Amendments to the Competition Act that make it a criminal offence for non-affiliated employers to enter into wage-fixing or no-poaching agreements will take effect on June 23, 2023. On May 30, 2023, the Competition Bureau (the “Bureau”) published its finalized guidelines reviewing the Bureau’s planned approach for enforcing the new criminal offence.
Last month, we wrote that wage-fixing and no-poach agreements between employers were set to become an offence in Canada, outlining key changes to the Competition Act. Below, we’ve updated the information relating to the Bureau’s guidance with respect to these amendments.
Changes to the Competition Act
The Budget Implementation Act, 2022, No. 1 (the “BIA”) was tabled on April 7, 2022, proposing changes to several pieces of federal legislation, including the Competition Act. The BIA was passed by Parliament and received royal assent on June 23, 2022.
Section 257 of the BIA introduced a criminal offence into the Competition Act applicable to buy-side agreements between non-affiliated employers, such as wage-fixing and no-poaching agreements. Although most sections came into force upon royal, section 257 of the BIA was set to come into force on June 23, 2023, the first anniversary of royal assent.
Prior to this amendment, the criminal provision of the Competition Act (section 45) did not apply to buy-side agreements and only applied to supply-side agreements between competitors. Soon, under subsection 45(1.1), it will also be a criminal offence for non-affiliated employers to enter certain buy-side agreements, regardless of whether they are competitors.
On January 18, 2023, the Bureau released draft Enforcement guidance on wage-fixing and no poaching agreements (the “Draft Guidelines”) for public feedback. The Draft Guidelines reviewed the Bureau’s interpretation of the new offence and planned approach for enforcing the offence.
On May 30, 2023, the Bureau published its finalized Enforcement Guidelines on wage-fixing and no poaching agreements (the “Guidelines”). The revised Guidelines are similar but include some notable changes from the Draft Guidelines, discussed below.
1. Application to Pre-Existing Agreements
As stated in the Draft Guidelines, there will be no retroactive liability under subsection 45(1.1). However, the provision will apply to conduct that reaffirms or implements agreements pre-existing the amendments after the provision comes into effect on June 23, 2023. Importantly, this means that agreements entered into prior June 23, 2023, could still be caught by the new provision.
In the Guidelines, the Bureau now clarifies its position on the application of the provision to agreements pre-existing the amendments taking effect:
- With respect to pre-existing agreements, the Bureau is unlikely to find a wage-fixing or no-poaching agreement problematic when the parties take no steps to reaffirm or implement the restraint on or after June 23, 2023. Further, at least two parties must reaffirm or implement the restraint for the Bureau to establish the requisite consensus or “meeting of the minds.” Since the Bureau’s focus is on the intent of the parties on or after June 23, 2023, employers may wish to update pre-existing company records and agreements, as they arise in the ordinary course, to ensure they accurately reflect its policies and intentions, and to avoid unnecessary confusion.
The Guidelines are not law but provides some comfort to employers with respect to the Bureau’s planned scope of enforcement. In particular, it is notable that the Bureau clarifies that there must be a meeting of the minds of two parties on or after June 23, 2023, to reaffirm or implement an unlawful restraint in a pre-existing agreement to contravene the provision.
2. Information Sharing
In the Draft Guidelines, the Bureau stated that “[p]arallel conduct coupled with facilitating practices, such as sharing sensitive employment information or taking steps to monitor each other’s employment practices, may be sufficient to prove that an agreement was concluded.” Accordingly, the Bureau advised employers to exercise caution in sharing information with other employers in the course of collaborative activities, such as benchmarking.
Notably, in the finalized version of the Guidelines, the Bureau has changed this language to the following:
- Employers should take care when sharing commercially sensitive information with each other in the course of collaborative activities, including the sharing of employment terms, to ensure that the conduct would not raise concerns.
Although the finalized Guidelines appear to walk back the language on what information exchanges may trigger the new offence, conduct such as benchmarking employment terms or monitoring terms of employment should still be undertaken with caution.
Education and training for staff, including human resources professionals, who may not have previously been trained in competition law issues will be particularly important for ensuring that information sharing is not done in a manner that will trigger the application of the new criminal offence.
Although there continues to be many uncertainties with respect to the impact of the new criminal offence, with the finalized version of the Guidelines in hand, employers should make themselves aware of the upcoming changes and review their agreements, policies and training materials to ensure that their contracts and practices will not be offside this legislation once it takes effect on June 23, 2023.
If you have questions about how the legislative change affects your organization, please do not hesitate to contact a member of our Competition Law team.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.