Parliament recently passed an amendment to the Competition Act (Act) enacting criminal sanctions and private actions for damages for no-poach and wage-fixing agreements between employers. Here are the key facts you need to know:
- It will soon be a criminal offense for employers to enter into agreements regarding wages, salaries, terms and conditions of employment, or the solicitation or hiring of each other's employees.
- Penalties for violating the new provision may include imprisonment for up to 14 years, a fine at the discretion of the court, or both.
- The provision will also be subject to a private right of action on behalf of affected parties, including class actions.
- The Competition Bureau (Bureau) may provide guidance on the application of this amendment in the coming months.
- Businesses will need to ensure that their contracts and compliance programs are up to date before the amendment comes into force in June 2023.
WHAT'S THE SCOPE?
This amendment was primarily intended to capture “horizontal” no-poach and wage-fixing agreements between competitors, but the scope of the new provision is quite broad and potentially applies to:
- any agreements between employers, even where those employers are not themselves competitors;
- not only agreements over wages and salaries, but also agreements over any “terms and conditions of employment” as well as no-poach and non-solicitation agreements.
The new provision will be subject to the existing ancillary restraints defence (ARD) that applies to the criminal conspiracy provisions of the Act. The ARD permits agreements that are reasonably necessary and connected to a broader agreement that is not, itself, anticompetitive. For example, although there remain many questions regarding how the new provision will be interpreted and applied, the ARD might protect contracts with vendors containing non-solicitation provisions intended to facilitate greater collaboration.
These new provisions will come into force in June
The Bureau may provide guidance on this new provision in the coming months, which should greater clarify its scope and application.
WHAT SHOULD MY COMPANY DO?
- Alert your employment, HR and legal departments to the changes
- Consult with legal counsel to ensure your contracts and compliance programs are updated to reflect these new developments
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