Canada: Changes To The Competition Act: What Employers Need To Know

On June 23, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022, and other measures (the "BIA") received Royal Assent. The BIA was the subject of Bill C-19, which was introduced on April 7, 2022, and contains a series of amendments to the Competition Act (the "Act"). While those amendments are significant, they are just a first step in modernizing Canada's competition regime as announced by the Canadian government in the winter of 2022.¹

This reform will have consequences and raise questions for all employers, whether they fall under federal or provincial jurisdiction. In particular, amendments to the part respecting offences in relation to competition will make no-poaching and wage-fixing agreements between non-affiliated employers offences. These amendments will come into force on June 23, 2023. This article provides an analysis of the aspects of the reform that are likely to affect employers.

1. Background

The reform of the Act, which is just beginning with the coming into force of the BIA, is taking place in a context where there are many reasons to review Canada's competition regime and ensure the country's competitive intensity, starting with rising inflation. In this regard, the Commissioner of Competition (the "Commissioner") pointed out in May of this year how healthy competition and competitive intensity in a market can reduce inflationary pressures.²

More specifically, BIA's labour-related changes are intended, among other things, to address situations like the wage premiums that were offered during the pandemic by certain employers, who withdrew them virtually simultaneously in the summer of 2020.

This situation had prompted calls for reform and was ultimately the subject of an investigation by the Standing Committee on Industry, Science and Technology ("INDU"). At the end of its investigation, INDU had recommended that the Canadian government introduce legislation to amend the Act to prohibit "cartel-type practices related to the purchase of goods and services, including wage-fixing agreements between competitors."³ In consultations held in the winter of 2022 on a possible reform of the Act, the Competition Bureau (the "Bureau") echoed this sentiment, pointing out that the Act did not protect workers from agreements between employers to fix wages or limit labour mobility.⁴

Finally, recent years have seen a gap emerge at the international level between Canadian competition legislation and the laws of other jurisdictions. In this regard, the Bureau noted in the winter of 2022 that other jurisdictions (notably Ireland, Italy and the United States) had determined that agreements between employers to fix wages or limit labour mobility were particularly detrimental to competition and had decided to expand the scope of the criminal section of their antitrust laws.⁵

2. Certain agreements between employers to be offences, penalties to be harsher

As mentioned earlier, the BIA amends the Act to make no-poaching and wage-fixing agreements between non-affiliated employers offences. It is important to note that this amendment will not come into force until June 23, 2023. As of that date, non-affiliated employers who enter into such agreements will incur criminal liability: this will be a criminal offence under the Offences in Relation to Competition portion of the Act.

The penalties provided for in that part of the Act are already severe: imprisonment for a term not exceeding 14 years and/or a fine not exceeding CA$25 million. Nevertheless, the amendments to the Act will allow for even heavier penalties, since the CA$25 million cap will be removed.

However, the reform has left the defence provided under section 45(4) of the Act (the ancillary restraint defence) intact. This means that employers will not incur criminal liability if the no-poaching or wage-fixing agreement is (i) ancillary to a broader and otherwise lawful agreement and is (ii) reasonably necessary for the performance of that agreement.⁶ The regulated conduct defence provided in section 45(7) of the Act has also been retained and will apply to no-poaching and wage-fixing agreements. That defence allows the parties to avoid liability where the conduct is regulated by federal or provincial law.⁷

It must also be noted that under section 36 of the Act, which was not amended by the BIA, any person who suffers loss or damage as a result of a no-poaching or wage-fixing agreement between non-affiliated employers may sue the employers for damages. This civil remedy may be used by employees who believe they have suffered loss or damage as a result of such agreements.

3. Legal considerations and practices

This reform brings with it a number of questions, while raising both legal and practical issues.

First of all, the term "employer" is not defined. The BIA also does not define precisely which agreements between employers will be offences. The amendments made by the BIA provide that the agreements in issue are those designed to "fix, maintain, decrease or control salaries, wages or terms and conditions of employment" as well as agreements "to not solicit or hire each other's employees." Without clarification, it will be difficult to determine with certainty which agreements will be grounds for prosecution.

The reform is also likely to generate interpretive debate because of section 4 of the Act, which provides that nothing in the Act applies in respect of agreements between two or more employers in the same trade or industry pertaining to collective bargaining with their employees in respect of salary or wages and terms or conditions of employment. At first glance, that provision is likely to conflict with the new provisions of the Act that make wage-fixing agreements between employers an offence. It will be interesting to see whether these agreements will be treated as offences in a unionized context.

As a final point, the reform could trigger a jurisdictional debate. While the federal government has jurisdiction over criminal law (Constitution Act, 1867, s. 91(27)) and the regulation of trade (Constitution Act, 1867, s. 91(2)), labour law has long been considered to fall primarily under provincial jurisdiction, based on the interpretation given to section 92(13) of the Constitution Act, 1867. While the pith and substance of the Act does seem, at first blush, to fall under the federal power in relation to criminal law or to the regulation of trade and commerce, it will be interesting to see whether any constitutional challenges are brought and, if so, how they are decided.

Nevertheless, to ensure that they are in compliance with the Competition Act as amended, it is imperative that employers contact their legal counsel to get an informed opinion on the subject if they are or expect to be participating in any sectoral discussions that may affect their employees or the employees' mobility.

Footnotes

1. Innovation, Science and Economic Development Canada, Minister Champagne maintains the Competition Act's merger notification threshold to support a dynamic, fair and resilient economy, News Release, Ottawa, February 7, 2022, online

2. Competition Bureau Canada, Building a More Competitive Canada, 2022, online

3. Standing Committee on Industry, Science and Technology, House of Commons of Canada, Report 6 – Wage Fixing in Canada: And Fairness in the Grocery Sector, June 16, 2021, online

4. Competition Bureau Canada, Examining the Canadian Competition Act in the Digital Era, Brief submitted by the Competition Bureau, February 8, 2022, online

5. Id.

6. Competition Bureau Canada, Competitor Collaboration Guidelines, online

7. Competition Bureau Canada, "Regulated" Conduct, online

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.