Canadian Competition Guidance: Wage-Fixing and No-Poach Agreements
Canada’s Competition Bureau recently published its draft guidance setting out rules relating to the recently-enacted criminal prohibition against employers to fix wages or other terms of employment, including arrangements to not hire or solicit employees. The Bureau’s aim with the draft guidance, which was issued on January 18, 2023, is to provide greater clarity on criminal prohibitions in the national Competition Act which are scheduled to come into force on June 23, 2023. The Bureau is also inviting stakeholder comments on the draft guidance.
The following are key provisions set out in the Bureau’s draft guidance on prohibited practices:
Rules Will Cover New and Existing Agreements: The new criminal prohibitions on wage-fixing between non-affiliated employers and “no-poach” arrangements will apply both to new agreements (meaning those made on or after June 23, 2023) and existing practices, which the Bureau refers to as “conduct that reaffirms or implements” agreements in existence as of that date.
An Express Agreement May Not Be Required: The upcoming criminal prohibitions refers to agreements or arrangements between parties which amount to uncompetitive conduct. The draft guidance makes it clear, however, that there does not need to be an agreement in writing. Instead, if parties share sensitive employment information, then that may lead to an inference of an improper agreement. The result is that the actual conduct of parties, considered broadly, will be a focus instead of a narrow review confined to what has been reduced to writing.
Prohibited “Wage-Fixing” Covers More Than Just Wages: One aspect of the new criminal prohibitions are agreements between unaffiliated employers to fix, maintain, decrease or control salaries, wages or terms and conditions of employment. The shorthand term often used for this concept is “wage-fixing”. The Bureau’s draft guidance makes it clear that any term or condition of employment which may affect a persons decision to enter into or remain in employment will be covered. This could include job descriptions, working hours or work location, or any other factor which employers address in an agreement.
Only Two-Way “No-Poach” Arrangements Will Be Prohibited: The June 23, 2023 Competition Act amendments will prohibit arrangements between unaffiliated employers which include agreeing to not hire or solicit each other’s employees. In other words, the Act will prohibit reciprocal agreements which would prevent employees moving either from or to the agreeing employers, meaning the prohibitions would be two way. The draft guidance confirms that this Act will not extend to prohibit a one-way arrangement where, on an unreciprocated basis, one employer agrees not to poach the employees of another employer. One point to note is that multiple one-way prohibitions which would have the effect of a two-way arrangement would be prohibited.
Reasonable Transaction Exemption: The draft guidance confirms that the Bureau’s view is that reasonable transaction-related clauses will not likely raise concerns. In other words, there will be scope to enter into agreements or arrangements in the context of mergers or other commercial arrangements such as a joint venture, provided that the relevant restrictions do not extend beyond what is reasonable necessary in the circumstances.
Takeaways For Employers
Organizations doing business in Canada will need to pay close attention to any agreements or arrangements which they have in place or are considering when dealing with suppliers, customers or other employers. This will require some level of review of existing and proposed arrangements so as to avoid the criminal prohibitions which take effect on June 23, 2023 relating to wage-fixing and no-poach arrangements. The January 2023 guidelines remain in draft, so will also be important to monitor any changes to the approach which the Bureau may take in the future.