Taking Customers With You When You Start a Business in Ontario

In Ontario, most non-compete clauses for employees have been void since October 25, 2021 under the Working for Workers Act. However, taking customers with you when you start a business is not automatically permitted. You may still be bound by a non-solicitation covenant, an implied fiduciary duty if you were a director or senior officer, and a duty not to take confidential client data. The answer depends on your role and your contract.

You have spent years building relationships with clients at your current employer. Now you are ready to launch your own venture, and the obvious question is whether those clients can come with you. Many people assume that because Ontario "banned non-competes," they are free to compete however they like. That belief is only one layer of a more complex picture.

Three distinct legal frameworks govern this situation. The first is the statutory ban on non-compete agreements under the Employment Standards Act, 2000. The second is non-solicitation covenants, which remain enforceable when reasonable. The third is the body of fiduciary duties and confidentiality obligations that can apply even when nothing is written down. This article untangles all three, from the departing person's perspective and from the employer's, because in this area both sides need to understand the same rules.

At Hadri Law, we advise both founders mapping their exposure before resigning and established businesses protecting the client relationships they have built. Understanding where the lines sit is the first step for either side.

Layer 1: Non-Compete Clauses and the Working for Workers Act Ban

The most significant change in this area came with the Working for Workers Act, 2021, which added Part XV.1 to the Employment Standards Act, 2000. Section 67.2(1) of the ESA prohibits employers from entering into non-compete agreements with employees, and any prohibited non-compete is void. The ban was deemed to take effect on October 25, 2021, the date the bill was introduced in the Legislature, even though Royal Assent was received on December 2, 2021.

A non-compete agreement, as defined in the statute, is an agreement that prohibits an employee from engaging in any business, work, occupation, profession, project, or other activity that competes with the employer's business after the employment relationship ends. In plain terms, a clause that says you cannot work in your field after you leave is now generally unenforceable for Ontario employees.

There are two important exceptions to keep in mind, and they matter a great deal depending on who you are.

The Executive Exception

Section 67.2 does not apply to "executives." The ESA defines an executive as a 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 who holds any other chief executive position. According to the Ontario government's guide to the ESA, a non-compete may still bind a genuine executive.

The key word is "genuine." A vice-president, a senior manager, or a director who simply carries an impressive title does not become an executive for this purpose. The role must truly be a chief executive office. Employers cannot sidestep the ban by inflating titles, and courts will look at the substance of the position rather than the label on the business card.

The Business-Sale Exception

The ban also does not apply in a specific business-sale context. Where there is a sale or lease of a business operated as a sole proprietorship or a partnership, the seller becomes an employee of the purchaser immediately after the sale, and the parties enter into a non-compete as part of that sale, the ESA prohibition does not apply.

This exception reflects how courts treat restrictive covenants in commercial transactions generally. In Dr. C. Sims Dentistry Professional Corporation v. Cooke, 2024 ONCA 388, the Ontario Court of Appeal enforced a non-compete negotiated in a business-sale context, applying the more favourable approach the Supreme Court of Canada set out in Payette v. Guay, 2013 SCC 45. A non-compete signed by the seller of a business sits in a very different category from one imposed on an ordinary employee.

What This Means If You Are Leaving

If your non-compete was signed on or after October 25, 2021, and you are not a genuine C-suite executive, it is very likely void under the ESA. That said, the treatment of non-competes signed before October 25, 2021 is a separate question that Ontario courts continue to work through, so a pre-existing clause should not be assumed to be unenforceable without legal advice.

A void non-compete also does not leave you free of all restrictions. For a fuller explanation of how non-compete clauses are drafted and analyzed in business contracts, see our comprehensive guide to understanding non-compete clauses in business contracts. Our overview of the Working for Workers Acts also tracks how this legislation has evolved. The other two layers below often matter more than the non-compete in a departure scenario.

Layer 2: Non-Solicitation Covenants and Taking Clients to a New Business

The ban on non-competes does not extend to non-solicitation clauses. Non-solicitation remains the primary contractual tool employers use to protect client relationships, and a reasonable one is enforceable in Ontario.

