On May 6, 2026, the federal government introduced legislation to prohibit non-compete clauses and other employment-related restrictions for federally-regulated employers and employees, except in limited circumstances.
If passed, Bill C-31: Budget 2025 Implementation Act, No. 2, will significantly amend the Canada Labour Code (the “Code”) for federally-regulated employers, which includesbanks, interprovincial and international transportation services, ports and marine shipping, and telecommunications. Federally-regulated employers will no longer be permitted to impose a “non-compete clause” or “other employment-related restriction” on an employee, including by inducing an employee to agree to a non-compete clause. Similarly, employers and employees will not be permitted to mutually agree to a “non-compete clause” or “other employment-related restriction”. For clarity, these proposed restrictions would not apply to provincially regulated employers in British Columbia, who are not governed by the Code.
Bill C-31 defines “non-compete clause” as a term or condition of employment, or a clause in an agreement, that prohibits an employee from engaging in any business, work, occupation or trade, profession, project or other activity that is in competition with the employer’s federal work, undertaking or business after the employee ceases to be employed.
In addition, Bill C-31 provides a catch-all by prohibiting “other employment-related restrictions” which is defined as a term or condition of employment, or a clause in an agreement, that is not a non-compete clause and is part of a class specified in the regulations. This catch-all will allow future regulations to curtail or restrict terms or conditions of employment that may restrict an individual’s post-employment rights.
The good news is there remain two discrete exceptions to the broad prohibition:
Bill C-31 includes a transitional provision that existing non-compete clauses will not immediately be void if and when the legislation comes into force. Instead, existing non-compete clauses (not captured by the exceptions) will only be invalidated one year after the prohibition takes effect.
Bill C-31 marks a significant alteration to the existing framework of employer-employee relationships in the federal sphere. Employers will no longer be able to rely on non-competes to protect their business interests by restricting a former employee from competing against it.
However, this does not mean there are no other avenues to protect a business’s key interests. If passed, federally-regulated employers are advised to consider the following options:
Bill C-31 is not yet in effect. It is currently before Parliament in second reading. We will continue to monitor its progress for any amendments that may be made.
If you have any questions regarding these legislative developments, please contact your Harris lawyer.
