Changes to Canada’s Competition Act coming into effect this summer: a primer on recent amendments impacting Canadian businesses
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.
Click here to subscribe to Stewart McKelvey Thought Leadership.
Archive
Yellow diamonds in the light And we’re standing side by side As your shadow crosses mine What it takes to come alive It’s the way I’m feeling I just can’t deny But I’ve gotta let…
Read MoreINTRODUCTION On December 6, 2012, The Nova Scotia Department of Environment (NSE) released Draft Ministerial Protocols (the “Draft Protocols”) related to contaminated sites. The release of the Draft Protocols has been eagerly anticipated. The adoption…
Read MoreRecent changes to the Rules of the Supreme Court, 1986, SNL 1986, c 42, Sch D On December 14, 2012, several changes were made to the Rules of the Supreme Court. These changes include: who may act…
Read MoreIN THIS ISSUE: Putting Trust in your Estate Planning, by Paul Coxworthy and Michael McGonnell The Risks, for Insurers in Entering Administration Services Only (ASO) Contracts, by Tyana Caplan Angels in Atlantic Canada, by Allison McCarthy, Gavin Stuttard and Adam Bata…
Read MoreBill 31, An Act Respecting Human Rights, came into force on June 24, 2010 replacing the Human Rights Code (the “Code”). For more information, please download a copy of this client update.
Read MoreIN THIS ISSUE Expanded Fines and Penalties for Environmental Offences: The New Federal Environmental Enforcement Act Spam about to be Canned? Preparing a Business for Sale Business Disputes Corner – Place of Arbitration and Selected…
Read MoreThe Nova Scotia Court of Appeal has unanimously upheld the province’s legislative limits on general damage recovery for “minor injuries”. Today’s decision, authored by Chief Justice Michael MacDonald, completely affirms the January 2009 decision of…
Read MoreThe Canada Revenue Agency (“CRA”) announced helpful administrative positions concerning the new rules under the Fifth Protocol to the Canada-US Income Tax Convention, 1980 which will come into effect on January 1, 2010. The CRA…
Read MoreIN THIS ISSUE Contractor Held Liable for Business Interruption: Heyes v. City of Vancouver, 2009 BCSC 651 When Can a Tendering Authority Walk Away if Bids are Too High? Crown Paving Ltd. v. Newfoundland &…
Read MoreWithholding tax and other issues under the Fifth Protocol The Fifth Protocol to the Canada-US Tax Convention, 1980 introduced significant changes which may affect the use of most unlimited companies and other so-called ULCs. These…
Read More