Author: Caroline Jodoin, Partner, Norton Rose Fulbright Canada LLP
In June 2022, the federal legislator made significant changes to the Competition Act (the "Act") that will significantly impact employers in both provincial and federal jurisdictions. In particular, certain amendments, which will come into force on June 23, 2023, prohibit agreements between employers to:
- fix, maintain, decrease or control wages, salaries, or any terms and conditions of employment; or
- not solicit or hire employees of another employer (prohibition of "no-poaching agreements").
As of June 23, 2023, employers can no longer enter into no-poaching agreements or continue to apply those previously entered into, on pain of civil and criminal liability.
A "no-poaching agreement" is any agreement entered into between two or more employers whereby they agree not to hire employees of the other employer(s) who are party to the agreement. This type of clause is therefore distinct from non-competition clauses in that the employee covered by a no-poaching agreement is not a party to the agreement and has not necessarily been informed of its existence. The prohibition includes restricting the communication of information related to job openings and any practice aimed at devaluing the application file of a person who is employed by an employer with whom an agreement is entered into[1].
This prohibition is more than just wishful thinking; it carries with it imprisonment for up to 14 years, fines with no maximum penalty, and a statutory cause of action in favour of an injured third party.
However, the prohibition contains certain exceptions, including: (1) agreements between affiliated employers, (2) one-way agreements, and (3) a restraint ancillary to a broader or separate agreement.
To be prepared, employers should already assess their risks and apply the following recommendations:
- Identify problematic no-poaching agreements and determine whether they qualify for an exception under the Act;
- Verify that the no-poaching agreement is limited to what is reasonably necessary to achieve the purpose of the broader agreement and amend it if it is not;
- Train employees who are required to enter into such agreements as part of their duties and equip them to comply with the Act in the future. It is also recommended that employers inform employees that their liability is at risk in the event of default. Indeed, "Employers" under the Act include directors, officers and employees or agents, such as human resources professionals.
To review the guidelines recently made available by the Competition Bureau Canada, please visit: Enforcement guidance on wage-fixing and no poaching agreements.
Employers are also invited to submit comments on the guidelines by March 17, 2023, by completing the following form: Feedback Form - Enforcement guidance on wage-fixing and no poaching agreements.
For more information on this topic, please contact Norton Rose Fulbright.
[1] Enforcement guidance on wage-fixing and no-poaching agreements, section 2.1.