Clarity needed on wage-fixing and no-poaching agreements

The Competition Law and Foreign Investment Review Section offers a comprehensive list of suggestions to improve the draft enforcement guidance on wage-fixing and no poaching agreements published by the Competition Bureau. The most salient ones are summarized below.

First, the guidelines should offer a clearer definition of employer and employee and include a framework to clarify the parameters of who would be considered an “employee” for purposes of subsection 45(1.1.) of the Competition Act having regard to federal, provincial and territorial law, guidance and standards, as well as applicable case law. The letter also suggests “giving further clarity on who can criminally bind a company and what safeguards a company can put in place to guard against an employee’s conduct that deviates from company policies.”

The guidance should also clarify what arrangements common to mergers, joint ventures or strategic alliances will generally be exempt from review, in particular cases involving professional service companies, consultancies, subcontractors and recruitment agencies. “The Bureau should state that, given the nature of these agreements, they will not ordinarily be scrutinized under section 45, as it has done in the Competitor Collaboration Guidelines (CCGs) with respect to dual distribution.”

As well, the Section believes that the Bureau should not second-guess the scope of restraints for bona fide agreements. “Considering whether the duration, geographic scope and/or subject matter of a restraint are reasonable should only be relevant to an assessment of whether the restriction is, in effect, the main objective of the agreement between the parties,” the letter says. Whether restraints go too far and have the potential to harm competition should be part of a section 90.1 analysis before parties are subject to criminal liability.

Agreements between a franchisor and a franchisee, absent exceptional circumstances, should similarly be subject to consideration on a civil basis only. As well, the draft guidance ought to make it clear that, absent a sham, “franchisors will not be exposed to criminal prosecution if they impose standards customary in the franchise model that their franchisees must adhere to, and that may dictate conditions of employment for franchisees’ employees.”

Other issues

The Section would like to see more detail on the difference between non-solicit and no-hire clauses in the context of transactions and strategic alliances. “Clearer guidance would help businesses better understand when these clauses are appropriate, and when they could be considered anti-competitive, thereby avoiding uncertainty and potentially chilling legitimate and often procompetitive business practices.”

The guidance should also make it clear that the scope of section 45(1.1) and prohibition on wage-fixing do not apply to unionized employees and their employers engaged in collective bargaining.

Finally, the CBA Section suggests the Competition Bureau address several hypothetical situations, including information sharing in the context of prospective employees demanding transparency from employers on compensation and benefits before they are offered a job. For instance, whether employers monitoring their competitor’s job offers would contravene section 45(1.1) of the Competition Act.