Wage Fixing Act Takes Effect in Canada: What Does It Mean?

Canada has implemented new legislation to make it a criminal offense for two or more employers to agree on wages and non-poaching agreements.

The legislation came into force on June 23 amendments to the conspiracy provisions of the Competition Act. It is now criminally prohibited for employers of various companies to make deals that will “fix, retain, reduce or control salaries, wages or terms of employment”. The same goes for companies to make agreements “not to recruit or employ each other’s employees”.

The revision of the Competition Act was part of this Account C-19 under the Budget Implementation Act, 2022, an omnibus federal budget bill that changed dozens of other pieces of legislation.

“Like price-fixing between competitors, wage-fixing and non-poaching agreements undermine competition,” according to to the Competition Bureau, which manages and enforces the law.

“Maintaining and encouraging competition among employers results in higher wages and salaries, as well as better benefits and employment opportunities for employees,” the agency added.

The law contains hefty penalties for violating the new provisions, including imprisonment for up to 14 years or a fine as determined by a court, or both.

“The new provisions require evidence beyond a reasonable doubt and are subject to severe criminal penalties,” said the agency on the enforcement guidelines page.

It noted that the provisions only apply to contracts between non-affiliated employers. “For example, wage or non-poaching agreements between two or more business entities controlled by the same parent company do not violate the provision,” the agency noted.

Criminal act

For the most recent amendmentsThe Competition Act only prohibited agreements between competitors to fix product prices, allocate markets or limit production as criminal offenses while labor and labor clauses were listed under civil provisions.

Those earlier civil law provisions barred deals that would prevent or reduce competition in the marketplace, subject to a fine of up to $25 million.

“So if an agreement between competing buyers results in anti-competitive effects, such as higher prices, then that agreement can be challenged and banned under the civil provisions,” said Adam Goodman, a partner in Dentons’ competition and foreign investment assessment group. .

“What the new law does is make it a criminal offense for a subset of buyer-side behavioral segments.”

Examples

The Competition Bureau makes a number of them available examples how the new law would be applied.

An example is that of an employer who owns a private medical laboratory and another employer who separately owns a chemical testing laboratory.

If both business owners agreed to limit annual bonuses for their employees to a certain percentage of the employees’ respective gross salary, it would likely be against the law.

Another example, that of a consulting firm and its client company, shows how the law only applies if both companies agree on no-poaching.

In this case, only the client company agreed, as part of a consulting contract, not to employ the consulting firm’s employees for a period of one year after completion of the contract. This is allowed, since the consulting firm has not made the same agreement with regard to the employees of the client company.

The agency says it plans to prioritize enforcement of agreements between companies competing for labor.

The Canadian Press contributed to this report.