We recently wrote about the introduction of a prohibition on employers entering wage-fixing and no-poaching agreements under the Competition Act. This protects workers and creates competition between employers, leading to better wages and employment opportunities. 

The Competition Bureau has now released draft guidelines for enforcing the prohibition. This article examines these new guidelines and what they reveal about the Competition Bureau’s approach to prohibition. 

What does the prohibition cover?

New subsection 45(1.1) of the Competition Act makes it an offence for an employer to conspire, agree or arrange with an unaffiliated employer:

  • to fix, maintain, decrease or control salaries, wages or terms and conditions of employment; or
  • to not solicit or hire each other’s employees.

For more detail on the new offence, please see our previous article.

What is the status of the guidelines?

The new guidelines issued by the Competition Bureau are in draft form and are designed to facilitate public consultation. Interested people can comment on the guidelines until March 17, 2023.

The Competition Bureau investigates possible contraventions of the Competition Act. If it thinks there is evidence of an offence, it can refer the case to the Director of Public Prosecutions (DPP) and recommend criminal charges. The guidelines give a useful indication as to how the Competition Bureau might go about enforcing subsection 45(1.1).

However, it is important to note that the guidelines do not constitute the law. They do not oblige the Competition Bureau or DPP to act in a particular way. The guidelines are also subject to change. They could be revised, for example, following the completion of the public consultation or if court decisions interpret the prohibition differently.

What do the guidelines reveal about the Competition Bureau’s prohibition enforcement approach?

The draft guidelines contain several important clarifications and examples. Some of these are summarized below.

Entry into force of the prohibition

The guidelines remind employers that subsection 45(1.1) comes into force on June 23, 2023. As a result, it is an offence to enter a wage-fixing or no-poaching conspiracy, agreement or arrangement as of that date.

However, the Competition Bureau considers that the prohibition applies to conduct engaged in on or after June 23, 2023, reaffirms or implements older agreements.

Prohibition does not apply to affiliated employers

The conduct only constitutes an offence if an employer conspires, agrees or arranges with another employer who is not affiliated. The draft guidelines explain that the Competition Act defines affiliation with reference to control. Therefore, agreements between corporate entities controlled by the same parent company would not fall foul of the new offence.

The guidelines also remind employers that the conspiracy, agreement or arrangement does not need to be entered into by the corporation or business to contravene the prohibition. “Employer” is defined broadly to include directors, officers, agents or employees. The individuals could be prosecuted, as could the company if the agreement was entered into by employees acting as senior officers.

Mere “conscious parallelism” is permissible

In our previous article, we noted the potentially broad nature of the prohibition and that the existence of a conspiracy, agreement or arrangement could be inferred from circumstantial evidence. This means it is possible that activities like exchanging information for salary benchmarking purposes could potentially raise concerns under subsection 45(1.1).

The draft guidelines offer a little bit of clarity on the Competition Bureau’s likely approach to such practices. They state that merely acting independently with awareness of the likely response of competitors or in response to the conduct of competitors is not considered to be contrary to the prohibition. 

However, the guidelines state that an inference could potentially be drawn if there were:

“parallel conduct coupled with facilitating practices, such as sharing sensitive employment information or taking steps to monitor each other’s employment practices.”

This highlights the importance of employers having a carefully considered policy to minimize the risk that information sharing attracts the attention of the Competition Bureau.

Prohibition on no-poaching agreements only applies if both employers agree not to poach

The prohibition only applies to situations where employers conspire, agree or arrange not to solicit or hire each other’s employees. The draft guidelines state that it is not an offence if only one of the parties agrees not to poach the other’s employees. However, separate arrangements can be considered together to determine whether each party has taken on the obligation not to solicit employees.

Prohibition is directed at “naked” restraints on competition

The draft guidelines say that:

“Subsection 45(1.1) is directed at “naked restraints” on competition, that is, restraints on wages or job mobility that are not implemented in furtherance of a legitimate collaboration, strategic alliance or joint venture.”

As a result, the guidelines envisage using the ancillary restraints defence in section 45(4) of the Competition Act to facilitate certain types of broader transactions where the wage-fixing or no-poaching agreement is directly related to and reasonably necessary for achieving the objective of the transaction. 

The guidelines use the example of a recruitment agency that has agreed with a company to provide workers for a short period. Each also agrees not to hire the other’s employees while the contract is in effect. The agency and company may be able to rely on the defence if it is reasonably necessary for achieving the effect of the broader staffing agreement. The guidelines note that the duration and other terms of the restraint, like the geographic scope, impact on whether it is reasonably necessary.

Contact Haynes Law Firm in Toronto for Guidance on Employment Legislation

The Haynes Law Firm advises both employers and employees on their rights and obligations under employment legislation. Paulette Haynes understands the recent statutory developments and stands ready to help the former prepare policies to comply with legislation and the latter to enforce their legal rights. Please contact the Haynes Law Firm online or call us at 416.593.2731