The federal government plans to amend the Canada Labour Code to restrict non-compete agreements in employment contracts for federally regulated businesses, with consultations on proposed changes starting in early 2026.
Budget 2025 announced the government intends to limit the use of non-compete clauses that prevent workers from moving to rivals or starting competing businesses. The restrictions will apply to federally regulated sectors including banking, telecommunications, interprovincial transportation and federal Crown corporations.
The measure aims to protect workers’ rights, promote labour mobility, strengthen competition and enable workers to move to higher-paying jobs or start their own businesses.
Competition and mobility concerns
Non-compete agreements reduce competition and undermine labour market efficiency, according to the budget. The restrictions are expected to benefit workers across Canada by improving job matches and reducing barriers to labour mobility.
Higher competition for talent is expected to raise wages and productivity, supporting gains across age, education and income groups.
The budget states competitive labour markets foster innovation and productivity. By restricting non-compete agreements, the government aims to create conditions where workers have more freedom to advance their careers.
Consultation timeline
The government will launch consultations on proposed legislative changes in early 2026. Details on specific restrictions, exemptions or thresholds have not been released.
Federally regulated businesses employ approximately 955,000 workers, representing about six per cent of Canada’s workforce. These employees work in sectors including banking, telecommunications, broadcasting, air and rail transportation, shipping and ports.
The measure follows similar restrictions in other jurisdictions. Several provinces have already limited or banned non-compete agreements, with Ontario eliminating most non-compete clauses in 2021.
Business impacts
The changes will require federally regulated employers to review and potentially revise employment contracts. Companies that rely on non-compete agreements to protect trade secrets or client relationships may need to use alternative measures such as non-solicitation agreements or confidentiality clauses.
The budget does not specify whether existing non-compete agreements will be grandfathered or if the restrictions will apply retroactively.
Industry groups have not yet commented on the proposal. The government has indicated it will work with employers and workers during the consultation process to develop appropriate restrictions.
