Labour and Employment

On May 6, 2026, the Minister of Finance and National Revenue tabled Bill C-31, entitled A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.1 Bill C-31 proposes significant amendments to the Canada Labour Code2 (the “Code”) to prohibit non-compete clauses, by an approach comparable to that adopted in Ontario. However, the federal legislator is going further than its Ontario counterpart by granting itself the authority to potentially prohibit other types of restrictive covenants—such as non-solicitation clauses—through regulations.  Among the key measures enacted by the federal legislator is a prohibition against imposing non-compete clauses on federally regulated employees, subject to two categories of exceptions. The stated objective is to promote employee mobility, reduce certain forms of abuse associated with post-employment restrictions and stimulate competition in the labour market.3 This legislative approach aligns with current trends across the globe restricting non-compete clauses in the world of employment law.   Definitions  A “non-compete clause” means a term or condition of employment, or a clause in an agreement, that prohibits an employee from engaging in any business, work, occupation or trade, profession, project or other activity that is in competition with the employer’s federal work, undertaking or business after the employee ceases to be employed’4 This definition is broad and potentially encompasses non-compete clauses included in documents that are not employment contracts, such as a long-term incentive plan. The Bill also defines an “other employment-related restriction” as “a term or condition of employment, or a clause in an agreement, that is not a non-compete clause and is part of a class specified in the regulations.”5   Scope and proposed changes  Division XI.1, slated to be incorporated into Part III of the Code through the Bill, prohibits an employer from entering into a non-compete clause with an employee or a union.6 It also prohibits imposing such a clause on an employee, in particular by inducing them to agree to one. The Bill also provides for the nullity of clauses subject to this prohibition.7  For now, the prohibitions imposed by the Bill only apply to non-compete clauses. The federal government may, however, through regulation, define “other employment-related restrictions” to make the prohibitions apply to them, further limiting the ability of employers to safeguard their legitimate interests, such as their goodwill.  Exceptions  The law provides for two main categories of exceptions.   First, the prohibition would not apply to a person who, after leasing or transferring all or part of their work, undertaking or business to an employer, including by sale or merger, becomes an employee of that employer and agrees to a non-compete clause or employment-related restriction in that context, when the business is or becomes a federal enterprise as a result of the transaction.8   Second, it would not target the chief executive officer9 nor certain senior management employees reporting directly to the chief executive officer and holding the position or performing the functions of president, chief operating officer, chief financial officer, chief human resources officer, chief information officer, chief technology officer or chief legal officer. The exception for senior management employees is subject to two conditions: 1) The person reporting directly to the chief executive officer must be the only one to hold or perform the functions of the aforementioned positions, and 2) they must be a “manager” within the meaning of section 167(3) of the Code.10 The legislator also reserves the right to add excluded positions by regulation.  Other provisions included in the Bill  The Bill introduces a prohibition on retaliation, preventing an employer from reprimanding or penalizing an employee for refusing to agree to a non-compete clause.11  It also provides for a reversal of the burden of proof. The employer will have the burden of demonstrating that a condition of employment or stipulation does not constitute a non-compete clause or, if it does, that it is not null.12  The path to enactment13  Bill C-31 was tabled on May 6, 2026. On June 3, 2026, the second reading was passed in the House of Commons and the Bill was referred to the Standing Committee on Finance. It still needs to pass the third reading and the process in the Senate before royal assent.  Coming into force is scheduled for a day to be fixed by order of the Governor in Council.   Once the law comes into force, federally regulated employers will no longer be permitted to require employees to enter into non-compete clauses, subject to the exceptions provided in the Bill. Non-compete clauses existing at the time the law comes into force will remain valid for one year and will only become null after the grace period expires. Employers would be well advised to immediately begin developing alternative strategies to mitigate the upcoming prohibition of non-compete clauses for employees who are currently bound by such clauses.   Practical recommendations   Here are some practical recommendations to help federally regulated organizations both comply with this new legal framework and protect their legitimate interests:  Review existing restrictive covenants within in your organization  A comprehensive review of employment contracts and other relevant contractual documents is crucial to identify non-compete and other restrictive covenants currently in force within your organization.  The review should not be limited to employment contracts alone—it should also extend to any other program, policy or document containing restrictive covenants, including short-term or long-term incentive plans, such as stock option plans. Any atypical non-compete clause, such as one providing for the cancellation of stock options or units if the participant joins a competing business, should also be listed, as it may fall within the scope of the law. Because we do not yet know how the new restrictions will be interpreted, a broader review is more prudent at this stage.  