The penalties for violating section 45 are severe
by Anita Banicevic and Mark Katz, Davies Ward Phillips & Vineberg LLP
On June 23, 2022, the federal government enacted amendments to the Competition Act which will make it a criminal offence for parties to enter into wage-fixing and no-poaching agreements. These amendments, which will come into force on June 23, 2023, mark a significant expansion of the scope of Canadian competition law to employee-related issues that could lead to enhanced enforcement by the Competition Bureau as well as private class actions for damages. It is therefore imperative that Canadian businesses and their HR professionals be aware of these changes and take pro-active steps to mitigate the associated risks.
The amendments concern section 45 of the Competition Act, which makes it a criminal offence for competitors (or potential competitors) to enter into certain types of anticompetitive conspiracies (such as price-fixing). As a result of the amendments, it is now also a criminal offence for parties (not limited to competitors) to agree to:
- “fix, maintain, decrease or control salaries, wages or terms and conditions of employment” (wage-fixing); and
- “not solicit or hire employees” (no-poaching).
The section 45 offence is per se, meaning that there is no requirement to show that the agreement in question had an anticompetitive effect in a relevant market; it is only necessary to prove that (a) there was an agreement falling within one of the enumerated categories, and (b) the parties intended to enter into that agreement.
The penalties for violating section 45 are severe. Parties convicted of an offence are liable to (a) a fine in the discretion of the court (there is no maximum fine); (b) imprisonment for a term of up to 14 years; or (c) both. Private parties may also bring damage claims for injuries allegedly suffered as a result of the conduct in question.
What the Amendments Mean for You
Given the potential consequences - criminal prosecution and claims for damages – businesses operating in Canada must now incorporate employee-related issues in their competition compliance efforts. Here are immediate steps to consider:
- Audit your HR practices to ascertain whether your companies are involved in wage-fixing or no-poaching arrangements, or in any discussions or exchanges of information on these topics (which could be regarded as evidence of an unlawful agreement). Depending upon the results, it may be advisable to consult with experienced competition law counsel.
- Ensure that internal compliance materials and training encompass a discussion of potential HR risks, and that HR personnel are included in compliance training.
- Always be vigilant in ensuring that internal, ordinary course documents do not create the erroneous impression of anticompetitive intent or conduct, and that they document the pro-competitive nature of business decisions and initiatives.
HR professionals in Canada are faced with a more fraught environment of possible competition law exposure. The one saving grace is that the amendments will not come into force until June 2023. You should use that time to enhance your compliance efforts and mitigate the new risks that the law now presents.