Competition Bureau invites feedback on new guidance regarding wage fixing, no-poaching agreements

By Elizabeth Raymer

Law360 Canada (January 18, 2023, 5:03 PM EST) -- The Competition Bureau is inviting public consultation on its new guidelines to address wage-fixing and no-poaching agreements following recent amendments to the Competition Act.

The new guidelines, released on Jan. 18, follow on an amendment to the Act that came into effect in June, and which criminalized agreements between employers on the wages and recruitment of their respective workers.

Subsection 45(1.1) was announced in June and will come into force in June 2023; it is intended to protect competition in labour markets by making it an offence for unaffiliated employers to agree to fix, maintain, decrease or control wages or other terms of employment, or to not solicit or hire each other’s employees.

The bureau’s new guidelines describe how it will enforce subsection 45(1.1), and supplement its current Competitor Collaboration Guidelines.

“When the amendment comes into force, wage-fixing and no-poaching agreements will become illegal and subject to significant criminal penalties in Canada,” the Competition Bureau said in a news release.

As of June 23, it will be an offence for unaffiliated employers to agree to fix, maintain, decrease or control wages or other terms of employment, or to not solicit or hire each other’s employees, the government noted in its guidelines. “The provision 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.”

When the government passed this new provision in 2022, there was consternation among companies wondering whether “typical market agreements that we enter into on a day-to-day basis; are they going to be caught?” said Jim Dinning, a partner in Davies Ward Phillips & Vineberg LLP who specializes in competition, antitrust and foreign investment.

If, for example, Company A is looking to buy Company B, Dinning said, they might enter into a … confidentiality agreement, which may include a non-solicit agreement. Company A “can kick the tires on Company B, but you can’t hire Company B’s employees away from them.”

Companies were concerned “that those sorts of clauses, which are very common in a commercial context, were suddenly going to be illegal. So, that’s what these guidelines, to an extent, are attempting to address: those common questions around whether these common types of agreements are going to be viewed as offside going forward.”

The guidelines describe what is prohibited; types of prohibited agreements; defences; penalties; and immunity and leniency. They also provide examples and analyses of wage-fixing agreements; no-poaching agreements and employee secondments; no-poaching agreements and recruitment agencies; and no-poaching and franchise agreements.

Concerning no-poaching agreements and employee secondments, the guidelines provide the example of Company A, a consulting company, embedding “its employees in its clients’ businesses for a set period of time. As part of a consulting contract, Company B agrees to not hire Company A’s embedded employees for a period of one year following completion of the contract. Company A does not make the same agreement regarding Company B’s employees.”

In its analysis, the government notes that “[t]he no-poaching agreement was entered into by two employers to prevent Company A’s employees from being hired away by Company B. Since the restraint contained in the agreement only applies to Company A’s employees, it is a ‘one-way’ agreement that does not apply to ‘each other’s’ employees, and, therefore, does not violate paragraph 45(1.1)(b).”

In November the bureau announced public consultations on a second round of amendments to the Competition Act.

Reforming competition law “clearly seems to have the government’s attention,” Dinning said. “Certainly I don’t think we’ve heard the last of this, and there will be, I think, some further debate over the next year over potential further amendments to the Act.”

The public is invited to provide feedback on the new guidelines until March 3, either online or by letter, to: 

Cartels Directorate
Competition Bureau
50 Victoria St.
Gatineau, Que.
K1A 0C9

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