Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
When Bill C-19, Budget Implementation Act, 2022, No. 1 received Royal Assent in June 2022, it amended Canada’s Competition Act (Act) by including a new provision, s. 45(1.1), which comes into force on June 23, 2023. Section 45(1.1) will prohibit employers from conspiring, agreeing or arranging to enter into “wage-fixing agreements” and “no-poach agreements” with another employer that is not affiliated with them. The Competition Act applies to all businesses operating in Canada, whether they are provincially or federally regulated.
On January 18, 2023, Canada’s Competition Bureau (Bureau) published draft enforcement guidance on wage-fixing and no poaching agreements (Draft Guidelines) for public consultation. The Draft Guidelines describe the Competition Bureau’s proposed approach to enforcing s. 45(1.1), and supplement the Bureau’s existing Competitor Collaboration Guidelines (CCGs). Those interested in submitting their views on the Draft Guidelines may do so by completing an online feedback form by March 3, 2023 (11:59 pm Pacific time).
Summary of Draft Guidelines
Set out below is a summary of key aspects of the Bureau’s Draft Guidelines:
New Agreements and Conduct that Reaffirms or Implements Older Agreements
Section 45(1.1) will apply only to new agreements entered into by unaffiliated employers (“regardless of whether they compete in the supply of a product”) on or after June 23, 2023, and to “conduct that reaffirms or implements older agreements” as of that date. “Employers” includes directors, officers, and certain agents/employees acting on the employer’s behalf.
Sharing Sensitive Employment Information
The Bureau does not consider “conscious parallelism” (“when a business acts independently with awareness of the likely response of its competitors or in response to the conduct of its competitors”) a violation of section 45; however, under subsection 45(3), “parallel conduct coupled with facilitating practices, such as sharing sensitive employment information or taking steps to monitor each other’s employment practices,” could result in the Bureau’s drawing an inference of an agreement between the parties in violation of subsection 45(1.1). Employers are cautioned to be mindful that, when sharing information with each other in the course of collaborative activities (e.g., benchmarking employment terms), their conduct does not raise concerns under subsection 45(1.1)..
Prohibited Wage-Fixing Agreements
The “wage fixing” prohibition in s. 45(1.1) applies to agreements to fix, maintain, decrease or control salaries, wages, or “terms and conditions” of employment that could affect a person’s decision to enter into or remain in an employment contract, i.e., responsibilities, benefits and policies associated with a job such as job descriptions, allowances (e.g., per diem and mileage reimbursements), non-monetary compensation, working hours, location and non-compete clauses, or other directives that may restrict an individual’s job opportunities.
Prohibited No-poaching Agreements
The no-poaching agreement prohibition in s. 45(1.1) applies to agreements between employers that limit their employees’ opportunities to be hired by each other, e.g., by “restricting the communication of information related to job openings and adopting hiring mechanisms, such as point systems, designed to prevent employees from being poached or hired by another party to the agreement.” The offence occurs when two or more employers agree or arrange to not solicit or hire each other’s employees by reaching a consensus, either explicitly or tacitly. It is not an offence, however, when only one employer agrees to not poach another employer’s employees.
Ancillary Restraints Defence
The ancillary restraints defence (ARD) in s. 45(4) of the Act may protect wage-fixing or no-poach agreements provided the restraint (a) is ancillary to, or flows from, a broader or separate agreement that includes the same parties and that, when considered without the restraint, does not violate subsection 45(1.1); and (b) is directly related to and reasonably necessary for achieving that broader or separate agreement’s objective. The Bureau’s proposed approach to the ARD in the Draft Guidelines is consistent with its approach to it in its CCGs.
Mergers, Joint Ventures and Strategic Alliances
The Bureau will generally not assess wage-fixing or no-poaching clauses that are ancillary to merger transactions, joint ventures or strategic alliances under the criminal track, except when they are “clearly broader than necessary” (e.g., as to covered employees, territories or duration), or when the merger, joint venture or strategic alliance is a sham.
Other Defences and Exceptions
Employers are encouraged to consult the CCGs and other applicable legislation and case law for other legal defences (e.g., the regulated conduct defence) or exceptions (e.g., agreements reached between employers in the course of collective bargaining) that may apply.
If the Commissioner concludes that an offence under section 45 was committed, the Bureau may refer the case to the Director of Public Prosecutions (DPP) and recommend criminal charges. It is then up to the DPP to decide whether to prosecute.
In accordance with the 2022 amendments to the Act, as of June 23, 2023, a person found guilty of an offence under ss. 45(1) or (1.1) may be imprisoned for up to 14 years or subjected to a fine at the discretion of the court, or both.
Other penalties and remedies available to the Bureau and persons who have suffered loss or damage as a result of a violation are described in the CCGs.
Immunity and Leniency Programs
The Bureau’s Immunity and Leniency Programs (currently being updated to reflect the June 2022 amendments to section 45) are available for s. 45(1.1) offences. To be eligible, applicants must provide sufficient information pertaining to the applicable offence(s), including information about hiring practices and employee compensation.
Bottom Line for Employers
Employers interested in submitting their views on the Draft Guidelines should complete an online feedback form by March 3, 2023.
As well, to mitigate the potential risk of criminal prosecution, employers are encouraged to take proactive steps to ensure that they will be in a position to comply with s. 45(1.1) when it comes into force on June 23, 2023. Such steps may include conducting a review of whether they are engaged in any activities that will become prohibited, developing policies and practices that ensure that such activities will not be engaged in as of June 23, 2023, and providing internal training to encourage their adoption.