On June 23, 2022, Bill C-19 received Royal Assent and by its enaction amended the Competition Act (the “Act”). In short, the amendments make it an offence for an employer to conspire, agree or arrange with another unaffiliated employer:

(a) to fix, maintain, decrease or control salaries, wages or terms and conditions of employment; or

(b) to not solicit or hire each other’s employees.

The legislation applies to all business, whether provincially or federally regulated, and will come into force on June 23, 2023.

Why Criminalize?

The purpose of the amendments are to encourage competition in the labour market and to prohibit anti-competitive practices. Employers are in positions of power as they can make decisions that significantly impact the economic security of their employees.  They control the conditions of work, determine compensation levels, and decide who they want to hire.  

While an employer and employee generally do not have equal bargaining power, an employee’s freedom of choice between prospective employers is an important economic counterbalance.   In a competitive labour market, particularly when there are labour shortages, employers need to offer higher salaries, invest in their employees, and offer favourable contract terms, in order to attract and retain talent.   

No-poaching or wage-fixing agreements, however, tilt the balance further in favour of employers, with the overall effect of stifling worker choice and depressing wages below the competitive “equilibrium”.    This is considered anti-competitive behaviour, and the Federal government has now legislated against it, with hefty penalties. 

Consequences for Infringing Employers

If convicted, an offender can be imprisoned up to 14 years and/or be subjected to significant fines. There are defences to these offences under the Act, but they are limited and will still require the employers to show that the conduct did not contravene the prohibitions.

Note that employers do not have to be caught red-handed engaging prohibited behaviour.  The existence of a conspiracy or agreement can be inferred from circumstantial evidence. However, the Crown must still prove the existence of such a conspiracy or agreement beyond a reasoned doubt.  

It is likely that employers who have been found guilty of these offences will also face civil liability, including constructive dismissal and bad faith claims.  

Takeaway

Employers should review their existing hiring and wage practices to ensure that they are compliant by June 23, 2023.  

Employees who believe that their employer/industry is engaging in these practices can report the conduct to the Competition Bureau and can also consider commencing litigation.  

If you believe you are facing difficulties with your employment due to dubious wage, recruitment,  or other illegal/bad faith practices, email us at info@jpakemploymentlawyers.com or contact us here to obtain legal advice on your rights.