Table of Contents
DISCLAIMER: The June 2022 amendments to the Competition Act will come into effect on June 23, 2023. The Bureau will issue new guidelines to address wage-fixing and no-poaching agreements. The information on this page will be updated to reflect the final text of the new guidelines.
On this page:
- The basics
- Penalties
- Reasons why compliance is good for your business
- Considerations that the Bureau gives to a compliance program
- Key takeaways
- Case study
The basics
A wage-fixing agreement refers to an agreement between employers to fix, maintain, decrease or control wages or other terms of employment.
A no-poaching agreement refers to an agreement between employers to restrict job mobility by refraining from hiring or trying to hire one another’s employees.
At the Competition Bureau, we can investigate such agreements or arrangements to see if any competition laws were broken. These provisions apply to unaffiliated employers and will apply even if the employers are not competitors in terms of supplying products.
Learn more about these kinds of agreements by reading our guidance on wage-fixing and no-poaching agreements.
Penalties
Wage-fixing and no-poaching agreements are criminal. If a business or individual breaks the law, it could face any of the following penalties, or a combination of them:
- fines
- criminal record
- jail time
Reasons why compliance is good for your business
Most businesses in Canada want to do the right thing and operate within the law. Companies with strong compliance programs are in the best position to do so.
A credible and effective compliance program minimizes the chances of risky behaviour or potentially illegal activity and its consequences.
It can help your organization:
- operate within the law
- keep marketing activities compliant
- understand the risks from industry events and interactions with third parties, such as partners, competitors, or trade associations
- reduce the risk of costly investigations and lawsuits that interfere with your operations
- avoid penalties for your business and jail time for your people
- avoid the consequences of being associated with criminal conduct and protect your reputation
- minimize your business’ exposure to class action lawsuits
- remain eligible to participate in federal public procurement
A credible and effective compliance program strengthens your business and your reputation.
It might help:
- your organization recruit and retain good talent
- your business compete fairly and with confidence
- your people spot when others in the market are not playing by the rules
- your organization meet its environmental, social and governance goals
A small reminder on what makes a compliance program credible and effective
Your compliance program needs to be credible and effective to truly help you.
To be credible, your program must at a minimum show your business’ genuine commitment to obeying the law and competing fairly.
To be effective, your program must inform all your people, and those acting for your organization, that compliance is important. It must inform them of their legal duties and your internal compliance measures. It should also give you the tools to prevent and detect misconduct.
Your program should be reasonably designed, implemented and enforced in the circumstances. This means that it addresses your organization’s risks within your resources and in light of your business activities.
If you’re a small business...
Compliance is important for all businesses, no matter their size, risk profile, industry or location of operation.
Credible and effective compliance programs don’t have to be costly or complicated. They’re not only for large organizations. If your business is small or medium-sized, you need to make sure that management is committed to doing the right thing. Even simple steps can ensure that your compliance program runs effectively.
There are many benefits to having a credible and effective compliance program. Here are just a few examples:
- You stand a better chance of doing business with larger companies. They generally have compliance programs in place. They’ll probably be more comfortable working with you if you do too. Some might even require their suppliers or partners to have a compliance program.
- If you want to sell your business, you’ll find it easier to attract potential buyers. Acquirers will look into your organization’s compliance history. A compliance program demonstrates that you take compliance seriously.
Consideration that the Bureau gives to a compliance program
In criminal matters, we can investigate whether an offence was committed. If we find evidence of an offence, we may make a recommendation to the Public Prosecution Service of Canada (PPSC). The PPSC has discretion over whether or not to prosecute the case.
A credible and effective compliance program could help you uncover a possible crime at an early stage and facilitate an application under our Immunity and Leniency Programs. The treatment of all immunity or leniency applications under these programs depends on the relevant facts of the case.
