On June 23, 2023, amendments to the Competition Act will come into force that criminalize wage-fixing and no-poaching agreements between unaffiliated employers. These changes are intended to prevent employer activities that undermine competition and efficient labour allocation. We discuss the amendments in further detail below.
Prohibition on Wage-Fixing and No-Poach Agreements
The Competition Bureau published Enforcement Guidelines (the “Guidelines”) on May 30, 2023 to describe its approach to enforcing the recent amendments to the Competition Act, which include the prohibition on wage-fixing and no-poaching agreements contained within subsection 45(1.1).
Under subsection 45(1.1), it is a criminal offence for an employer to conspire, agree, or arrange with an unaffiliated employer to:
- Fix, maintain, decrease or control salaries, wages or terms and conditions of employment (wage-fixing); or
- Not solicit or hire each other’s employees (no-poaching).
Subsection 45(1.1) only applies to agreements made between employers on or after June 23, 2023, or to conduct that reaffirms or implements agreements made before that date.
A person found guilty under the above provision could potentially face a maximum of 14 years imprisonment, a fine in the discretion of the court, or both.
Though the term “employer” is not defined under the Competition Act, the Guidelines indicate that, “employer” includes directors, officers, as well as agents or employees, which includes human resource professionals. However, subsection 45(1.1) only applies to agreements made between unaffiliated employers. This provision does not apply to wage-fixing or no-poaching agreements entered into by two or more corporate entities controlled by the same parent company or individual. In addition, the no-poaching provision only applies to agreements to not solicit or hire “each other’s” employees, i.e. a mutual arrangement. For example, it is not an offence under the Competition Act when only one party decides to not poach another employer’s employees.
One of the main defences to section 45(1.1) is the “ancillary restraints defence” (“ARD”) under subsection 45(4) of the Competition Act. The ARD is available when certain desirable business transactions or collaborations require restraints on competition to make them efficient, or even possible.
In particular, the ARD is available when it is likely that:
- The restraint (i.e. the wage-fixing or no-poach agreement) is ancillary to, or flows from, a broader or separate agreement that includes the same parties;
- The restraint is directly related to and reasonably necessary for achieving the objective of the broader or separate agreement referred to in (a); and
- The broader or separate agreement referred to in (a), when considered without the restraint, does not violate s.45(1.1).
Other exemptions and defences include:
- Agreements between employers with respect to collective bargaining with their employees over salaries or wages and terms or conditions of employment; and
- Conduct required or authorized by or under another Act of Parliament or the legislature of a province.
It is crucial that employers review their existing agreements, arrangements and policies to ensure compliance with the new amendments to the Competition Act given the significant criminal liability at stake. Employers may also consider training management and human resources personnel on the new prohibitions.
If you have any questions about this topic, or employment and labour matters in general, please contact a member of our Labour, Employment, and Human Rights Group.
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