federally regulated employers face active inspections and penalties where roles look like employment. See the federal Labour Program overview on misclassification. Also monitor competition law: the Competition Act criminalizes wage-fixing/no-poach agreements between employers; align your non-solicit drafting with Competition Bureau guidance on wage‑fixing and no‑poach.

 

Step-by-step contracting updates

Step 1. Map your documents. Pull every template and signed agreement that controls how you engage people: offers, promotion letters, equity plans, IP/confidentiality agreements, contractor MSAs/SOWs, and vendor agreements with staffing firms. Tag by province and employment status.

Step 2. Remove or replace non-competes. In Ontario, strip non-competes from employee templates unless the role falls within a statutory exception. Elsewhere, use them only where you can justify necessity and narrowly define time, territory, and scope. Prefer targeted non-solicit and confidentiality protections supported by fresh consideration.

Step 3. Upgrade non-solicit, confidentiality, and IP. Draft non-solicits tied to actual customer lists and live business lines, with sensible duration (for example, 12 months). Tighten confidentiality definitions and equitable relief language. Confirm inventions/IP assignment covers pre- and post-employment creations tied to your business.

Step 4. Add role-based riders. Use province-by-province riders to reflect local rules (Quebec civil law specificity for restrictive covenants; BC/Alberta reasonableness tests; Ontario ESA carve-outs). Keep a federal rider for Canada Labour Code employers.

Step 5. Rework contractor engagements. Build a contractor playbook: outcome-based SOWs, right to subcontract, clear lack of exclusivity, control resting with the contractor, contractor-borne tools/expenses, and indemnities for CPP/EI/WSIB. Cross-check the engagement against federal and provincial factors cited in the Labour Program overview on misclassification. If the facts look like employment, adjust the model or convert to employment.

Step 6. Fix consideration and variation mechanics. Use signing bonuses or promotions as consideration for new covenants. Include a clear, enforceable amendment clause and fresh consideration for mid-employment changes. Avoid “fire/rehire” optics without real benefits.

Step 7. Align with competition law on hiring restraints. Avoid clauses that could be read as no-poach between separate employers in commercial contracts (franchise, JV, vendor). Ensure any non-solicit provisions in M&A and services agreements are necessary and narrow, consistent with Competition Bureau guidance on wage‑fixing and no‑poach.

Step 8. Govern the rollout. Set board oversight for workforce legal risk. Approve a contract remediation plan, assign HR/Legal owners, and track conversion rates and variance. Benchmark goals, for example: reduce “void-on-its-face” clauses to 0% within 60 days; cut contractor misclassification exposure by [30–50%] over two quarters.

 

Quick wins you can ship this month

Replace non-competes with non-solicit and confidentiality language in Ontario employee templates. Add an executive-only non-compete rider where lawful and justified. Insert a standard IP assignment and moral rights waiver across all templates. Launch a redline protocol so recruiters and managers don’t reinsert banned terms.

 

Longer-term safeguards

Stand up a classification review at intake and renewal, with quarterly audits. Centralize templates in a clause library with province and federal tags. Train HR, finance, and procurement on when to escalate. Add a compliance calendar that tracks emerging rulings and updates.

 

Practical rollout example

A mid-sized tech company with teams in Ontario and Quebec retired non-competes for Ontario staff, tightened non-solicits (12 months), and issued Quebec-specific covenant riders. It replaced contractor time-and-materials statements with deliverables-based SOWs and diversified contractor tools/expense ownership. Within 90 days, they reached [100%] template compliance and passed an internal audit with [no high-risk findings].

 

Why this matters in 2025

Courts and regulators are skeptical of overbroad restraints. AI-driven audits and e-discovery make inconsistent templates easy to spot. SMBs need enforceable, province-ready contracts that won’t collapse in litigation or investigations.

Explore how we operationalize these updates with fixed-fee packages and playbooks at Lamba Law. Learn more about our Services, see how we work on About Us, or start a scoped review via Work With Us.