We are sharing an update regarding the Competition Act, a piece of legislation that we rarely handle. New employment-related provisions are coming into force in June, which will impact all Canadian employers and their internal and external HR practices.
Here’s a broad summary of the current interpretation of the law and its draft enforcement guidance, with further clarification anticipated when the draft guidance is finalized close to the end of May (note: on May 30, 2023, the Competition Bureau published its updated, final Enforcement Guidelines):
There are new criminal prohibitions for Canadian employers regarding (a) wage fixing and (b) no poaching agreements (subsection 45(1.1.)), which come into force on June 23, 2023.
The penalties are up to 14 years in prison, plus fines and the option for civil claims (even class actions).
Specifically, Canadian employers cannot enter into a new agreement (or enforce an old agreement) with another unaffiliated employer to:
“fix, maintain, decrease or control salaries, wages or terms and conditions of employment” (i.e. “wage-fixing agreements”); or
agree to “not solicit or hire each other’s employees” (i.e. “no-poaching agreements”) (note: this only applies to reciprocal and not one-way agreements).
While the purpose of prohibiting “collusion” with other employers to fix wages or restrict poaching is understandable, the legislation prohibits conduct that has historically been part of everyday, collaborative (i.e. not anti-competitive) business practices.
Consider the following nuances about this new legislation:
“employer” is broadly defined to include employees (including non-directing minds, such as HR professionals) and agents (e.g. recruiters, staffing agencies, etc.)
“employee” is broadly defined to include contractors and consultants
“terms and conditions” of employment includes anything “that could affect a person’s decision to enter into or remain in any employment contract”
put differently, wage fixing goes way beyond wages
it prohibits relying on terms in existing agreements (i.e. there is no legacy amnesty, as there was with the ban on non-competition agreements in Ontario in October 2021)
it’s a “per se” offence – i.e. an employer’s intentions and actual consequences are irrelevant, even if they benefit employees
informal understandings, parallel conduct, and other unwritten agreements are considered “agreements”
It’s important for organizations to start reviewing their existing business practices and third-party agreements, since the following types of activities can be caught:
Information sharing – e.g. participating in HR, pay equity, and other industry groups that share wage, employee benefit, and employment perk information
Information monitoring – e.g. talent acquisition teams that monitor job postings for compensation details
There are defences (e.g. M&A, joint ventures, and “strategic alliances”), but they are not clearly defined and will still be subject to the “reasonableness” scrutiny, similar to the way the courts scrutinize one-way restrictive covenants.
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PH will be doing an invitation-only client seminar about this legislation in June. Please reach out to us directly if you are interested in attending. But given the significant impact of this legislation on everyday employment and HR practices, it should be on our clients’ radars before then.