Immunity applications
- Only the first individual or business to report misconduct can be eligible for immunity under our Immunity Program
- A business with a compliance program might uncover misconduct sooner and could be more likely to qualify for immunity from prosecution
Leniency applications: Mitigating factors
- Even when immunity is not available, a compliance program may result in favourable treatment when it comes to sentencing
- If you are a leniency applicant and we are satisfied that you had a credible and effective compliance program in place when the misconduct occurred, we will include it in our recommendation to the PPSC as a mitigating factor to support lenient treatment in sentencing
- We might also recommend that the PPSC require an applicant to build a credible and effective compliance program based on the Bureau’s guidance as part of a plea agreement
Leniency applications: Aggravating circumstances
- Lying about a compliance program or using it to promote misconduct, or to cover it up, will weaken an applicant’s case
- If, during our investigation, we see signs that your program is not credible or effective, we will be skeptical about your commitment to compliance. For example, if senior management attempts to implement a compliance program while they also intend to break the law, we will not consider the program to be either credible or effective
- Despite individual managers’ involvement in a violation, we might still give consideration to a business’ program if it shows all of the following:
- the business applied the principles in the Bureau’s guidance to prevent misconduct
- the manager(s) in question acted alone
- the perpetrators hid the conduct from others in the company
- If an individual intentionally broke the law despite the existence of a compliance program, we might consider this as an aggravating factor in our recommendation to the PPSC in relation to that individual
Compliance program review process for leniency applicants
We will consider information and evidence that we see throughout our investigation that speaks to the credibility and effectiveness of your compliance measures. When a leniency applicant asks us to consider its compliance program, our Compliance Unit reviews it to determine if the program applies the principles set out in this guidance.
The burden is on the applicant to prove that its program meets the principles of compliance covered in Build a credible and effective compliance program for your business. The Compliance Unit will need timely access to all appropriate corporate records and staff. This access is voluntary and the leniency applicant may decide whether or not to provide it. If the Compliance Unit lacks information, it might not be able to make a positive recommendation.
The Compliance Unit might also consider relevant information gathered by Bureau staff during their investigation.
Compliance program review process for leniency applicants (for the sections on conspiracies and wage fixing & no poaching agreements)
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Compliance program review process for leniency applicants
The image explains the process of review of compliance programs for leniency applicants.
First, the Compliance Unit of the Bureau reviews the compliance program to determine if the program is credible and effective. After reviewing the compliance program, the Compliance Unit will make a recommendation to the Deputy Commissioner of Competition (Cartels Directorate).
The Deputy Commissioner of Competition (Cartels Directorate) of the Bureau, will review the recommendation of the Compliance Unit and further make leniency recommendations to PPSC.
The PPSC has the discretion to accept or reject the Bureau’s recommendation.
Determining how we will try to resolve a criminal matter
When determining how to address criminal conduct, we will consider the strength of the evidence and determine whether we should recommend prosecution or pursue other forms of resolution like voluntary compliance. In this context, we will take into account the party’s conduct including whether the business had a pre-existing credible and effective compliance program.
Key takeaways
Determining your risk of wage-fixing or no-poaching
Wage-fixing
- Have you agreed or arranged with another employer to do any of the following:
- to fix salaries, wages or terms and conditions of employment?
- to maintain salaries, wages or terms and conditions of employment?
- to decrease salaries, wages or terms and conditions of employment?
- to control salaries, wages or terms and conditions of employment?
No-poaching
- Have you agreed or arranged with another unaffiliated employer, directly or indirectly, to not solicit or hire each other’s employees?
Examples of such limitations include:- restricting the communication of information related to job openings
- adopting hiring mechanisms, such as point systems, designed to prevent employees from being poached or hired by another party to the agreement
If in doubt in any of these situations, review our detailed guidance on wage-fixing and no-poaching agreements, or talk to your lawyer or compliance officer
Strategies to mitigate your risks
External activities
- Seek legal advice before:
- contacting or communicating with other unaffiliated employers regarding terms of employment, sensitive employment information or employment opportunities available to employees
- before taking steps to monitor others’ employment practices
- engaging in collaborative activities such as the benchmarking of employment terms
Internal activities
- Make all employment decisions independently, without discussing them with other employers, whether they are competitors or not
- Contact the Bureau if you encounter or suspect wage-fixing or no-poaching agreements
Case study
Let’s look at two hypothetical scenarios that compare a positive and a negative approach to compliance for wage-fixing and no-poaching agreements.