A non-solicitation clause restricts you from actively approaching or recruiting your former employer's clients, and sometimes its employees. It does not stop a client from independently deciding to follow you. The distinction between active solicitation and passive following is the heart of most disputes about taking customers with you when you start a business.

How Courts Assess Reasonableness

Ontario courts start from a presumption that restrictive covenants in employment contracts are unenforceable, and they place the burden on the employer to prove a clause is reasonable. Reasonableness is generally assessed along three axes.

• Scope: the clause must be tied to clients the employee actually managed or had meaningful contact with, not every client the company has ever served.
• Duration: courts in employment contexts typically accept restrictions of roughly six to twelve months. Multi-year restrictions are usually struck down.
• Geography: the restricted area must reflect where the business actually operates. Province-wide or worldwide restrictions on a local business are difficult to defend.

A non-solicitation clause drafted so broadly that it effectively prevents you from working in your field at all will be treated as a disguised non-compete. Because the ESA now voids non-competes for most employees, that kind of overreaching clause can collapse entirely.

Active Solicitation Versus Passive Following

If a client finds you on their own after you leave and chooses to move their business, that is generally not a breach of a non-solicitation clause. If you reached out first and invited them to follow you, that is solicitation. Employers who want to enforce a non-solicit need documented evidence that the former employee initiated the contact.

This is where the so-called courtesy call becomes risky. An employee who phones former clients to announce a departure, share new contact details, and suggest the client move their business may be soliciting even if the call feels friendly and informational. Courts look at substance over form. A call framed as a simple update can be characterized as a pitch if its real purpose was to capture the client. The safer course is to let clients learn of your move through neutral channels and to avoid anything that reads as an invitation while a restriction is in force.

When There Is No Written Clause

Even without a signed non-solicitation agreement, every Ontario employee owes an implied duty of good faith and fidelity during employment. That duty prohibits competing with the employer or soliciting its clients while you are still on the payroll. For ordinary employees, this implied duty largely ends when the employment relationship ends. The important exception is fiduciaries, whose obligations survive resignation, which brings us to the third layer.

Layer 3: Fiduciary Duties and the Higher Standard for Key People

Some employees carry obligations that go well beyond any contract. These are fiduciary duties, and they apply to a narrower group of people but cut much deeper.

Not every employee is a fiduciary. Fiduciary status is fact-specific and tends to attach where the employer is vulnerable to the employee in a particular way, the employee has been entrusted with discretion that affects fundamental business interests, and the employer placed trust and confidence in the employee to act in its interests. Directors, officers, senior managers with strategic decision-making power, and key employees with significant client-relationship authority or access to sensitive pipeline information are the usual examples. Whether a specific person qualifies is a genuine legal question that turns on the facts, so no one should assume the answer on either side.

The Maturing Business Opportunity Doctrine

The leading authority is Canadian Aero Service Ltd. v. O'Malley, 1973 CanLII 23 (SCC). The Supreme Court held that a director or senior officer cannot take for themselves, or divert to a company they are connected with, a maturing business opportunity that their employer was actively pursuing. This prohibition continues after resignation, especially where the resignation itself was driven by a desire to capture that very opportunity.

In practice, a fiduciary who is leaving generally cannot do the following without exposure: solicit former clients with whom they held a fiduciary relationship, divert business opportunities the employer was actively pursuing, use information obtained in their fiduciary capacity to compete, or resign specifically to seize an opportunity that belongs to the employer.

How long these obligations last after resignation is itself fact-dependent. There is no fixed rule. The duration varies with the seniority of the role, the nature of the opportunity, and the circumstances of the departure, which is one more reason a senior employee should get advice before acting rather than relying on a number from an article.

A Concrete Example

Consider a vice-president of business development who is negotiating a significant deal on the employer's behalf, resigns, and then closes that same deal through a newly formed company within weeks. That scenario sits squarely within the maturing business opportunity doctrine. Courts have awarded damages measured by the value of the diverted opportunity, which can dwarf any salary the departing person earned.

