Bill 27, Working for Workers Act, 2021: Key Amendments for Employers in Ontario

On November 30, 2021, the Ontario government passed the Working for Workers Act, 2021 (Act), which amended several employment-related statutes, including the Employment Standards Act, 2000 (ESA) and the Occupational Health and Safety Act (OHSA). Most of the provisions of the Act came into force when the Act received Royal Assent, on December 2, 2021. The most noteworthy amendments made by the Act are outlined in further detail below.

Ontario Bans Non-Competes Except for Executives and a Sale of Business

Effective as of October 25, 2021, employers are prohibited from entering into an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement, subject to the two exceptions outlined below. In addition to employees and employers, this prohibition applies also to applicants for employment and prospective employers.

A non-compete agreement is 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 employer’s business after the employment relationship between the employee and the employer ends.” This means that non-compete clauses and agreements that apply for the duration of the employment period remain enforceable. It is unclear, however, whether the reference to “other activity that is in competition with the employer’s business” will be interpreted to apply strictly to non-competes or whether it could potentially include non-solicitation of the employer’s customers or employees.

Section 5(1) of the ESA provides that “no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.” The Act specifies that section 5 (1) of the ESA applies and, if an employer contravenes this provision, the non-compete agreement is void.  It is not yet clear whether this applies to employment contracts that were entered into prior to October 25, 2021.

Exception: Executives

The prohibition about entering into an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement does also not apply to an employee who is an executive. An ‘executive’ is defined in the Act to mean “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.” It remains to be seen how strictly this definition will be interpreted by case law, and if it will apply to other employees who may not bear such executive titles, but their responsibilities signify similar roles.

Exception: Sale/Lease of a Business

The non-compete-related restriction does not apply to an employment agreement between a seller and purchaser, provided that (a) there is a sale of a business or a part of a business, which sale includes a lease, and (b) as a 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, and (c) immediately following the sale, the seller becomes an employee of the purchaser with respect to that agreement.

Purchasers in a share sale may want to consider requiring that the vendor(s) agree(s) to have any of their option-holder employees (whom the Purchasers wish to keep on after the sale), to exercise their options to purchase shares prior to the sale, and participate in such a sale as vendors, in order to have them fall within this exception.  We could potentially see more merger and acquisition deals being structured in a way, where employees, whom the purchasers wish to agree to a non-compete, be issued shares by the vendor before such closing, in order to be considered vendors, and be covered under this exception.

Overall, the Act provides more clarity about the enforcement of non-compete agreements, but it does not deviate significantly from the existing common law rules in Ontario. Until now Ontario courts have only enforced employment restrictive covenants that do not exceed what is reasonably necessary to protect employers’ legitimate proprietary rights and do not unduly restrain employees from making use of their skill and talents or earning their livelihood. That said, restrictive covenants in employment contracts were until now generally unenforceable unless they were reasonable and in the public interest. Courts have refused to enforce non-competition clauses because of their overly broad geographic scope, or for being ambiguous and unreasonable.

Employers with 25 or More Employees Must Have a Written Disconnecting-from-Work Policy

The Act creates a new Part VII.0.1 of the ESA, that will require employers that employ twenty-five (25) or more employees to have a written policy about disconnecting from work. The term “disconnecting from work” is defined as “not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work.”

The written policy must contain such information as may be prescribed. It remains to be seen how the respective regulations under the ESA will further prescribe what information must be included in such policies and whether certain categories of employees will be excluded from their application.

Generally, employers will determine whether they employ 25 employees or more as of January 1 of each year and will have until March 1 of the same year to prepare and distribute the written policy about disconnecting from work to comply with this requirement. However, for the initial compliance, employers have until June 1^st, 2022, to determine whether, based on the number of employees they employ, they have to comply with this requirement, and until June 2, 2022, to have such policy in place. It is, therefore, advisable for employers that expect to have around 25 employees by June 1^st, 2022, to be proactive and comply with these requirements in advance of the stipulated date.

The policy must include the date, on which it was prepared, and the date any changes were made. A copy of such policy must be provided by the employer to each of the employer’s employees within 30 days of preparing the policy or, if an existing written policy is changed, within 30 days of the changes being made. The same applies to new employees, who must receive a copy of such written policy within 30 days of the day the employee becomes an employee of the employer. This likely means the effective date the employment relationship commences and not the date any such agreement is executed.

