Canadian Workers Among the Most Restricted by Non-Compete Clauses

New OECD report links restrictive employer agreements to declining competition, productivity and wage standards

Canadian workers are among the most restricted by non-compete clauses in a new survey of 15 countries by the Organization for Economic Co-operation and Development.

Thirty-nine per cent of Canadian employees are definitely or probably bound by a non-compete clause that prevents them from working for a firm or organization in the same field, according to surveyed employers. That’s higher than the average 30 per cent across the OECD countries covered by the report and trails only Sweden, at 41 per cent. Poland ranks lowest at 15 per cent.

Employees surveyed confirmed this high prevalence of non-compete clauses, the report says, with 41 per cent responding that they were definitely or probably bound by such clauses, compared to an OECD average of 36 per cent. South Korea, Japan, Switzerland and France placed higher than Canada by this measure, with Poland again ranking lowest at 27 per cent.

The report, which is part of the OECD’s larger Employment Outlook 2026 published Tuesday, links non-compete clauses and other forms of post-employment restraints, including non-disclosure agreements (NDAs), to declines in competition and productivity that are taking place broadly across the OECD.

“While the use of such restraints was originally justified on the basis that they protect legitimate business interests such as trade secrets, there are concerns that they are increasingly being deployed to stifle job mobility and competition,” the report says.

“The evidence… while preliminary… suggests that such clauses tend to reduce productivity growth by impeding the forces of growth-enhancing job reallocation and knowledge diffusion – and wage growth – by limiting workers’ outside options.”

Canada’s poor productivity – a measure of how efficiently employees turn their work into valuable results such as goods and services, and a proxy for living standards – has received considerable attention in recent years.

A report by the Fraser Institute last year found that Canada’s productivity grew at less than half the rate of the U.S. between 1981 and 2024, with the gap especially widening since 2000. Bank of Canada senior deputy governor Carolyn Rogers has called this situation an “economic emergency.”

Post-employment restraints and the role they play in competitiveness and productivity have caught the eye of governments in Canada as a result. Ontario, in particular, banned non-compete clauses for all workers except top executives in 2021, making it one of the most restrictive regulatory settings in the OECD, according to the report.

The Carney government also announced plans to restrict the use of non-compete clauses in federally regulated sectors including telecommunications, banking and transport this past May.

Despite the ban, companies in Ontario are still regularly inserting non-compete clauses into contracts, according to Peter Carey, a partner at employment law firm Levitt LLP in Toronto.

“Employers still put these clauses in on the chance that employees don’t know that they’re unenforceable,” he tells Do Not Pass Go. “The situation hasn’t really improved, people are still ‘chancing their arm.’”

The report notes that non-compete clauses in Canada have spread into parts of the labour market where the traditional justifications for them “appears weak or absent.”

Between 13 and 25 per cent workers with no access to confidential information said they had signed non-compete clauses, as did between 15 and 26 per cent of low-pay workers, or those earning less than $3,000 a month.

Other types of restrictive clauses are relatively common and rising in Canada. According to surveyed employers, 48 per cent of private sector employees are covered by NDAs, 28 per cent by non-solicitation of client clauses, 22 per cent by repayment of benefits or bonuses clauses, 26 per cent by non-solicitation of clients clauses, and 22 per cent by training-cost repayment clause. Except for the NDA percentage, all of those results rank higher than the OECD average.

The survey also raises concerns about no-poaching agreements and wage fixing, both of which became illegal in Canada in 2023. While employers weren’t asked directly if they engaged in these practices, they were surveyed on whether they were aware of them happening in their industry. Forty per cent said one or both were in fact happening.

“This does not imply that 40 per cent of firms engage in these practices themselves, but high reported awareness suggests that such practices may not be isolated occurrences, particularly in service sectors,” the report says.

Check out the report here.

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