Other anti-competitive employment-related agreements between employers
in a nutshell
Canadian government amended federal law competition lawCanada’s Consolidated Antitrust Act criminalizing wage-fixing and no-withdrawal agreements between employers, effective June 23, 2023.
Criminal prohibitions apply to all employers and are not limited to those in competing sectors or industries. Employers who violate the new ban on labor-related collusion risk incurring hefty fines, imprisonment, or both, increasing the risk of private and class action lawsuits.
Employers will take action now to review relevant contracts and policies to ensure they are being followed when these amendments come into force.
- Recommended action
- In detail
Prior to the changes coming into force on June 23, 2023, employers will need to take the following steps towards compliance:
- Check existing contracts identify and rectify any violating terms; Beyond his M&A deal agreements, which often contain no-poach clauses, look to contracts with consultants, agents or brokers, suppliers, and customers, as well as outsourcing and franchise agreements.
- Involve employees responsible for hiring/compensation Identify individuals with particularly externally facing HR roles in discussions to identify business areas and activities that may be at higher risk.
- Update internal policies and compliance programs To reflect amendments – Consider expanding compliance training to employees in HR, Compensation, and Procurement roles who may not have historically attended competitive compliance training.
The Canadian government has adopted provisions criminalizing agreements between employers to address gaps in the existing collusion provisions in competition law. This section of Section 45 of the Act criminalizes agreements between competitors to fix prices, allocate markets or customers, and limit production. In 2020, after the Competition Bureau sought legal advice from the Canadian Department of Justice and the Canadian Public Prosecutor’s Office, existing criminal collusion clauses will no longer apply to buy-side contracts or arrangements (i.e., they apply to the purchase, not the sale, of products or services) (joint purchasing arrangements, etc.). It also includes cooperation on terms of employment. A 2009 amendment to the Criminal Code removed the word “purchase” and ostensibly limited its scope to supply-side contracts. However, it was envisioned at the time that any buy-side agreement or arrangement could be evaluated under the corresponding civil provisions. materially hinder or reduce competition in the marketplace or may do so;
The proposed amendments criminalizing anti-poaching and wage-fixing agreements are part of a larger package of amendments to Canada’s competition law adopted as part of the Budget Execution Act on 23 June 2022 and have been the subject of little debate. It was swiftly passed without The amendment was part of the Government of Canada’s response to calls for legislative reform by Competition Commission members, commentators, and the general public. This new ban brings Canada’s competition laws into line with certain other jurisdictions, notably the United States, which is taking strong steps to limit the use of anti-poaching and wage-fixing agreements.
This amendment and the accompanying changes are part of a broader program of competition law reform. On 17 November 2022, the Federal Minister for Innovation, Science and Industry announced a comprehensive review of competition law. This legislative review aims to examine the Canadian competition law framework. This includes competition law coverage, enforcement methods and corrective actions, and improving or strengthening competition policy in an increasingly digital and data-driven marketplace. As part of the public consultation, the Government of Canada will hold a series of roundtables and written submissions will be available online until 27 February 2023.
This amendment introduced a new provision criminalizing any agreement (implicit or explicit) between employers to modify, maintain, reduce or control wages or conditions of employment (wage fixing agreement). poaching agreement). This prohibition applies to all employers, regardless of whether they are in direct competition with each other. For example, an anti-poaching agreement between a grocery store and a retail clothing store could be banned despite operating in a non-competitive market. In addition, the new provisions cover agreements relating to restrictions on “conditions” of employment that are much broader than merely restricting wages/salaries. As the Competition Bureau has yet to issue guidance on the priority of implementation or the scope of interpretation of the new rules once they come into force, employers are taking a conservative approach and considering conditions including flexible work policies, leave and time off. need to do it. Sick leave, parental leave, benefits.
The criminalization of poaching bans, wage fixing, and other employment-related agreements raises risks for all employers. Employers may face fines, imprisonment, generally up to 14 years, or both, at the court’s discretion. Consistent with amendments to remove the existing cap on criminal penalties applicable to anti-competitive buy-side competing contracts (currently he’s C$25 million), the employment-related ban is likewise uncapped. In particular, collusion provisions, including new employment-specific provisions in competition law, are themselves criminals and therefore do not require proof that these agreements harmed competition or their actual impact on the market; The agreement itself is considered a crime.
In addition to regulatory enforcement risks, private individuals can also bring civil actions (including class actions) against their employers. This could result in substantial damages, based on Canada’s experience with competitive class action lawsuits.
Employers may, in certain circumstances, make use of the “supplemental restriction defense” when a prohibited anti-poaching or wage-fixing contract is required in the context of a broader legal contract. increase. This should be carefully evaluated on a case-by-case basis. We expect the Competition Bureau to release guidance that provides insight into its enforcement priorities and how the “subsidiary restriction defense” applies to employment-related agreements.
Before any amendment becomes effective, employers should review existing contracts to identify and amend violating provisions, conduct risk assessments of existing employment-related activities, and update internal policies and compliance programs to reflect amendments. need to let
1 Global competition law and labor – The battle continues in the talent market.
2 United States: DOJ continues to prioritize the protection of competitive labor markets.
3 President Biden of the United States issued a presidential decree encouraging the reduction of post-retirement non-compete obligations.