In June of 2022, the federal government passed Bill C-19, amending the Canada Competition Act. The amendment will make it a criminal offense for unaffiliated employers to agree to fix employees’ wages, or to establish that they (the employers) will not solicit or hire one another’s employees. The law will come into force on June 23rd, 2023, and will carry a hefty penalty of up to 14 years in prison and/or a fine deemed appropriate by the court. The Competition Act applies to all employers, whether they are subject to federal or provincial jurisdiction. The law, once passed, will read as follows:
Conspiracies, agreements or arrangements regarding employment
45(1.1) Every person who is an employer commits an offence who, with another employer who is not affiliated with that person, conspires, agrees or arranges:
(a) To fix, maintain, decrease or control salaries, wages or terms and conditions of employment; or
(b) to not solicit or hire each other’s employees.
(2) Every person who commits an offence under subsection (1) or (1.1) is guilty of an indictable offence and liable on conviction to imprisonment for a term not exceeding 14 years or to a fine in the discretion of the court, or to both.
This law criminalizes what are commonly referred to as ‘price-fixing’ agreements and ‘no-poaching’ agreements. They are defined as follows:
Price-fixing agreements: An agreement or arrangement between employers to fix, maintain, decrease, or control the wages of their employees. Such agreements could also involve efforts to control or coordinate the terms and conditions of work, benefits, and/or workplace policies between two or more employers. This will be prohibited under paragraph 45(1.1)(a) of the Competition Act.1
No-poaching agreements: An agreement or arrangement between employers not to solicit or hire each other’s employees. This will be prohibited under s. 45(1.1)(b) of the Competition Act.2
Naturally, this may make some employers nervous. No one wants to break the law, especially when doing so could result in prison time. However, it is likely that this law will not apply to the current practices of most employers. Here are some important things to consider when determining if this law is going to impact your operations.
1. This law only prohibits agreements between employers who are not affiliated.
The law only prohibits wage fixing and no-poaching agreements between employers who are not affiliated. For the purposes of the Competition Act, one entity is considered to be affiliated with another if one is the subsidiary of the other, if one controls the other, if both are controlled by a common party, or if both are affiliated with a common third party.3 It should be noted that franchisors and franchisees are not considered to be affiliated for the purposes of the law, and employers in franchise relationships cannot rely on the affiliation exception.
It is important to note that this law does not apply to most non-compete and non-solicitation clauses that are commonly found in employment contracts between employer and employees.
The term ‘employer’ also is inclusive of persons and entities that legally speak on behalf of the employer, including an employer’s directors, officers, agents, and certain employees such as human resource professionals. An agreement between the representatives of two different employers can be deemed to be an agreement between employers and can be grounds for a criminal charge under this provision. As such, employers should make sure that their managers and HR employees fully understand the acts that are prohibited by this law.
2. This law only prohibits reciprocal agreements between employers.
To contravene the law, the agreement must involve a promised act or omission between multiple employers – it does not prohibit agreements or policies that only extend to one employer to another, unless it is reciprocated. The law does not capture, for example, an agreement by one employer not to hire the employees of another, or one employer’s agreement not to improve or lower wages. Nor does the law prohibit one employer from refusing to hire employees with a specific career history, or from using information about a competitor’s compensation package to inform their decisions on wage and compensation.
There must be – explicitly or implicitly – a ‘conspiracy’ between multiple employers to restrict employees’ career options, compensation, benefits, or working conditions. The ‘implicit’ part here is tricky, and employers should probably avoid practices that could be misinterpreted, such as sharing and comparing their compensation packages. This is especially true if any of the employers are in a dominant position in the industry. It is possible that such activity, whether accurate or not, could be interpreted as a contravention of this law.
3. The law only comes into force on June 23, 2023.
The law will only be applicable to agreements that are signed after that date, or to conduct that affirms or implements agreements made prior thereto. Employers do not have to rush to amend existing employment agreements by June 23, 2023.
4. The wage-fixing provisions do not apply to collective agreements.
Generally speaking, the Competition Bureau has found that the Competition Act does not apply to agreements formed by way of collective bargaining. As such, employers should not be concerned about any provision that was lawfully negotiated with a trade union.
5. Subsection 45(4) provides for the “ancillary restraint defence.”
The ancillary restraint defence distinguishes between ‘naked’ attempts to fix wages and no poaching agreement on the one hand, and provisions that are part of a broader agreement on the other. If employers have an agreement that is focused on a broader topic, but also involves the coordination of human resource strategies, then the ancillary restraint defence may be available. In order for it to apply the following must be true:
- a broader agreement contains a provision that would otherwise violate s. 45(1.1) of the Competition Act;
- The provision(s) is reasonably necessary to give effect to the broader agreement; and,
- the broader agreement is otherwise compliant with the Competition Act.
Bill C-19 will constitute a major change to the Competition Act, and may have implications for how some employers cooperate and collaborate on human resources strategies. However, it is important to note that it will rarely impact employment agreements between employers and employees. Further, it only applies to conduct and agreements after June 23, 2023. Employers should seek legal counsel if they are concerned about how the law may impact them as of that date.
It is also worth noting that the federal government delayed the date Bill C-19 would come into force so that employers would have time to review their practices and adjust them accordingly. Employers should use this time to review their practices, policies, and agreements (written, verbal or implied) and consider if they, in collaboration with other employers, restrict employees’ career options, compensation, benefits, or working conditions.
Please feel free to reach out to Barteaux Labour & Employment Lawyers Inc. if you have any questions or concerns, or would like us to review any agreements or policies your organization may have in place.
1 Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures, 1st Sess, 44th Parl, 2022 (assented to 23 June, 2022) [Bill C-19], at s. 257(1) 2 Ibid. 3 Competition Act, RSC, 1985, c. C-34 [Competition Act],at s 2(2)