Employers must retain or arrange for some other person to retain copies of every written policy on disconnecting from work for three years after the policy ceases to be in effect.

Temporary Help Agencies and Recruiters Must Obtain and Yearly Maintain Licence

New sections 74.1.1 and 74.1.2 of the ESA require persons operating as temporary help agencies or acting as recruiters to obtain a licence for that purpose. An application for a licence or a renewal of a licence can be submitted to the Director of Employment Standards (Director) according to section 74.1.3 (1) of the ESA.

The licence application can be submitted in a written or electronic form approved by the Director, and after paying the prescribed fee and providing the Director with the prescribed security. In addition to complying with any other requirements, as they may be prescribed by regulations, the application should include the following information and required statements.

• The legal name of the applicant, as well as any operating or business name of the applicant, if different from the legal name.
• The address of every location where the applicant carries on business.
• The name and address of each officer or director of the corporation, if the applicant is a corporation.
• The name and address of each partner in the partnership, if the applicant is a partnership.

For a licence to act as a recruiter, the application should include a number of statements, and specifically:

• a statement that the applicant is aware of the prohibition to, directly or indirectly, charge a foreign national a fee for any service, good or benefit provided to such foreign national if the applicant acts as a recruiter in relation to that foreign national according to subsection 7 (1) of the Employment Protection for Foreign Nationals Act, 2009 (FNA);
• a statement that the applicant is aware that if an employment standards officer finds that a recruiter has contravened section 7 of the FNA, the officer may order the recruiter to pay the amount of the fees to the foreign national or to the Director in trust, pursuant to subsection 24 (2) of the FNA;
• a statement that the applicant is aware that if an employment standards officer believes that a person has contravened a provision of the FNA, the officer may issue a notice to the person setting out the officer’s belief and specifying the amount of the penalty for the contravention, according to subsection 27 (1) of the FNA;
• a statement that the applicant is aware that the Director shall refuse to issue a licence or revoke or suspend a licence, if the applicant has charged fees to a foreign national contrary to subsection 7 (1) of the FNA, and
• a statement confirming that the applicant has not charged fees to a foreign national contrary to subsection 7 (1) of the FNA.

Additional Requirements for Temporary Help Agencies and Recruiters Engaging Others for Recruitment or Employment of Foreign Nationals

Applicants who engage or use the services of any person, other than an employee of the applicant, in connection with the recruitment or employment of foreign nationals, must also provide:

• the name and address of each person they engaged or used,
• a description of the person’s business,
• a statement confirming that the applicant has made reasonable inquiries about the person’s business practices with respect to foreign nationals and is satisfied that the person did not charge fees or collect a fee charged to a foreign national in contravention of subsection 7 (1) of the FNA,
• a statement that the applicant is aware that subsection 18.1 (1) of the FNA provides that a recruiter who uses the services of another recruiter in connection with the recruitment or employment of a foreign national is jointly and severally liable with the other recruiter to repay fees charged to the foreign national by the other recruiter in contravention of subsection 7 (1) of that FNA, and
• a statement that the applicant is aware that the Director shall refuse to issue a licence or revoke or suspend a licence if the applicant engages or uses the services of a recruiter that charges fees to a foreign national in contravention of subsection 7 (1) of the FNA, and
• such other information or statements as may be prescribed.

Considerations for Issuing or Renewing the Licence

To issue or renew such a licence to an applicant, the Director will consider if they are satisfied that the applicant has complied with any orders under, and meets the requirements set out in, the Act or the FNA. On receipt of an application under section 74.1.3, the Director may refuse to issue or renew a licence if:

•  the Director has reasonable grounds to believe that,
  • based on the past or present conduct of the applicant, or any officers, directors or representatives of the applicant, the applicant will not carry on business with honesty and integrity and in accordance with the law, or
  • the applicant has made a false or misleading statement or provided false or misleading information in an application for a licence or a renewal of a licence; or
•  any other prescribed circumstances exist.

It remains to be seen if the regulations will prescribe any processes for refusal or any other circumstances, as grounds for refusal. Applicants, whose licence or licence renewal has been refused or revoked cannot apply to the Director for a licence unless, at least two years have passed since the refusal or revocation, or the applicant satisfies the Director that new evidence is available.

