What can a buyer and seller agree about pay and hiring under the Competition Act?

A purchase agreement can include promises about people: the seller will not hire the buyer’s staff, the buyer will not hire the seller’s remaining staff, or the two settle what transferring employees will be paid. The Competition Act treats some agreements between employers as a crime, so these clauses need the same care as a non-compete.

What the offence covers

Section 45(1.1) applies to an employer who conspires, agrees or arranges with another employer that is not affiliated with it. Two things are caught: fixing, maintaining, decreasing or controlling salaries, wages or terms and conditions of employment, and agreeing not to solicit or hire each other’s employees. A court may infer an agreement from circumstantial evidence, though it must still be proved beyond a reasonable doubt, so an unwritten understanding can be caught as well as a signed clause.

Who counts as affiliated

Affiliated employers fall outside the offence. The Act treats one entity as affiliated with another if one is the subsidiary of the other, both are subsidiaries of the same entity, or each is controlled by the same entity or individual, and an individual who controls an entity is affiliated with it. Whether a newly formed buyer with no staff yet is an employer is a point for a competition lawyer.

The defence for a sale

No one is convicted if they establish, on a balance of probabilities, that the arrangement is ancillary to a broader or separate agreement that includes the same parties and is directly related to, and reasonably necessary for giving effect to, its objective; the broader agreement must also not breach the subsection when considered alone. Whether a particular clause qualifies is a legal judgment for a competition lawyer. The non-compete side is covered in whether a sale non-compete is illegal.

What sits beside it

Merger review is separate: the Act requires the parties to certain proposed mergers to notify the Competition Bureau before closing, depending on thresholds, but a deal that is not notifiable can still contain a clause that breaches section 45. An agreement setting the wages or terms transferring staff will receive may also fall within the section’s words.