What’s happening? Further to our HR Alert of July 12, 2022 on the federal government’s amendments to the Competition Act (the “Act”) to protect labour competition and prohibit employers from fixing wages and restricting job mobility of employees across Canada, the Competition Bureau (the “Bureau”) recently published its Enforcement Guidelines on wage-fixing and no poaching agreements (the “Guidelines”), as the Competition Act amendments (the “Amendments”) come into effect. This HR Alert summarizes some of the key aspects of the Guidelines to help employers navigate the Amendments.
Effective Date. Though many of the Amendments, such as clarification on drip pricing and the definition of an “anti-competitive act” for abuse of dominance, came into effect on June 23, 2022, the Amendments that criminalize wage-fixing and no-poaching agreements, as outlined below, came into effect on June 23, 2023.
What does it say? The key sections of the Guidelines are as follows:
|Amendment||Section in Act||Guideline Guidance|
|Prohibition on wage-fixing and nopoaching agreements (“Restraining Agreements”): It is a criminal offence for an employer to agree, conspire, or arrange with an unaffiliated employer to:|
1. Maintain, decrease, or control salaries or wages;
2. Maintain, decrease, or control terms and conditions of employment; or
3. Refrain from hiring or soliciting each other’s employees.
|s. 45 (1.1)(a) & (b)||An “Employer” includes: individuals such as human resource professionals (“HR”) or directors.|
“Terms and conditions” include (but are not limited to): job descriptions, benefits, policies, reimbursements, working hours, location, and non-compete clauses.
No-poaching agreements include: actions to prevent employees from being solicited or hired, such as placing restrictions on sharing job postings and using biased hiring procedures. Generally, the prohibition on these agreements do not apply to those agreements that restrict only one employer from poaching another employer’s employees 2 (rather than an agreement where all employers agree to refrain from soliciting or poaching each other’s employees, which is prohibited).
Employer-Employee Relationship: Whether an employer-employee relationship exists between employers such that the prohibition on Restraining Agreements applies depends on the nature of their interactions and applicable laws. Information sharing: Sharing information between employers is generally not a problem under the law, but in specific cases, it may suggest that a Restraining Agreement exists or be subject to review if it raises concerns.
Pre-June 23, 2023 Restraining Agreements: Employers that entered into Restraining Agreements prior to June 23, 2023, are prohibited from implementing or reaffirming these Restraining Agreements.
Immunity and leniency programs: These programs are available for eligible employers that violate the restriction against Restraining Agreements
|Ancillary restraints defence: Employers can defend against the prohibition on Restraining Agreements if they demonstrate that:|
• The Restraining Agreement is ancillary to or flows from a larger or independent agreement between the same parties (the “Principal Agreement”);
• The Restraining Agreement is directly related to and reasonably necessary for achieving the objective of the Principal Agreement; and
• The Principal Agreement, without the Restraining Agreement portion, complies with the prohibition on Restraining Agreements.
|S. 45(4)||Factors assessed by Bureau: In determining the viability of an ancillary restraints defence, the Bureau will consider factor such as:|
• The terms and form of the Principal Agreement;
• The direct relevance and reasonable necessity of the Restraining Agreement in achieving the objective of the Principal Agreement;
• Whether a significantly less restrictive method (compared to the Restraining Agreement) was available to achieve a comparable arrangement;
• The duration, subject matter, and geographic scope of the Restraining Agreement; and
• Whether the Principal Agreement could be implemented only under more uncertain conditions, at higher costs, or over a longer period without the Restraining Agreement.
What should we do? Employers should seek advice from experienced legal counsel on the changes to the Act that may implicate their current practices and agreements. Some of the key factors to keep in mind include:
Pre-June 23, 2023 Restraining Agreements: Though the prohibition on Restraining Agreements applies to such agreements made on or after June 23, 2023, Canadian employers that have entered into any Restraining Agreements at any point in time (including prior to June 23, 2023) should refrain from implementing such Restraining Agreements, as implementing these Restraining Agreements is also prohibited. Employers should also consider updating any such pre-June 23, 2023 Restraining Agreements or any practices to ensure no steps are taken to implement such Restraining Agreements, while keeping in mind that Restraining Agreements need not be formal written agreements.
Information sharing: Employers should train their HR to take caution when sharing sensitive information, including employment terms, during collaborative activities with unaffiliated employers as well as trade associations, to avoid having a court infer that an Agreement was created. Per the Bureau’s guide on information sharing with trade association members, which employers and HR are encouraged to review, individuals involved in setting employment terms should consider: opting for a neutral third party to collect data and distributing only general aggregated information; implementing safeguards to prevent the disclosure of competitive information to trade association members; and refraining from coercing trade association members into providing such sensitive and competitive data. Employers and HR should remember that, despite the risks of sharing such information with other employers or trade association members, it is generally unlikely that an employer will be found to have created an Agreement if they are sharing only information that is legally required to be disclosed (for instance, to comply with pay transparency rules such as in British Columbia).
Affiliated employers: It is important to remember that Restraining Agreements between affiliated employers (such as between a parent company and its subsidiaries) are not prohibited. One-way agreements (for instance, where only one employer agrees not to poach the other employer’s employees) are not considered to be Restraining Agreements for the purposes of the prohibition on Restraining Agreements.
Review commercial agreements: Employers should review any commercial agreements (including Principal Agreements) that contain Restraining Agreement language and update these agreements as needed to ensure compliance with the Amendments.
Other defences and exceptions: Employers are reminded that, in addition to the ancillary restraints defence, they are also permitted to enter into Restraining Agreements if they are:
- Required or authorized to do so under provincial or federal law; or
- Engaging in collective bargaining with their employees.
Immunity and leniency programs: In the event that an employer has contravened the prohibition on Restraining Agreements, it is encouraged to consider the Bureau’s Immunity and Leniency Programs information page which provides an overview on situations where the Crown may forego prosecution or recommend a reduction of court-imposed penalties.
Penalties: As a reminder, per the Amendments, employers that are guilty of contravening the prohibition on Agreements can face up to 14 years in prison, subjected to a fine at the discretion of the court, or both.
Guide Examples: Employers are encouraged to review the wide-ranging examples of Restraining Agreements, as provided in the Guide.
Why should we care? The Competition Act applies to employers across all provinces and territories in Canada in addition to federally-regulated employers, and all Canadian employers should stay up-to-date on the Amendments. The Canadian government made the changes to the Act to address issues including fair competition being undermined by agreements that fix wages and restrict poaching and around resource allocation, such as the ability of employees to earn a livelihood, especially in industries where relatively few employers compete. These issues are not restricted to one province or territory or the federal jurisdiction. In publishing the Guidelines, the Bureau aims to promote healthy competition among employers and greater employment opportunities in all jurisdictions in Canada.
For additional information regarding this HR Alert, please contact your Relationship Manager or the ADP Workforce Now Comprehensive Services team. This HR Alert, along with all the other HR Alerts and HR Tips issued by ADP Workforce Now Comprehensive Services, is also available in the HR Knowledge Library through the ADP Workforce Now Comprehensive Services Portal.
The information contained in this document is summary in nature and is intended to provide general guidance only. It should not be viewed as a replacement for legal or professional advice. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the province or territory. You should review applicable law in your jurisdiction and consult experienced counsel for legal advice. This content is the property of ADP Canada Co.
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