The authority of the Director with respect to issuing licences and revoking and suspending licences is subject to the appeal powers given to the Ontario Labour Relations Board.

Additional Requirements for Recruiters

Additionally, new section 74.12.1 (1) of the ESA requires that recruiters or people acting on behalf of a recruiter must not intimidate or penalize, or attempt or threaten to intimidate or penalize, a prospective employee who engages or uses the services of the recruiter, because the prospective employee:

• asks the recruiter to comply with this legislation and the regulations; 
• gives information to an employment standards officer;
• testifies or is required to testify or otherwise participates or is going to participate in a proceeding under this Act; or
• makes inquiries about whether a person holds a licence to operate as a temporary help agency or a licence to act as a recruiter as required under Part XVIII.1.

If an employment standards officer finds that a prospective employee who engages or uses the services of a recruiter has contravened section 74.12.1, the officer may order that the prospective employee be compensated for any loss incurred as a result of the contravention.

Employers Must Not Knowingly Engage or Use the Services of Unlicensed Temporary Help Agencies or Recruiters

New sections 74.1.1 (2) and 74.1.2 (1) of the ESA require employers, acting as clients of temporary help agencies and recruiters, to not knowingly engage or use the services of such temporary help agency unless the person who operates the temporary help agency holds a licence for that purpose.

For the purposes of these sections, the term ‘employer’ includes “a client of a temporary help agency, a recruiter or a prospective employer who engages or uses the services of a recruiter to find or attempt to find an employee.” Similarly, an ‘employee’ includes a “prospective assignment employee or a prospective employee who engages or uses the services of a recruiter to find employment in Ontario.”

Employers, who are clients of a temporary help agency, must record the name of each assignment employee assigned to perform work for the client and the number of hours worked by each assignment employee assigned to perform work for the client in each day and each week, according to subsection 74.4.2 (1) of the ESA, as repealed and substituted by the Act. An ‘assignment employee’ is defined by the ESA as “an employee employed by a temporary help agency for the purpose of being assigned to perform work on a temporary basis for clients of the agency.”

In addition, section 74 (1)(a) of the ESA was amended to include a prohibition stating that no employer or person acting on behalf of an employer shall intimidate, dismiss or otherwise penalize an employee or threaten to do so, because the employee, makes inquiries about whether a person holds a licence to operate as a temporary help agency or a licence to act as a recruiter as required under Part XVIII.1 of the ESA.

Employers and Recruiters Are Prohibited from Knowingly Using Services of Recruiters Who Charge Foreign Nationals Fees

Effective December 2, 2021, recruiters and employers are prohibited from knowingly using the services of a recruiter who, in contravention with the new subsection 7 (1) of the FNA, has charged a fee to a foreign national in connection with the recruitment or employment of such foreign national. The FNA is also amended to provide that if such recruiter (who uses the services of another recruiter in connection with the recruitment or employment of a foreign national) is a corporation, the directors of that recruiter are jointly and severally liable to repay fees charged to the foreign national by the other recruiter in contravention of subsection 7 (1) of the Act.

Business Owners Are Required To Permit Washroom Access For Delivery Workers

The Act amends the OHSA to require that workplace owners ensure delivery workers have access to a washroom, on request, when they are making deliveries to or from that workplace. This requirement is subject to exceptions, namely where providing access would not be reasonable or practical for reasons relating to the health and safety of any person in the workplace or because of other circumstances related to the workplace.

Key Takeaways for Employers

Employers should become familiar with the new requirements and their effective date given that some of the requirements come into force on Royal Assent, while others on a day to be named by proclamation of the Lieutenant Governor. Employers should also review and determine which of these requirements apply to them and comply proactively, including by revising their employment and non-compete agreements, developing disconnecting from work policies, determining whether they need to provide washroom access to delivery workers, and ensuring that any recruiters they use are licensed and do not charge fees on foreign nationals in connection with the recruitment or employment of such foreign nationals.

If you have any questions about this article or wish to learn more, please contact Allan Oziel, Yonida Koukio, or Thassiane Gossler. Oziel Law communications and legal articles are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. To obtain additional details or advice about a specific matter, please contact our lawyers.

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