What You Can Always Do: General Skills and Knowledge

It is important to balance the restrictions above with what the law clearly protects. You are entitled to use the general skills, knowledge, and experience you acquired during your employment to compete after you leave. This principle was confirmed by the Supreme Court of Canada in Elsley v. J.G. Collins Insurance Agencies, 1978 CanLII 7 (SCC).

General skills and knowledge include your industry expertise, your professional credentials, your understanding of how to manage client relationships, and your familiarity with common practices in your sector. None of that belongs to your former employer. What does not count as general knowledge is the confidential material you had access to: client lists, pricing data, proprietary methodologies, confidential contract terms, pipeline and business development information, and trade secrets.

The line can blur. Detailed knowledge of a particular client relationship may become confidential where the specifics are not publicly known. There is also a frequently misunderstood point about memory. The law does not prohibit an ordinary former employee from contacting clients they remember, even though they could not lawfully take a physical client list. A fiduciary or someone bound by a valid non-solicitation clause, however, cannot exploit that memory to solicit, because the restriction applies regardless of the medium.

The practical guidance that flows from this is straightforward. You should be able to name the clients you personally served without looking at any employer document. You should not copy, download, screenshot, or export any client data, customer relationship management records, contact lists, pricing documents, or internal reports before or during your resignation. The moment you take data, you move from fair competition into the territory of the next section.

Springboard Injunctions: The Employer's Emergency Tool

When an employer believes a departing employee has taken confidential information and used it to get ahead, it can ask a court for a springboard injunction. This is an equitable remedy designed to prevent a former employee from exploiting a head start gained by improperly using confidential information or trade secrets.

A springboard injunction is calibrated to the head start. It restrains the competitor only for the period it would have taken to acquire the same advantage lawfully, so it is not indefinite. The concept developed in English authorities and has been applied by Canadian courts in cases involving misappropriated client data and trade secrets.

Courts can act quickly. On an urgent or interim basis, an employer may obtain orders requiring delivery up of misappropriated data, the surrender of personal computers and smartphones for forensic review, and the freezing of online accounts pending resolution. To obtain an interim injunction, the employer must show a serious question to be tried, that it will suffer irreparable harm if the injunction is refused, and that the balance of convenience favours granting it. In cases involving client data, the irreparable harm requirement is often satisfied, because the loss of client relationships is genuinely difficult to measure in money.

For a departing employee, the lesson is direct. If you walk out with confidential client data and start competing immediately, your former employer may be able to obtain court orders within days that stop your activity and force the return of the data. Any head start you gained by using that information can be neutralized by the length of the injunction, and you will have created litigation risk that a clean departure would have avoided.

Do's and Don'ts Before You Resign

For the departing employee or founder, a careful exit protects you far more than aggressive moves ever could.

• Do review your employment contract before doing anything, looking specifically for non-solicitation, confidentiality, and intellectual property assignment clauses.
• Do consult an employment lawyer before resigning if you have any written restrictive covenants or hold a director or senior officer role.
• Do use only personal devices and personal email for any planning related to your new business.
• Do announce your departure honestly after you have left, and compete fairly using your general skills and publicly available information.
• Do not copy, download, export, or screenshot any client lists, customer data, pricing documents, or pipeline reports.
• Do not solicit clients while you are still employed, which breaches the implied duty of fidelity regardless of any written clause.
• Do not close or divert a deal your employer was actively pursuing, particularly if you are in a senior role.
• Do not assume your non-compete is unenforceable without legal advice, given the exceptions discussed above.

For the employer protecting its client base, prevention is far cheaper than litigation.

• Do ensure employees in client-facing roles sign reasonable, well-drafted non-solicitation and confidentiality agreements, with fresh consideration on promotion. Strong contract drafting is the foundation, and a clear confidentiality agreement is what makes a later breach-of-confidence claim viable.
• Do define confidential information clearly, covering client lists, pricing, pipeline data, and methodologies, and keep your workplace policies current.
• Do act quickly and consult litigation counsel about a springboard injunction if you suspect client data has been taken.
• Do consider a non-compete in any business-sale agreement where you are the purchaser, since Ontario courts will enforce a reasonable one in that context.
• Do not rely on a non-compete for a non-executive employee signed after October 25, 2021, because it is void.
• Do not draft non-solicitation clauses that sweep in clients the employee never dealt with, or impose geography and duration beyond what the role justifies.

