Canada Prohibits Wage-Fixing, No-Poach Agreements

​The Canadian government will outlaw wage-fixing and no-poaching agreements between employers concerning wages, work conditions and hiring practices starting in June 2023.

François-Philippe Champagne, minister of Innovation, Science and Industry, said when the government reviewed Canadian competition law earlier this year, it homed in on tackling wage-fixing agreements.

"The goal of Canada's Competition Act is to protect Canadian employees," said W. Michael G. Osborne, an attorney with Cozen O'Connor in Toronto.

Canada's Competition Act now includes a provision that will make it a crime for any employer in Canada to enter into a wage-fixing agreement with another employer to fix, maintain, decrease or control salaries, wages, or any terms and conditions of employment, explained Antonio Di Domenico, an attorney with Fasken in Toronto.

Employers that violate this law beginning in June 2023 could face imprisonment for up to 14 years or an uncapped fine in the discretion of the court—or both, Osborne noted. To date, the highest fine under the Competition Act was $40 million Canadian dollars (approximately USD $29.2 million).

"The sky's the limit," he added. "Judges want to make sure the fine is appropriate for the crime."

Similarly, the U.S. Department of Justice Antitrust Division (DOJ) announced in 2016 that it would prosecute no-poach and wage-fixing agreements as crimes. While the U.S. government has ramped up enforcement of antitrust laws the past six years, the DOJ has recently lost a few high-profile court cases.

Hero Pay Stoppage During Pandemic Spurs Action

As the COVID-19 pandemic unfolded in March 2020, three of Canada's largest grocery chains announced that they would give their store employees a hero pay raise, explained William Wu, an attorney with McMillan in Toronto. When the virus started trending downward—for the first time—in June 2020, CEOs from Loblaws, Sobeys and Metro announced that their hero pay programs would end around the same time.

In response, the Canadian government questioned whether the grocery chains may have coordinated with each other to end their pay raise programs, Wu added.

"This change has been a long time coming in Canada, but the pandemic has certainly played an important role in making it happen," said David Feldman, an attorney with Stikeman Elliott LLP in Toronto.

Changing Advice on Labor Issues

Competition law experts say the new rules about wage-fixing and no-poach agreements will change the way they advise employers in Canada on labor issues.

"These amendments caught competition experts by surprise," Wu noted.

Competition laws in Canada have focused on harm to consumers rather than to employees and labor, Di Domenico stated. With the shift in focus, human resource professionals in Canada need to be advised and trained on relevant competition law issues.

"Our advice to employers has always been grounded in the fact that there was no criminal liability and no scope for real penalties under the civil provision when it came to employee matters," Feldman said. "With the coming into force of this new provision next June, it will become critically important for HR departments to be just as careful about actual or perceived coordination with other companies as sales departments are."

HR Takeaways

Once this rule takes effect, Feldman said, it will become risky for HR to discuss or exchange nonpublic information with another company about employee compensation, benefits or any other terms of employment. In addition, he said it will be inadvisable to agree with another company to refuse to solicit or hire that other company's employees, including by expressing to competitors that they should not compete too aggressively for employees.

"The creation of a criminal wage-fixing and no-poach offense needs to prompt a change in the mindset of HR professionals," Feldman said. "Many activities that are completely ordinary and legitimate today will be risky or even illegal next June, including casual fact-finding calls to counterparts at other companies and industry compensation benchmarking exercises."

Experts recommend that businesses operating in Canada and their HR professionals consider the following checklist when it comes to competition law compliance and avoiding risk:

• Review immediately any practices or plans that involve discussions of any aspect of employment terms with any other company.
• Devise a list of do's and don'ts to ensure HR professionals at all levels of the organization understand what actions could break the new rules.
• Engage in appropriate audit measures.
• Develop best practices to avoid criminal and class-action risk.

"It will be important for HR professionals in Canada to plan to work with internal and external legal counsel to adapt to this new legal reality," Feldman said.

Catherine Skrzypinski is a freelance writer based in Vancouver, British Columbia.