THE EMPLOYERS' EDGE
Budget 2025: A Briefing for Employers
The federal government delivered Budget 2025: Canada Strong on November 4, 2025. The budget proposes several employment-related amendments that may affect federally regulated employers, including potential changes to the Canada Labour Code, Canadian Human Rights Act, Employment Insurance Act, and Federal Public Sector Labour Relations Act.
Set out below is a summary of the key proposals that may impact employers.
Non-Compete Agreements
Budget 2025 proposes amendments to the Canada Labour Code that would restrict the use of non-compete agreements in employment contracts for federally regulated businesses.
These proposed restrictions mirror those already in place in Ontario. In 2021, the province enacted the Working for Workers Act, 2021, which generally prohibits non-competition clauses in employment agreements entered into after October 25, 2021, subject to limited statutory exceptions.
The federal government has indicated that consultations on the proposed legislative changes will begin in early 2026. If adopted, employers will need to review existing employment agreements for compliance and consider alternative mechanisms to protect confidential information and proprietary interests.
Wage Theft Penalties
The 2024 Fall Economic Statement announced the government’s intention to substantially increase penalties for employers who commit wage theft.
Building on that commitment, Budget 2025 proposes regulatory changes and anticipates consultations with workers and employers in the coming months.
While specific penalty amounts have not yet been announced, employers should expect increased enforcement and heightened financial exposure once the regulatory changes are implemented.
Employment Insurance and Benefits
Budget 2025 proposes amendments to the Employment Insurance Act that would allow claimants receiving parental benefits to access an additional eight weeks of benefits in the event of the death of the child.
These proposed amendments align with recent amendments to the Canada Labour Code. As of December 23, 2025, employees in federally regulated workplaces are entitled to job-protected and partially paid leave for pregnancy loss, including up to eight weeks for a stillbirth occurring on or after the twentieth week of pregnancy, or three days for other pregnancy losses.
While these measures primarily affect employees, employers may need to revisit parental leave policies, benefit top-ups and accommodation practices to ensure alignment with the evolving legislative framework.
Real-Time Employer Reported Payroll Information Pilot
The government also announced proposed funding for Employment and Social Development Canada to support a two-year pilot project assessing whether Employment Insurance eligibility and entitlement can be determined accurately and securely using real-time payroll information.
Although this initiative is currently limited to a pilot, it may inform future decisions aimed at reducing administrative burdens, improving program and service delivery, and streamlining interactions between employers, employees, and the federal government.
Worker Misclassification
Budget 2025 addresses the deliberate misclassification of employees as independent contractors. The government proposed amendments to the Income Tax Act and Excise Tax Act to allow the CRA to share information with the Department of Employment and Social Development Canada for the purpose of identifying and addressing worker misclassification.
Amendments to the Canadian Human Rights Act
The budget also proposes amendments to the Canadian Human Rights Act to make changes to the organizational structure of the Canadian Human Rights Commission. This includes consolidating the roles of the Chief Commissioner and Deputy Chief Commissioner to reflect a more streamlined structure.
Public Sector Collective Bargaining
Finally, Budget 2025 proposes amendments to the Federal Public Sector Labour Relations Act to adjust the collective bargaining dispute resolution framework. These changes are intended to provide greater certainty and transparency regarding the factors an arbitration board will take into account when making an arbitral award.
Takeaways for Federal Employers
Although none of these proposals have yet come into force, employers should monitor upcoming consultations and legislative developments and consider proactively reviewing and updating employment contracts to prepare for anticipated non-compete restrictions. Employers may also wish to audit independent contractor relationships to mitigate misclassification risks and review payroll and compensation processes in light of the proposed increase in wage theft penalties.
If you have any questions about these proposed changes or how they may affect your workplace, please reach out to our team at CCPartners.
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