Wage-Fixing and No-Poach Agreements Between Employers to Become a Criminal Offence in Canada

New provisions in the Competition Act

Employers should take care to ensure that their current practices and agreements are compliant with the new provisions of the Competition Act, or face criminal charges.

Amendments to the Canadian Competition Act (the “Act”) received Royal Assent on June 23, 2022, some of which are aimed at protecting workers from anti-competitive conduct of employers. The amendments include a new provision that makes it a criminal offence for employers to conspire, agree, or arrange to fix, maintain, decrease or control wages or other terms and conditions of employment (“wage-fixing agreements”) and to refrain from soliciting or hiring each other’s employees (“no-poach agreements”). The penalty for violating this provision includes: 1) imprisonment for up to fourteen years 2) a fine at the discretion of the court, or 3) both. This provision adds to the existing criminal conspiracy provisions of the Act.

These employment-related provisions come into force June 23, 2023, giving employers time to take proactive efforts to ensure compliance with the new law.

The new provisions appear to come as a result of employer wage-fixing during the COVID-19 pandemic, which at the time, was not prohibited by  competition laws. A June 2021 Report of the House of Commons Standing Committee on Industry, Science and Technology, asked the government “to prohibit cartel-like practices related to the purchase of goods and services, including wage-fixing agreements between competitors.”

Ancillary Restraints Defence and Regulated Conduct Defence

The Act allows for situations where no-poach agreements and wage-fixing agreements may be defensible. Certain agreements will be protected by the ancillary restraints defence, which recognizes that some  business transactions or collaborations require restraints on competition to make them possible. An ancillary restraint is an agreement or term of an agreement that contravenes the Act, but which is directly related to, and reasonably necessary for giving effect to, a broader and lawful agreement.

Practically speaking, this means that a no-poach agreement between unaffiliated employers in the context of the purchase and sale of a business, a joint venture, or a similar commercial context would not likely violate the Act.

In addition to the ancillary restraints defence, the exception for conduct which may be regulated by another federal, provincial or municipal law or legislative regime may apply in some circumstances.

Key Takeaways for Employers

Employers should take proactive compliance efforts to avoid prosecution. Employers should consult their legal advisers to ensure that any current arrangements with other employers comply with the new provisions of the Competition Act. MLT Aikins has a leading labour and employment law team that would be happy to assist.

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.