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

Office workers and other pedestrians cross an intersection in downtown Toronto. The Canadian Press/Colin Perkel

Canada has implemented new legislation to make it a criminal offence for two or more employers to engage in wage-fixing and no-poaching agreements regarding employees.

The legislation took effect June 23 with amendments to the Competition Act’s conspiracy provisions. It is now criminally prohibited for employers from different companies to make deals together that will “fix, maintain, decrease or control salaries, wages or terms and conditions of employment.” The same is true for companies to make arrangements “to not solicit or hire each other’s employees.”

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

“Like price-fixing agreements between competitors, wage-fixing and no-poaching agreements undermine competition,” says the Competition Bureau, which administers and enforces the act.

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

The act includes hefty penalties for violating the new provisions, including a jail term of up to 14 years or a fine as determined by a court, or both.

“The new provisions require proof beyond a reasonable doubt and are subject to serious criminal penalties,” said the bureau on its enforcement guidelines page.

It noted that the provisions only apply to agreements between unaffiliated employers. “For example, wage-fixing or no-poaching agreements between two or more corporate entities that are controlled by the same parent company do not violate the provision,” the bureau explained.

Criminal Offence

Before the most recent amendments, the Competition Act only prohibited as criminal offences agreements between competitors to fix product prices, allocate markets, or restrict output, while labour and employment clauses were mentioned under civil provisions.

Those previous civil provisions banned deals that would prevent or reduce competition in the marketplace on threat of up to a $25 million fine.

“So if an agreement between competing purchasers resulted in anti-competitive effects, such as higher prices, then that agreement could be challenged and be prohibited under the civil provisions,” said Adam Goodman, a partner at Dentons’ competition and foreign investment review group.

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

Examples

The Competition Bureau provides a number of examples of how the new law would be applied.

One 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 they would limit annual bonuses for their employees to a certain percentage of the employees’ respective gross salary, this would likely violate the act.

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

In this case, only the client company, as part of a consulting contract, agreed not to hire the consulting company’s employees for a a period of one year following contract completion. This is allowed, since the consulting company did not make the same agreement regarding the client company’s employees.

The bureau says it plans to prioritize its enforcement on arrangements between companies that compete for labour.

The Canadian Press contributed to this report.