Assess your organizational structure   Given the well-defined exceptions provided for by the law, organizations would do well to review their organizational structure to identify the individuals who may be bound by a non-compete clause and ensure that the corresponding legislative requirements are met.    Exercise increased caution in commercial transactions     Greater caution is required in the context of commercial transactions to ensure that contractual documents are compatible with the exception established by the law.   Identify alternative contractual strategies  What many employers have done in Ontario is use non-solicitation clauses and confidentiality agreements. This could be a good option to proportionately protect the legitimate interests of a federally regulated organization while preserving employee mobility. However, the federal government may limit this contractual strategy by prohibiting other types of restrictive covenants through regulation.  In certain circumstances, garden leave clauses, which we do not believe to be restrictive covenants under Quebec civil law,14 are certainly options to consider for some employees of federally regulated organizations.   Monitor ongoing legislative updates  We recommend implementing an internal or external monitoring strategy, through your legal counsel, to track the progress of the Bill and any regulations that the federal government may adopt under it.   Our Labour and Employment Law group will closely follow all developments related to Bill C-31. We remain at your disposal to answer any questions you may have regarding these changes and provide innovative strategic advice to protect your legitimate interests under this new legal framework.   A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025., Bill C-31 (first reading – May 6, 2026), 1st Session, 45th Legislature. Can., section 9. R.S.C. 1985, c. L.-2. Department of Finance Canada, Minister Champagne introduces second piece of legislation to implement Budget 2025: Canada Strong, online: Minister Champagne introduces second piece of legislation to implement Budget 2025: Canada Strong - Canada.ca. A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025, Supra, note 1, s. 237.1. Id. Id., s. 237.2(1). Id., s. 237.2(2). Id., s. 237.2(3)(a). Id., s. 237.2(3)(b). Id., s. 237.2(3)(c). Id., s. 237.3. Id., s. 237.4. Parliament of Canada, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025, online: C-31 (45-1) - LEGISinfo - Parliament of Canada. Maude Grenier and Frédéric Desmarais, “Quand la clause de jardinage tombe dans le terrier du lapin civiliste : Alice est-elle au pays des merveilles ? Histoire d’une clause possiblement restrictive,” in Service de la qualité de la profession du Barreau du Québec, Développements récents en droit du travail (2020), Cowansville, Yvon Blais, 2020, p. 185.

Artificial intelligence (AI) is no longer merely a futuristic concept but a present-day reality—a practical business tool that is routinely used in management and production. Organizations are increasingly adopting generative AI and analytics solutions for tasks such as writing, sorting, decision-making, monitoring and evaluating. However, this is often done without any prior structured planning.  Employers now face the dual challenge of achieving productivity gains quickly while ensuring that AI does not pose legal, reputational or operational risks. The range of applications is expanding to include writing assistance, decision-making support, performance analysis, digital monitoring and incident and accident prediction. This raises questions of interest to both executives and the media. For example, who should be held responsible when the tool makes a mistake? What data is being used? How far can employers go in monitoring their employees?  If properly regulated, AI can support innovation and expedite its implementation, while also contributing to workplace well-being, health and safety. In Quebec, these benefits are particularly significant in the context of an aging population, labour shortages and increased pressure to boost productivity. Addressing this situation requires solutions that foster growth and competitiveness.  The use of AI systems in the workplace raises real and multifaceted challenges. These include protecting personal information and maintaining confidentiality, establishing liability and accountability where errors or failures occur, and considering the potential impact on workloads and the work environment.  Aware of the effect that digital transformation and AI are having on the workplace, the Minister of Labour launched a consultative process to assess whether existing legislation adequately addressed these developments. In October 2025, he tasked the Comité consultatif du travail et de la main-d’œuvre (the “CCTM”) with further exploring ideas and developing a shared vision regarding:  Consultation processes that factor in the implications of AI use in the workplace;  Ethical, governance and transparency principles in human resources decision-making;  The prevention of emerging occupational health and safety risks.1  CCTM report: Recommendations  The Avis du CCTM concernant les enjeux entourant l’implantation et l’usage des systèmes d’intelligence artificielle en milieux de travail au Québec [CCTM report on the implications of implementing and using artificial intelligence systems in Quebec workplaces] (“CCTM Report”) was released on April 29, 2026. The recommendations set out in the report regarding the implementation and use of AI systems in Quebec workplaces include, in particular:  Applying the current legal framework governing labour and employment law in Quebec; Preserving the essential role of human judgment—and the responsibility that comes with it—in automated decision-making processes;   Applying laws respecting the protection of personal information2 when developing, implementing and using AI systems, and prioritizing solutions that limit the use of electronic surveillance;  Implementing an algorithmic impact assessment process that would involve employees and take into account the impact of automated decision-making on fundamental rights and privacy;  Ensuring that organizations continue to support employee mobility and ongoing professional development;  Regulating algorithms through sound governance practices that promote transparency and explainability in algorithmic decision-making;  Placing emphasis on the need to pay special attention to discriminatory biases.   