As of June 23, 2023, wage-fixing and no-poaching agreements will be criminal offences under the Competition Act. What does this mean for Canadian employers?
WHAT IS WAGE-FIXING?
Wage-fixing refers to two or more employers agreeing to fix, maintain, decrease or control salaries, wages and other terms and conditions of employment.
WHAT ARE NO-POACHING AGREEMENTS?
No-poaching agreements refer to two or more employers who enter agreements not to solicit or hire each other's employees.
These changes to the Competition Act will apply to all employers, regardless of whether they are competitors. An employer can include a director, officer or employee acting as an agent of an organization (i.e. HR professionals). Penalties for violations can be severe, including up to 14 years imprisonment and fines at the court's discretion. Additionally, those harmed by wage-fixing and no-poaching agreements have the ability to pursue damages through class actions.
It is important to be mindful that "agreements," in this context, do not have to be in writing and can include information sharing and/or informal discussions between employers. If you communicate with peers in the industry on employment practices (through industry associations or forums, for example), consider the extent that wages and terms of employment are shared and take measures to avoid running afoul of these new Competition Act provisions. Update your company policies and provide training for employees and management at all levels on compliance.
There are a few exceptions and defences that are available for employers. The Ancillary Restraints Defence (ARD) is one in which many employers will likely rely upon. Under the ARD, agreements that contravene the Competition Act's wage-fixing and no-poach provisions are legal if they are form part of otherwise legal agreements and are necessary inclusions that give effect to said legal agreements.
The Competition Bureau will not be pursuing employers who entered into offending agreements:
- prior to June 23, 2023 (that remain unenforced); and
- that ended prior to June 23, 2023.
For more information, see the Government of Canada's enforcement guidance on wage-fixing and no poaching agreements.