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On June 23, 2023, new Competition Act amendments will come into effect. Of significance to employers and companies are the amendments under s. 45(1) which now criminally punish wage-fixing and no-poach clauses in contracts between unaffiliated employers. As of the date the amendments come into effect, it will be a criminal offence for unaffiliated employers to enter into agreements to refrain from soliciting or hiring each other’s employees, or to maintain, decrease or control salaries/wages and employment terms and conditions.

The punishment for non-compliance will be imprisonment for up to 14 years and/ or an uncapped fine, at the discretion of a judge. Employers, individuals, directors, officers and employees can all face punishment if found to have been involved in illegal anticompetitive activity captured by s.45. The Ancillary Restraints Defence is available if found to have committed an offence under s. 45. The Ancillary Restraint Defence under s. 45(4) can be used in scenarios where the challenged agreement is ancillary to a broader separate agreement and reasonably necessary to give effect to the broader agreement. However, the broader agreement relied on in the defence cannot contravene s. 45. The onus is on the employer or company to prove this on a balance of probabilities.

No-poach and wage-fixing agreements are often cause for concern in contracts to acquire a business, in franchisee-franchisor agreements or agreements whereby one company contracts out employees to another company to perform services. Where employers contract out employees, they are often concerned that the other company will simply strike a deal with their employees to do the same work at a better rate, and in effect poach their employees.

The amendments to the Competition Act follow in the footsteps of Employment Standards Act (“ESA”) amendments that came into force on October 25, 2021. One of the key ESA amendments, included in the Working for Workers Act, 2021, was the prohibition of non-compete agreements (with the exception of certain executive level employees). The prohibition on non-compete agreements, similar to the prohibition on wage-fixing or no-poach agreements, are designed to ensure employee mobility.

The prohibitions on wage-fixing include “terms and conditions of employment”, but the scope and interpretation of this phrase has not been clarified.

These amendments are not restricted to direct competitors, but rather apply to all businesses who enter into no-poach and wage-fixing agreements.

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For further information, please contact a member of our growing team: Leslie Dizgun, Paul Schwartzman, or Alyssa Jagt.