In its report, the CCTM also makes recommendations to the Commission d’accès à l’information, such as updating its guide on drafting privacy policies to include disclosure requirements regarding AI and surveillance technologies, and encouraging employers to inform employees of their intention to use partially or fully automated decision-making processes.  Lastly, the CCTM recommends that the Ministère du Travail develop, in collaboration with the CCTM, a guide to support the implementation of responsible, compliant and socially acceptable AI.  Guide released by the Ministère du Travail: 5 principles  Further to the recommendations made in the CCTM report, the Minister of Labour released, on June 12, 2026, a document titled L’intelligence artificielle au travail : Guide d’accompagnement pour une intégration responsable [A guide to using artificial intelligence responsibly in the workplace] (the “Guide”).  The Guide aims to ensure that AI is integrated into workplaces in a responsible, user-centric and collaborative manner. It sets out five (5) key principles designed to inform discussions and help organizations recognize the main issues, namely:  Respect for rights and freedoms in the workplace;  Protection of privacy and data governance;  Governance, participation and social dialogue;  Human oversight and transparency;  Sustainable development and well-being.  For each principle, the Guide provides examples of how AI is used in the workplace. It also highlights the associated benefits and challenges, and suggests practical steps to ensure that AI is adopted and used responsibly.  The Guide serves as a practical, evolving tool that organizations and labour market stakeholders are encouraged to tailor to their specific circumstances.   Accessible and regulated AI  While the adoption of AI in the workplace offers tangible opportunities for improvement, it also raises important issues that require careful oversight. With that in mind, the Guide aims to support the use of AI in a way that protects rights and users, while taking workplace considerations into account. It also aims to provide the various stakeholders involved with the tools they need to facilitate the adoption of AI at work.  A number of interesting challenges are likely to arise over the next few years, and Lavery’s highly qualified professionals are ready to help you deal with them. Contact the team today.  Comité consultatif du travail et de la main-d’œuvre, Avis du CCTM concernant les enjeux entourant l’implantation et l’usage des systèmes d’intelligence artificielle en milieux de travail au Québec, online: lien, April 9, 2026, p. 6. (In French only) Act respecting the protection of personal information in the private sector, CQLR c. P-39.1; Act respecting Access to documents held by public bodies and the Protection of personal information, CQLR c. A-2.1.

WHEN? On Tuesday May 26, 2026, from 8:30 a.m. to 11:45 a.m. PANELS Our experts will hold four talks on the latest topics in this area of these talks below: Labour and employment law in 2025 and early 2026: the art of navigating a constantly changing world Speakers: Frédéric Desmarais and Ariane Pasquier Employee personal information: compliance, governance and tools Speaker : Guillaume Laberge  Trends and innovations in labour and employment law outside Quebec Speakers: Brittany Carson and Marc Ouellet AI in business: managing legal risks without hindering innovation in HR Speakers: Gaspard Petit and Anne-Sophie Paradis Webinar registration The talks are recognized as training courses by the Barreau du Québec and the Ordre des conseillers en ressources humaines agrees (CRHA).

Following a series of urgent proceedings in late December and early January, the Quebec Superior Court issued an interesting decision1 on January 8, 2026, providing important clarifications on the scope of policies relating to intellectual property, confidential information and conflicts of interest, as well as on the duties of loyalty and confidentiality set out in employees’ employment contracts. The facts Concordia University (“Concordia”) sought a provisional injunction from the Court against a former employee and student, Mr. Oleg Khalimonov, as well as against Polaris Aerospace Inc. (“Polaris”), a company of which he was a director and shareholder. Mr. Khalimonov was employed by Concordia from September 2023 to December 2025. He had also been a student at the University since 2016 and, since 2023, he had served as Program Leader for Space Concordia, one of the University’s student associations. The group received significant public visibility with the launch of Starsailor in August 2025, described as the first rocket launch from Canadian soil in twenty-five years. These research and development activities are said to have generated significant intellectual property and attracted interest from commercial partners looking to invest in Concordia’s projects. In December 2025, Concordia was informed that Polaris was claiming in the market it had acquired Space Concordia’s intellectual property and as the entity behind the Starsailor project. On December 16, 2025, Concordia formally notified Mr. Khalimonov that his dual role with Polaris and Space Concordia raised serious concerns about potential breaches of his employment contract, the University’s Intellectual Property Policy, and its Conflict of Interest Policy. This process led to Mr. Khalimonov’s resignation as Program Leader for Space Concordia on December 18, 2025. On December 29, 2025, Polaris submitted a bid under the Launch the North initiative, a program of the Government of Canada’s Department of National Defense providing for a total of 105 million dollars in investments and grants over three years. Concordia asked the Court to order Polaris and Mr. Khalimonov to: Cease any use of proprietary or confidential information belonging to the