Background
Beaver Kitchen is a family-owned and operated mid-sized regional restaurant chain. Major decisions are made by family members who have run the business for decades. They typically do not consult any professionals.
Moose Cuisine is a mid-sized catering business with branches across the same region. While they do not compete for customers, the two firms are struggling to hire and retain employees due to a labour shortage in the industry. Turnover of cooks and other staff is high. Neither wants to increase prices, as that could drive away business, but they both worry about staying profitable if their labour costs rise too much.
A chef at Moose Cuisine recently quit. During her exit interview, she mentioned to her manager that she had taken a similar job at a neighbouring Beaver Kitchen location because she was offered an extra $1/hr of pay. The manager calls his counterpart at Beaver Kitchen, and they agree to meet for lunch. During their discussion, they both expressed frustration at “paying more for the same work,” and how uncertainty with their labour force makes their jobs more difficult. They realize they could both have an easier time if staff mobility was reduced. They each agree not to hire workers who are part of each other’s organization, or to pay more than the current rate for new employees. This way, they can avoid raising prices on their menus and driving away business.
Both managers report of the agreement at their respective company’s next internal management meeting. Other managers at each company decide to implement their own wage-fixing and no-poaching agreements.
A few months later, Beaver Kitchen’s operations are handed over to the new generation of the family.
Positive approach to compliance
Culture shift at Beaver Kitchen
Beaver had a compliance program, but it was last amended over a decade ago. It never addressed competition law risks and there was no designated compliance officer.
The new generation of the family decided to change its approach to business. They appointed new directors to achieve gender parity on the board, and they also appointed some industry experts.
One of the new directors, who had compliance-related experience in the restaurant sector in another country, suggested a review of the outdated compliance program.
Compliance program review uncovered misconduct
Beaver engaged a compliance specialist to update the compliance program to factor in competition law risks, including recent amendments to the law. The company appointed its CFO as the compliance officer to implement the revised program.
At the next quarterly review, data analysis showed a sudden lower-than-expected staff turnover and an unusually stable cost of labour.
To investigate the situation, the CFO met with some location managers and eventually learned of the no-poaching and wage-fixing agreements.
Outcomes
Realizing that this was criminal activity, the CFO immediately informed the board of directors. She also retained and instructed external counsel to apply to the Bureau’s Immunity Program. Senior management ordered that the conduct be stopped.
Beaver Kitchen’s updated compliance program allowed it to detect the issue early. It was the first company to report the agreement to the Bureau and avoided criminal sanctions by obtaining immunity.
Negative approach to compliance
Moose Cuisine oblivious to misconduct
Moose Cuisine had no compliance program for competition law. Senior managers were aware and pleased that the company had managed to avoid the worst effects of the labour shortage in its industry but did not investigate why that would be.
Managers at Moose Cuisine were surprised that the mutually beneficial agreements were terminated. When senior management learnt of the change, it was suspicious and sought advice, which confirmed that the agreements were illegal.
Outcomes
Moose Cuisine then contacted the Bureau in an attempt to request immunity but was too late because Beaver Kitchen had already done so. The best it could do was cooperate with the investigation in exchange for lenient treatment.
Moose Cuisine had to plead guilty to an offence and pay a fine. If it had had a credible and effective compliance program in place when the misconduct happened, the Bureau would have made a recommendation to the PPSC to consider a reduction in its fine.
How to contact us
For general inquiries: contact the Bureau
DISCLAIMER: Because every situation presents unique facts, the information set out herein is provided for general information only. This content is not a substitute for legal advice, nor is it a binding statement of the Commissioner of Competition’s position on the requirements or efficacy of any particular compliance program. Indeed, there is no one-size-fits-all approach when it comes to achieving credible and effective compliance.
The Competition Bureau launched a Compliance Portal to help you and your business stay on the right side of competition and labelling laws. It replaces the Corporate Compliance Programs Bulletin. We’re currently reviewing the feedback we received during the recent consultation on the form and substance of this portal. An update will follow later this year.