Competition Act criminalizes certain agreements between employers

Subsection 45(1.1) of the Competition Act (the “Act”) comes into force on June 23, 2023.  This new subsection has been added to the existing criminal conspiracy provisions of the Act and aims to protect competition in the labour markets by prohibiting employers from entering into agreements that fix wages and restrict job mobility through no-poaching agreements.

Subsection 45(1.1) reads as follows:

45 (1.1) Every person who is an employer commits an offence who, with another employer who is not affiliated with that person, conspires, agrees or arranges

1. to fix, maintain, decrease or control salaries, wages or terms and conditions of employment; or
2. to not solicit or hire each other’s employees.

45(1.1)(a) focuses on wage-fixing agreements and 45(1.1)(b) focuses on no-poaching agreements.

The Competition Bureau, which is an independent law enforcement agency responsible for administering and enforcing the Act provided guidance and commentary to this section in their “Enforcement Guidelines on wage-fixing and no poaching agreements” (the “Guidelines) which can be found here.

A couple of key points from the Guidelines that employers should be aware of:

1. This section will apply only to new agreements entered into by employers on or after June 23, 2023, as well as to conduct that reaffirms or implements older agreements.  The Guidelines provide that the Competition Bureau’s focus is on the intent of the parties on or after June 23, 2023, and that they are unlikely to find an existing wage-fixing or no-poaching agreement problematic if the parties do not take steps to reaffirm or implement the restraints after this date.  It is still recommended that employers review and/or update their existing agreements as necessary.

2. This subsection only applies to agreements between unaffiliated employers.  In other words, it means that a wage-fixing or no-poaching agreement between two or more corporate entities that are controlled by the same parent company would not violate the provision.

3. Information sharing may give rise to an inference that an agreement between employers exists, especially when sensitive information is shared such as employment terms, compensation, etc.

4. A person found guilty of an offence under subsection 45(1.1) may be imprisoned for up to 14 years or subjected to a fine at the discretion of the court, or both.

5. It is not an offence when only one party agrees to not poach another’s employees.  In other words it cannot be mutual.  However, if there are two separate agreements that result in reciprocating promises not to poach, this could result in a violation being found.

The Guidelines do provide a list of defences and exemptions that may be considered by the Competition Bureau.  However, given the serious nature of the consequences if found to be in violation, employers should review their agreements judiciously, and only continue to apply these types of agreements if they can be confidently argued as reasonable and necessary as outlined in the Guidelines.  In the coming months, as this subsection is applied, there will likely be further direction and commentary from the Competition Bureau.  We will provide updates when available.

For more information on this and other similar topics, please contact Ryan Chan at [email protected] or anyone else from our team listed on the Authors page.