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Competition Bureau’s Guidelines on Wage-Fixing and No-Poach Agreements: Implications for Employers in Canada

Jul 28, 2023 | HR Canada, HR Legal

The Competition Bureau of Canada has recently introduced guidelines regarding the criminalization of wage-fixing and no-poach agreements between unrelated employers. The amendment to the Canadian Competition Act aims to bring the country’s competition laws in line with other jurisdictions, including the United States, which already prohibit certain labour-related agreements. The criminal prohibition will take effect on June 23, 2023, after a one-year grace period for Canadian employers to ensure compliance.

Wage-fixing and No-poach Agreements Between Unaffiliated Employers Are Prohibited
The new prohibition makes it a per se criminal offense for employers to conspire or agree with other unaffiliated employers to fix, decrease, or control salaries, wages, or employment conditions (wage-fixing agreements). It also prohibits agreements not to solicit or hire each other’s employees (no-poach agreements). The term “employer” encompasses human resources professionals, agents, employees, directors, and officers.
Violating this prohibition can lead to severe penalties, including imprisonment for up to 14 years and fines at the court’s discretion. Corporations may also be held liable if their “senior officers” are involved in the prohibited agreements. Moreover, employers may face civil actions from private litigants, particularly in follow-on class action litigation, leveraging the criminal evidentiary record to demonstrate the contravention.

 Defences, Exemptions, and the Immunity and Leniency Programs
Certain defenses and exemptions exist for employers, including the Ancillary Restraints Defense, the Regulated Conduct Defense, and exemptions related to Collective Bargaining agreements. Additionally, the Bureau’s Immunity and Leniency Programs offer a way for employers to seek protection if they discover they have entered into a prohibited agreement and wish to cooperate with the Bureau.|
The Enforcement Guidelines published by the Bureau on May 30, 2023, detail how the prohibition will be enforced and alleged contraventions assessed. It’s essential for businesses operating in Canada to understand key takeaways from these guidelines and ensure they are prepared to comply with the new prohibition.
Some key takeaways from the guidelines include:

  • Investigations and enforcement actions will focus on agreements made, reaffirmed, or implemented after June 23, 2023. Pre-existing agreements are generally not a concern as long as parties do not reaffirm or implement labor restraints after the effective date.
  • The prohibition applies to wage-fixing and no-poach agreements between employers who are not affiliated with each other under the Competition Act’s meaning. Agreements between affiliated employers, controlled by the same parent company, for example, are not prohibited.
  • The Bureau may investigate relevant employment relationships to determine whether the prohibition applies. The nature of interactions and applicable laws will be considered to establish employer-employee relationships.
  • Only “two-way” no-poach agreements are prohibited, where unaffiliated employers agree not to solicit or hire each other’s employees. “One-way” restraints, such as those between service providers and businesses, are generally not in violation.
  • Businesses should exercise caution when sharing information about employment terms, as sharing competitively sensitive information could raise competition risks.
  • Commercial agreements and business arrangements with wage-fixing and no-poach provisions may contravene the prohibition if they go beyond necessary scope or are determined to be a sham.

To comply with the new prohibition, businesses should update compliance policies and training, establish guidelines for sharing employment-related information, review commercial agreements for compliance, and continually assess relationships with independent contractors.

Overall, it is crucial for businesses to be well-informed about the new prohibition and the Competition Bureau’s enforcement approach to ensure they avoid violating the law and face potential penalties or legal actions.