Some important changes to the law are coming into effect on June 23, 2023 which could significantly alter the ways employers share employment information and interact with other businesses.
Amendments to the Competition Act is making it an offence for employers to enter into wage-fixing and no poaching agreements with other employers. Section 45 (1.1) is designed to maintain competition in labour markets by prohibiting these agreements between unaffiliated employers which fix wages and restrict job mobility:
45 (1.1) Every person who is an employer commits an offence who, with another employer who is not affiliated with that person, conspires, agrees or arranges
- to fix, maintain, decrease or control salaries, wages or terms and conditions of employment; or
- to not solicit or hire each other’s employees.
The Competition Act’s guidelines make it clear that the language of s. 45 (1.1) is quite broad. An “employer” not only captures the corporation or head of the business, but also directors, officers, and even agents or employees such as HR professionals. This means these individuals can be subject to prosecution. A corporation can be subject as well if the person entering into the agreement is acting as a senior officer.
The amendments to the Competition Act guidelines also makes it clear that the scope of an employment relationship may be broader than that in the employment law context. Commentators have suggested that this section could even capture independent contractors, given the frequent miscategorization of these workers and the protective goals of the legislation.
Consistent with contract law principles, the agreement does not need to be in writing. The agreement or understanding can be inferred by conduct.
The Ancillary Restraints Defence (“ARD”) is available to employers accused of entering into one of these agreements. The ARD provides that one of these restrictions is legal if: (1) it is a component of an otherwise legal agreement, and (2) directly related to and reasonably necessary for giving effect to that agreement. For example, the ARD may permit employee-related restrictions in mergers, joint ventures, and strategic alliances.
If found guilty, employers could face imprisonment of up to 14 years or a fine.
This new prohibition could have serious ramifications for employers, their business, and their recruitment practices.
First, sharing sensitive employment information or taking steps to monitor other employers’ practices may be sufficient to prove that an agreement was concluded. Therefore, employers should think twice before sharing employment information, especially with other employers. Similarly, employers and their staff should be careful about seeking out other employers’ employment information.
Second, although the provision prohibits mutual no solicit agreements, the standard one-way non-solicit agreements are not affected. However, as general good practice these agreements should continue to be as least restrictive as possible to achieve the employer’s goals. Similarly, if a restriction is required as part of another larger agreement, the least restrictive means should always be used.
Third, this provision casts a wider net than what is typical in employment law. Employers should ensure their staff are trained on this prohibition as individual employees can fall under the definition of “employer.” These employees could expose themselves to significant liability, and also expose a corporate employer to liability if the employee is acting in a certain capacity.
In conclusion, the new provisions of the Competition Act could have serious ramifications for employers’ business practices. As s. 45 (1.1) is still young, there has been no judicial interpretation on this provision and these ramifications and the exact scope of what constitutes prohibited practice remain unclear. It would be good practice for employers to tread with caution in the short term so that they do not accidentally breach these new prohibitions.
If you have any questions or concerns about the new laws coming into effect, please reach out to Barriston’s employment law team.
Written by Nicolas Guevara-Mann and Josh Valler