Competition Act – Amendments to Non-Poaching and Wage-Fixing Agreements

As of June 23, 2023, significant amendments have been made to the Competition Act of Canada, impacting employers across the country. The updated legislation now prohibits employers from entering into non-poaching agreements and wage-fixing agreements with their competitors.

This blog post aims to provide employers with an overview of these changes, including the implications, exceptions, and alternative approaches to address workforce competition.

Prohibition and Enforcement

Under the amended Competition Act, it is now a criminal offence to engage in agreements with unaffiliated employers that prevent soliciting or hiring each other’s employees. Similarly, agreements to fix, maintain, or decrease employee compensation are also criminalized. It’s important to note that this prohibition extends to agreements made before June 23rd if either party seeks to enforce them post-June 23rd. The Competition Bureau of Canada has published enforcement guidelines to help employers understand the scope of this prohibition.

Exceptions to the Prohibition

While the ban on non-poaching and wage-fixing agreements applies to unaffiliated employers, certain exceptions exist. Companies that are related or operate under the same umbrella can still enter into such agreements. Additionally, agreements made as part of a collective agreement are not subject to this ban. Employers may also be able to establish an Ancillary Restraint Defence (ARD) by demonstrating that the non-poaching or wage-fixing terms were necessary to facilitate a desirable business transaction or achieve operational efficiency. Examples could include asset sales or resolving litigation related to poaching.

Impact on Employers

The amended Competition Act has significant implications for employers, particularly in an economy facing labour shortages and increased demands for competitive compensation packages. The prohibition of non-poaching and wage-fixing agreements means that employers can no longer align themselves through mutually agreed-upon restrictions. Instead, they are now compelled to offer market-based compensation packages to attract and retain talent.

Alternative Approaches

While non-poaching and wage-fixing agreements face restrictions, employers can still utilize non-solicitation agreements (restricting employees from soliciting clients or employees) and non-competition agreements (preventing employees from working for specific competitors) in various jurisdictions across Canada. However, it’s essential to understand that the enforceability of these agreements varies by jurisdiction and requires careful drafting and proper execution. For instance, in Ontario, non-competition agreements are only enforceable under specific conditions.

Moving Forward

Employers facing intense workforce competition now have limited options due to the amendments to the Competition Act. However, depending on the circumstances, exceptions to the prohibition may apply, and alternative agreements like non-solicitation and non-competition agreements can still be utilized. To ensure compliance and explore effective strategies, it is advisable to consult with experienced employment lawyers who can provide tailored guidance based on your specific needs and jurisdiction.

At Minken Employment Lawyers, our dedicated team of employment law specialists stays informed about the latest legal developments to support your business. If you have concerns about workforce competition or need assistance navigating the changes to non-poaching and wage-fixing agreements, reach out to us today to schedule a consultation. Contact us at: 905-477-7011 | Toll-Free: 1-866-477-7011 | contact@minken.com.

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Please note that this article is for informational purposes only and does not constitute legal advice.