University. Withdraw Polaris’s bid; and Remit any documentation in their possession relating to Space Concordia and/or the Starsailor project. Analysis of the criteria applicable to the provisional injunction The Court concluded that issuing the requested provisional injunction was appropriate and that Concordia had met its burden of proof. The evidence clearly showed that Mr. Khalimonov had played a central role in the University’s rocketry initiatives and that he had never formally disclosed to Concordia his simultaneous involvement with Polaris. He had undertaken to comply with strict obligations to Concordia regarding intellectual property and proprietary information, including keeping such information strictly confidential during and after his employment and acknowledging that any intellectual property developed in the course of his employment would remain Concordia’s exclusive property, with no vested rights accruing to him. Mr. Khalimonov also had to comply with university policies, including the Conflict of Interest Policy and the Intellectual Property Policy. The latter provided that the “Inventors” of “Qualifying Inventions” were deemed to have automatically assigned to Concordia the related intellectual property. The Court found that Starsailor constituted a “Qualifying Invention”, and that Mr. Khalimonov met the definition of an “Inventor” within the meaning of that policy. It also found that Polaris’s proposal used intellectual property and confidential information belonging to Concordia. In that context, the Court considers, on a prima facie basis, that Mr. Khalimonov had breached his obligations arising from his employment contract, the Intellectual Property Policy, and the Conflict of Interest Policy. The Court also concluded that refusing to grant the provisional injunction would result in the submission of competing proposals under the Launch the North initiative, creating significant uncertainty as to the ownership of the intellectual property upon which those proposals were based, and thereby causing irreparable harm to Concordia. It found that the balance of inconvenience favored Concordia and supported granting the requested provisional injunction, since the absence of a provisional injunction would likely lead to the disqualification of both Polaris’s and Concordia’s proposals due to unresolved competing claims regarding the intellectual property. Conclusions The Court granted Concordia University’s application for a provisional injunction and ordered, among other things, that Mr. Khalimonov and Polaris cease disseminating false statements suggesting that Polaris held any rights whatsoever in Concordia’s intellectual property, including in relation to Space Concordia’s rocketry projects. It also ordered Mr. Khalimonov and Polaris to cease using Concordia’s intellectual property (including for Space Concordia’s rocketry projects), as well as any confidential or proprietary information belonging to Concordia. Finally, it ordered the immediate withdrawal of Polaris’s submission filed under the Launch the North project. General Principles — Ownership of Inventions In Canada, except for inventions developed by federal public servants, ownership of inventions is derived from inventorship. Thus, the starting point for ownership of an invention lies with the inventor(s), who may subsequently transfer their rights. For Canadian federal public servants, inventions produced by a federal employee in the course of their employment are “vested in Her Majesty in right of Canada” and therefore belong to the federal government, pursuant to the provisions of the Public Servants Inventions Act. However, the Patent Act contains no comparable express provisions regarding ownership of an invention developed by an employee in the course of employment. The case law has established the general principle mentioned above: in the absence of a valid agreement relating to such rights in the context of employment ownership of an invention  vests in the employee who created it, unless the employee was “hired to invent.” The leading case in this respect is the Federal Court’s decision in Comstock2. In that case, the Court noted that the nature and context of the employer–employee relationship could be analyzed using various factors in order to determine whether an employee had indeed been “hired to invent.” Such a determination can be complex and remains uncertain, since each case depends on its particular facts. It is therefore always prudent to put in place an agreement governing ownership of inventions developed in the course of employment. Key Takeaway   Concordia University’s success in its application for a provisional injunction underscores the importance for employers of including robust intellectual property and confidentiality clauses in employment contracts. This decision is a reminder that it is not enough to rely on general principles: employers are well advised to draft comprehensive, clear, and operational provisions governing (i) the ownership and assignment of intellectual property rights, (ii) the definition and handling of confidential information, and (iii) the rules applicable during employment and after its termination. It is just as crucial that these policies and undertakings (intellectual property, confidentiality, conflicts of interest) be brought to the employee’s attention at the time of hiring, properly incorporated into or referenced in the employment contract, and easily accessible at all times. These contractual mechanisms complement the duties of loyalty and confidentiality set out in article 2088 of the Civil Code of Québec, which continue to apply after the end of the employment contract—but whose scope often remains insufficient in specialized sectors where intellectual property issues are decisive. In short, this case shows that, without well-structured contractual clauses, Concordia would have had much greater difficulty asserting its rights and obtaining the withdrawal of Polaris’s competing submission under Launch the North. Concordia University v. Polaris Aerospace Inc., 2026 QCCS 30. Comstock Canada et al. v. Electec Ltd. and Hyde, (1991) 45 F.T.R. 241 (TD).