By Deanne MacLeod, K.C., Burtley G. Francis and David F. Slipp

In June 2022, Canada’s federal government enacted a number of changes to the Competition Act (the “Act”) as the first step in a comprehensive review of the country’s competition regime. The Competition Bureau Canada (the “Bureau”) has released a short guide to all of the amendments which summarizes the most important changes.

Many of the amendments to the Act took effect immediately upon being enacted last year, with the remaining changes, which are arguably the most interesting (and potentially most impactful), coming into effect on June 23, 2023. As described below, the Wage-Fixing Provision and the No-Poach Provision may require businesses with employees to modify certain behaviours and standard form agreements.

Beginning on June 23, 2023, it will be unlawful under the Act for any two unaffiliated employers to agree:

(i) to fix, maintain, decrease or control salaries, wages or terms and conditions of employment (the “Wage-Fixing Provision”); or

(ii) to not solicit or hire each other’s employees (the “No-Poach Provision”).

Contravening either of these new rules will be considered an indictable offence punishable by imprisonment for a term of up to 14 years, a fine in an amount in the discretion of the court, or both.

As enacted, the Wage-Fixing Provision and the No-Poach Provision each have the potential to have huge impacts on the day-to-day operations of Canadian businesses, but thankfully, the Bureau has provided some comfort through its enforcement guidance (the “Guidance”).

The Wage-Fixing Provision

The phrase “terms and conditions of employment” is tremendously broad and not defined by the Act. The Guidance suggests that responsibilities, benefits and policies, including job descriptions, allowances, per diems, mileage reimbursements, non-monetary compensation, working hours, location and non-compete clauses, and any other directives that may restrict job opportunities will all be considered “terms and conditions of employment”. This requires an increased level of care from employers, because all of this information must now be treated as competitively sensitive. Caution will need to be used when benchmarking policies and employment terms in the market so as not to inadvertently trip over the Wage-Fixing Provision.

The No-Poach Provision

No-poach (commonly referred to as “non-solicit”) clauses are common in commercial contracts, including non-disclosure agreements, supply agreements, and agreements of purchase and sale. Thankfully, the Guidance indicates that the Bureau’s primary concern will be on “bare” no-poach agreements (i.e. a mutual agreement not to solicit the other party’s employees with the sole intent of limiting their job mobility). The Guidance confirms that the Bureau will not be concerned by one-sided agreements where only one of the parties agrees not to poach employees, or by no-poach provisions that can be justified by the “ancillary restraints defence”.

The ancillary restraints defence is found in subsection 45(4) of the Act and protects restrictions contained in contracts that are ancillary to the main purpose of the agreement but required to make the arrangement efficient or possible. The ancillary restraint in question must (i) flow from or be related to the broader business objective between the parties; (ii) be directly related to, or reasonably necessary for achieving the broader business objective; and (iii) the broader business objective, when considered without the ancillary restraint, cannot violate the criminal conspiracy provisions of the Act.

Key Takeaways:

• Starting in June 2023, it will be unlawful for unaffiliated employers to agree with each other to fix, maintain, decrease or control salaries, wages or terms and conditions of employment of their employees.
• Employers should begin treating employment terms and operational policies as competitively sensitive information.
• Starting in June 2023, it will be unlawful for unaffiliated employers to agree not to solicit or hire each other’s employees.
• The Bureau will be primarily targeting “bare” agreements not to solicit.
• The ancillary restraints defence will be available to save breaches of the Wage-Fixing Provision and No-Poach Provision in limited circumstances, such as when an agreement is ancillary to a broader, legal arrangement between the parties.

This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Competition Law group.

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