Risk Management and Crisis Response Blog

Wage fixing and no-poach provisions in the Competition Act:backgrounder and frequently asked questions

Jun 28, 2023 3 MIN READ
Authors
Chelsea Rubin

Associate, Competition, Trade & Foreign Investment, Toronto

Kaeleigh Kuzma

Partner, Competition/Antitrust and Foreign Investment, Calgary

Shuli Rodal

Partner, Competition/Antitrust and Foreign Investment
Chair, Diversity Committee, Toronto

Michelle Lally

Partner, Competition/Antitrust and Foreign Investment, Toronto

Reba Nauth

Associate, Competition/Antitrust & Foreign Investment, Toronto

Danielle Chu

Associate, Competition, Trade & Foreign Investment, Toronto

 

On June 23, 2023, the criminal no-poach and wage fixing provisions added to the Competition Act (Act) in June 2022 will come into effect. The Competition Bureau (Bureau) released its much-anticipated official guidance on the new provisions (Guidelines) earlier this week. The Guidelines provide helpful direction from the Bureau on its anticipated enforcement approach and priorities for the new criminal provisions. The wide range of circumstances in which businesses will need to anticipate and manage increased risks are clearly outlined, including in relation to no-poach agreements, benchmarking activities and communications between human resource professionals.

As of June 23, 2023, it will be a criminal offence under section 45(1.1) of the Act for unaffiliated employers to agree to fix or control wages or other terms of employment (Wage Fixing Provision), and a criminal offence for unaffiliated employers to agree to not solicit or hire each other’s employees (No Poach Provision). The provisions will apply to agreements entered into by employers on or after June 23, 2023, and to conduct that reaffirms or implements older agreements which contravene the provisions. Importantly, the criminal offences apply to agreements between employers, regardless of whether they compete and do not require that an agreement have any market impact to be illegal.

Similar to the existing criminal conspiracy offence under section 45(1) of the Act:

  • The prosecution must prove the elements of these new offences beyond a reasonable doubt; however, the court may infer the existence of an agreement from circumstantial evidence.
  • Existing defences and exemptions will continue to apply, most importantly in this context, the ancillary restraints defence and the collective bargaining exemption.
  • Prescribed penalties are fines with no statutory limit and determined at the court’s discretion, imprisonment of up to 14 years, or both, and
  • Additional liabilities include exposure to civil actions by private parties (on an individual or class basis) for civil damages regardless of whether the Commissioner or the Attorney-General take any action, debarment under the Federal Integrity Regime or provincial equivalents, and reputational damage.

The new criminal provisions capture agreements between unaffiliated employers to:

  • Fix, maintain, decrease or control salaries, wages or terms and conditions of employment; or
  •  Not solicit or hire each other’s employees.

The new criminal provisions are aimed at agreements between unaffiliated employers that impose “naked restraints” on competition in labour markets, including restraints on wages, job mobility or opportunities. It is illegal for unaffiliated employers to enter into such agreements, regardless of the effect or impact of the agreement, and regardless of whether the employers are competitors.

Whether the evidence establishes an implicit or explicit “meeting of the minds” to engage in the conduct prescribed by the new criminal provisions. For greater certainty, the Act explicitly provides that “the court may infer the existence of a conspiracy, agreement or arrangement from circumstantial evidence, with or without direct evidence of communication between or among the alleged parties”. Regardless of how the existence of the agreement is proven, it must be proven beyond a reasonable doubt.

Entering into the agreement is itself the offence. Similar to the existing criminal conspiracy offence, the new criminal provisions do not require evidence or proof that the agreement was implemented, or that the agreement had any anti-competitive effect.

Read the full Update published on June 2, 2023