2025 Budget Targets Canada Labour Code Non-Compete Clauses

In its 2025 Budget, the Government of Canada announced its intention to revise the Canada Labour Code so as to curtail federally regulated employers’ ability to include non-compete clauses in their employment contracts. The stated objective of these amendments is to foster a more dynamic labour market by removing constraints that inhibit employees’ ability to change jobs.

Formal consultations on the proposed changes are slated to commence in early 2026. If adopted, the restrictions would apply exclusively to “federal works, undertakings or businesses” as that term is defined in the Code—sectors that encompass, among others, banking institutions, broadcasters, interprovincial transportation providers, and maritime shipping operations.

Although the government has not yet published the specific legislative text, this federal proposal appears to follow the model introduced by Ontario in 2021 under its Employment Standards Act, 2000. In Ontario, non-compete agreements are largely invalid, with limited exceptions for certain senior executives and for sellers of a business who remain employed by the purchaser. It is likely that employers subject to federal jurisdiction will seek similar carve-outs under the Canada Labour Code, and we will continue to report on any developments arising from the consultation process.

In the meantime, federally regulated employers should track the consultation timeline closely and be prepared to update their employment agreements should the Code be amended. It would also be prudent to reinforce other contract provisions—especially non-solicitation and confidentiality clauses—in anticipation of an eventual prohibition on non-compete obligations.