The Competition Act (the “Act”) generally aims to prevent anti-competitive practices in the Canadian marketplace and seeks to both maintain and encourage competition in Canada by not only providing consumers with competitive prices and product choices, but also to expand and ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy. The Act is a piece of federal legislation which means that it will apply to all Canadian businesses and employers across the country, which also follows the provisions and developments of antitrust law in the U.S.A.
The Competition Act has recently undergone amendments in several areas which came into immediate force and effect on June 23, 2022. However, the final and most notable amendment scheduled to come into effect on June 23, 2023, which is catered specifically to employers. This new amendment seeks to further protect employees and criminalize certain activities or conduct pertaining to no-poach and wage-fixing agreements between unaffiliated employers. Employers will have one year to identify areas of risk, revise their agreements as necessary, and determine their compliance plans moving forward.
Types of Agreements
Wage-fixing agreements are those which exist between employers who compete for the same type of employees to fix those employees’ salaries and wages. On the other hand, no-poaching agreements are those between competing employers to not poach or hire each other’s employees. The existing criminal conspiracy provision under Section 45 of the Act protects workers from agreements between employers that fix wages and restrict job mobility. For now, no-poach and wage-fixing agreements will continue to be outside the scope of Section 45, however, it could still be reviewed under the civil stream of the Act (Section 90.1).
Effective June 23, 2023, it will become a criminal offence for employers to agree to fix, maintain, decrease or control wages or other terms of employment and to refrain from hiring or trying to hire one another’s employees between unaffiliated employers. However, the regulated conduct and ancillary restraints defences will still be available for agreements of this nature (i.e., if the employer can establish that the arrangement is ancillary to a broader or separate agreement that includes the same parties).
What Sort of Conduct or Agreements May be Considered Wage-Fixing and Poaching?
An agreement need not be explicitly titled as “wage-fixing” for it to be considered as such. Section 45 has been broadened to criminalize an agreement which pertains to any term or condition of employment, not one simply limited to salary or wages, which will apply to unaffiliated employers even if they are not competitors. Some conduct that may be caught under wage-fixing activities could include informal conversations between representatives of different companies; sub-contracting agreements; or commercial agreements and joint ventures if they are not affiliates of each other.
While the amended language for no-poach agreements is vague, many everyday activities or agreements could potentially be caught under this offence, including but not limited to, non-compete or staffing agency agreements, or Secondments and Assignments.
What Should You Do between Now and June 23, 2023?
You should closely consider the rationale and reasonableness of non-solicitation clauses or other employee-related provisions to determine whether their duration and scope are fair and reasonable for your specific industry. Furthermore, be prepared to explain why a restrictive term is both necessary and reasonable to achieve the objectives of the broader arrangement.
It would also be prudent to review your HR Procedures to ensure that employers are not involved in practices that may be considered to be conduct falling within wage-fixing or poaching behaviour, and, whether there is any information being improperly shared which could be perceived as facilitating such agreements. This may include participation in industry-related discussions or organizations where information is shared between different employers (either individuals or companies) with respect to wages, benefits or any terms or conditions of employment.
Earlier this year, the Competition Bureau released a short introductory guideline to highlight the important amendments that both came into effect and will come into effect next year. We’ll continue to wait for the Bureau to publish additional guidance for the business and legal communities in advance of June 23, 2023, which the Competition Bureau has committed to providing the public in order to promote transparency and predictability throughout this process.
Speak with one of our Litigation Associates at Mills & Mills LLP about this topic further and seek legal advice with respect to your employment contracts.
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