Five things to know about Canada’s new wage-fixing and no-poaching prohibitions

TORONTO –

New guidelines prohibiting wage-fixing and no-poaching agreements kick in Friday in an effort to crack down on firms undermining competitors at workers’ expense.

Here is what employers and workers must know in regards to the new guidelines:

What is the brand new regulation?

As of June 23, it’s a felony offence for 2 or extra employers to kind offers that repair, keep, lower or management wages. The similar goes for agreements that stop firms from hiring or soliciting one another’s workers.

It comes after the federal authorities made amendments to the Competition Act’s conspiracy provision in June 2022 as a part of its Budget Implementation Act.

“Like price-fixing agreements between competitors, wage-fixing and no-poaching agreements undermine competition,” states the Competition Bureau, which is chargeable for the administration and enforcement of the Competition Act.

“Maintaining and encouraging competition among employers results in higher wages and salaries, as well as better benefits and employment opportunities for employees.”

The penalty for violating the wage-fixing and no-poaching provisions contains imprisonment for as much as 14 years, and/or a high-quality to be set on the discretion of the courtroom.

What’s completely different from earlier than?

Section 45 of the Competition Act has till now criminally prohibited agreements between opponents to repair costs, allocate markets or limit output.

But that did not apply to firms’ practices when compensating for labour. Instead, agreements between competing purchasers had been seen below civil provisions contained in Section 90 of the act, which prohibits offers prone to considerably stop or reduce competitors.

“So if an agreement between competing purchasers resulted in anti-competitive effects, such as higher prices, then that agreement could be challenged and be prohibited under the civil provisions,” stated Adam Goodman, a accomplice at Dentons’ competitors and overseas funding overview group.

“What the new law does is make it a criminal offence for a subset of buyer-side conduct segments.”

Under the earlier provision, fines had been capped at $25 million.

“The wage-fixing and no-poaching amendments coming into force is an important step in the ongoing modernization of Canada’s competition law,” competitors commissioner Matthew Boswell stated in a press launch.

Who do the brand new guidelines apply to?

The modification applies solely to pacts between unaffiliated employers. That means wage-fixing or no-poaching agreements between two or extra company entities managed by the identical dad or mum firm don’t violate the provisions.

While the foundations cowl wage-fixing and no-poaching agreements between employers no matter whether or not they compete within the provide of a product, the Competition Bureau stated it expects to prioritize its enforcement on preparations between firms competing for labour.

The new regulation additionally solely targets no-poaching provisions which are mutual in nature. If just one firm agrees to not rent one other’s workers, the Competition Bureau says that is not caught by the laws.

Are there different notable exceptions?

The Competition Bureau says the regulation is directed at “naked restraints” on competitors, which embrace restrictions on wages or job mobility that aren’t carried out to additional a professional collaboration, strategic alliance or three way partnership.

It stated it intends to focus on restraints that “are clearly broader than necessary in terms of duration or affected employees, or where the business agreement or arrangement is a sham.”

The guidelines don’t cowl “ancillary restraints” on competitors meant so as to add effectivity to “certain desirable business transactions or collaborations.” The ancillary restraint defence is obtainable to employers when it’s seemingly the restraint flows from a broader or separate settlement that features the identical events and the association within reason crucial to realize an overarching goal.

If the events may have achieved an equal or comparable association by way of “significantly less restrictive means that were reasonably available,” then the bureau stated it will conclude the restraint was not crucial.

The bureau stated it is going to additionally typically not assess wage-fixing or no-poaching clauses which are ancillary to merger transactions below the brand new felony provisions.

“This is really reserved for naked restraints, where the parties are essentially trying to game the system or cheat in terms of no-poaching, wage-fixing, to the detriment of employees,” stated Goodman.

What prompted this variation?

Goodman stated there’s been heightened consideration towards the problems of price-fixing and no-poaching offers each in Canada and internationally over the previous decade.

In the U.S., he stated momentum began in 2010 when the Department of Justice challenged a no-poaching association between main tech corporations on a civil foundation. Then in 2016, the division, together with the Federal Trade Commission, launched a steering indicating they might problem such agreements on a felony foundation, which Goodman famous has had “limited success.”

The difficulty ramped up in Canada through the pandemic when grocery giants Loblaws, Sobeys and Metro ended a bonus program for hourly staff generally known as “hero pay” on the identical day in June 2020, prompting questions on attainable co-ordination.

While the businesses instructed a House of Commons committee later that 12 months that they’d acted independently, Loblaw’s then-president Sarah Davis acknowledged she had despatched a “courtesy email” in regards to the transfer to opponents upfront.

In late 2020, Canada’s Competition Bureau launched a steering that clarified it could not problem wage-fixing and no-poach agreements on a felony foundation because of the wording of current laws.

“It was always an option for the Competition Bureau to challenge no-poach, or wage-fixing conduct if they thought it resulted in anti-competitive effects and they never brought a case,” stated Goodman.

“It’s not as though there was an issue with the tools having been proven to be inadequate for the job. The tools were never used.”

This report by The Canadian Press was first revealed June 23, 2023.