If your departure involves incorporating a new venture or putting fresh contractor and client agreements in place, our corporate lawyers, commercial lawyers, and independent contractor agreement lawyers can help you start on solid footing. If you are still mapping out the full launch, our ultimate guide to starting a business in Ontario covers the wider picture.

Frequently Asked Questions

Can I take clients with me when I leave my job in Ontario?

It depends on your contract and your role. If you have no valid non-solicitation clause and you are not a fiduciary, you can generally compete and let clients choose to follow you. However, if you are bound by a reasonable non-solicit or you held a fiduciary position, actively reaching out to former clients can expose you to damages or an injunction. Always review your contract before resigning.

What is the difference between a non-compete and a non-solicitation clause?

A non-compete clause restricts you from working in a competing business at all. For most Ontario employees, these have been void since October 25, 2021. A non-solicitation clause is narrower: it only restricts you from actively approaching the employer's clients or staff. A reasonable non-solicit remains fully enforceable in Ontario even after the non-compete ban.

Does a fiduciary duty apply to me as an employee?

Not necessarily. Fiduciary duties attach to a narrow group: typically directors, officers, and senior employees entrusted with discretion over fundamental business interests. Whether you qualify is fact-specific. If you held a strategic or senior client-facing role, get legal advice before competing, because fiduciary obligations survive resignation and can be broader than any written contract.

What happens if I take client data when I leave my job?

Taking confidential client data creates serious legal exposure. Your former employer can pursue a breach-of-confidence claim and seek a springboard injunction, which may include urgent court orders to return the data, surrender your devices for forensic review, and halt your competing activity for a defined period. The safest approach is to take no employer data of any kind when you resign.

Can I start planning my new business while still employed?

You can take preliminary steps, such as forming a corporation or working through your business plan, using your own time and personal resources. What you cannot do is compete with your employer or solicit its clients while still employed, use the employer's systems or resources, or divert an opportunity the employer is actively pursuing. The duty of fidelity applies for as long as you remain employed.

Sources & Official Resources

Ontario Statutes Cited

1. Employment Standards Act, 2000, Part XV.1, s. 67.2 -- Non-Compete Agreements
2. Ontario Government Guide to the ESA: Non-Compete Agreements
3. Ontario ESA Policy and Interpretation Manual: Part XV.1 Non-Compete Agreements

Federal Case Law Cited 4. Canadian Aero Service Ltd. v. O'Malley, 1973 CanLII 23 (SCC) -- Fiduciary Duty, Maturing Business Opportunity 5. Elsley v. J.G. Collins Insurance Agencies, 1978 CanLII 7 (SCC) -- General Skills and Knowledge 6. Payette v. Guay inc., 2013 SCC 45 -- Restrictive Covenants in Business Sale Context

Ontario Case Law Cited 7. Dr. C. Sims Dentistry Professional Corporation v. Cooke, 2024 ONCA 388 -- Non-Compete in Business Sale

Contact Hadri Law

Whether you are a founder mapping your legal exposure before you resign, or a business owner trying to protect the client relationships you have built, the law in this area is fact-specific. A misstep in either direction can lead to litigation, injunctions, or significant damages.

Nassira El Hadri, founder of Hadri Law and a corporate and commercial lawyer admitted to the Law Society of Ontario, leads a team that advises both departing entrepreneurs and established businesses on restrictive covenants, fiduciary duties, and client-relationship protection in Ontario.

Call +1 (437) 974-2374 for a free consultation, or book online at calendly.com/hadrilaw/free-consultation. We advise clients in English, French, Spanish, and Catalan.

This article provides general information and is not legal advice. Every situation is different. Contact a lawyer to discuss your specific circumstances.