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Amendments to the federal Competition Act all employers should be aware of
The Federal Competition Act, RSC 1985, c C-34 is a piece of legislation that, broadly speaking, attempts to maintain and encourage competition in the Canadian economy.
In June of 2022, the Federal Government passed certain amendments to the Act, which will be of concern to employers generally. These amendments will officially come into force on June 23, 2023.
While there are a variety of amendments, the most important amendments for employers to be aware of are those which add a new prohibition on “wage fixing” and “no-poach” agreements between employers.
“Wage fixing” agreements between employers are those which “fix, maintain, decrease or control salaries, wages or terms and conditions of employment”. “No poach” agreements between employers are those where the parties agree “to not solicit or hire each other’s employees.”
The language of the Act is also broad enough not only to capture formal agreements but also informal arrangements, as it states, “every person who is an employer commits an offence who, with another employer who is not affiliated with that person, conspires, agrees or arranges…”.
Notably, affiliated entities are not captured by this section, so subsidiaries of the same parent entity or otherwise related entities are not prohibited from entering these types of agreements.
The Act also more broadly defines who meets the definition of “employer”, which would include not just corporations but also directors, officers, and agents or employees of an entity. An agreement between directors of two separate corporations (as long as they are not affiliated) could potentially violate the wage fixing or no poach provisions of the Act.
The Act makes it a criminal offence to engage in any wage fixing or other activity that would breach the very broad wording of that section.
Competition Bureau Guidelines
The Competition Act is enforced by the Competition Bureau, who recently released guidelines as to how the Bureau will enforce these new provisions of the Act.
The broadest wording in the amendments is the restriction on agreements that control “terms and conditions of employment”. The terms and conditions of employment will not just include salary or wages but also such items as job descriptions, per diems, mileage reimbursements, non-monetary compensation, working hours, location, non compete clauses, or any other directives that may restrict an individual’s job opportunities. The Bureau states in their guidelines that they generally will limit their enforcement to those “terms and conditions” that could affect a person’s decision to enter into or remain in an employment contract. That, of course, is incredibly broad and could include any condition of employment seen as a potential positive by the employee.
As for no-poach agreements, the Bureau states that the amendments prohibit all forms of agreements between employers that limit opportunities for their employees to be hired by each other, including restricting communication of information related to job openings, as well as adopting hiring mechanics designed to prevent employees from being poached or hired by the other employer. However, it is important to note that the prohibition is only limited to those instances where both employers agree not to poach each other’s employees. A unilateral agreement where one employer agrees not to poach the other’s employees, without a reciprocal agreement from the other employer, is not prohibited under the Act.
The Bureau notes that even if a wage fixing or no poach agreement would violate the new terms of the Act, the “ancillary restraints defence” might apply, which means the agreements will not constitute an offence if they are directly related to and reasonably necessary to give effect to a broader, otherwise legal agreement.
Finally, the Bureau also states that any terms in existing agreements in effect prior to June 23, 2023, will not violate the amendments to the Act, as long as they are not actively being enforced.
Going forward, employers should ensure that any agreements they enter into do not contain provisions which might directly impose terms or conditions of employment on their employees, or that contain any terms which might contravene the new amendments to the Act. If there are such terms, seek legal counsel review to ensure that the agreements would fall under the scope of the recognized defences under the Act.
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.