Jun. 16, 2022 "Tim Hortons, hero pay and the long battle against wage suppression in Canada": Today I found this article by Jake Edmiston on the Financial Post:
The lawyer who took on Tim Hortons for allegedly suppressing wages believes a key piece of his proposed class-action lawsuit fell apart because of a hole in Canada’s competition law when it comes to workers.
“It’s a gap that should have been filled years ago,” said David Klein, whose Vancouver-based Klein Lawyers LLP represents the plaintiff in a case that started in 2019 against the coffee chain.
He’s not the only one who has issues with the Competition Act. Progressives, labour advocates and the federal competition watchdog have a long list of grievances, but one of the top concerns is that the act doesn’t consider so-called no-poach and wage-fixing schemes to be criminal offences.
Put another way: it’s criminal to fix the price of bread, but not wages.
The federal government has proposed to change that. In this spring’s budget bill, the Liberals included an amendment that would criminalize wage-fixing and no-poach schemes between employers.
Legal scholars and policy wonks fear the change isn’t the silver bullet the government seems to think it is.
But Klein said it would have helped his case against Tim Hortons.
“We would likely have been successful if that wording had been in the act when it was originally passed,” he said. “It would have had a direct impact on this case.”
No-poach Clause
The case started with Samir Latifi, a former staff member at a Tim Hortons in Surrey, B.C., who launched the class action in 2019 on behalf of all Tim Hortons employees in Canada, as the Toronto Star reported.
The claim zeroed in on a clause in Tim Hortons’ standard contract with its franchisees, which forbids restaurant owners from hiring, or attempting to hire, each other’s employees.
Tim Hortons, owned by Toronto-based Restaurant Brands International Inc. (RBI), has more than 3,900 locations in Canada, according to the company’s latest earnings report. In an email, Tim Hortons said it stopped using no-poach clauses in its franchise agreements in 2018 and no longer enforces those clauses in older agreements.
“Should there be any further guidance provided in the future, we would gladly review it,” RBI spokesperson Jane Almeida said in an email.
Latifi’s lawyers said the old no-poach clause broke the competition law by suppressing employee wages and boosting profits for franchisees.
In an application to dismiss the case, Tim Hortons argued that the proposed class action was bound to fail because the Competition Act doesn’t consider no-poach agreements between competitors to be a criminal offence.
In Canada, agreements to fix the cost of consumer goods, called sell-side agreements, are treated differently than agreements to fix the cost of business inputs — for example, a sack of flour or a cashier’s hourly wage.
These “buy-side” agreements aren’t treated as criminal in the act because they can sometimes lead to benefits for consumers if, for example, retailers pool their resources to get a bulk deal from suppliers.
Buy-side agreements can still be pursued as civil cases, but to avoid penalizing positive kinds of collusion, Canadian law first requires proof that the agreement had a negative impact on competition.
Also, civil cases don’t allow victims to seek private damages, as Latifi did against Tim Hortons.
In a judgment issued late last year, B.C. Supreme Court Justice Neena Sharma sided with Tim Hortons, deciding Latifi’s claim for damages under the Competition Act would fall apart because the act doesn’t consider “buy-side” agreements as criminal.
But Sharma did not strike the entire case. A separate claim included in the class action, which relates to civil conspiracy under common law, will go on to an as-yet unscheduled certification hearing to determine whether it can proceed as a class action.
“We’re still able to move forward but the case isn’t as strong,” Klein said.
“It is not an impossible claim.
It’s not a hopeless claim.
It’s not one that’s doomed to fail.
But it’s a harder claim to prosecute.”
Robin Shaban, a former Competition Bureau officer, said the ruling is another sign that the current Competition Act needs to change to protect workers.
“It really does highlight a critical gap that we have in our legislation,” said Shaban, who currently works as a senior economist at the consulting firm Vivic Research. “It’s even more egregious given that we’re talking about not only people’s wages, but wages for people who don’t even make that much in the first place.”
Hero Pay Scandal
Policymakers have been trying to toughen up the rules on wage-fixing and no-poach agreements for most of the pandemic. It started in earnest with the “hero pay” scandal in June 2020, when the three top grocery chains cut their respective $2-an-hour bonuses for “frontline” store clerks and warehouse workers on the same day.
The move turned into a public relations crisis for the big grocers at a time when essential workers were heralded as civic heroes for showing up to their jobs. Executives from the three grocery chains — Loblaw Cos. Ltd., Sobeys’ parent Empire Co Ltd. and Metro Inc. — were summoned to Ottawa to explain themselves in front of a parliamentary committee.
Sarah Davis, then-president of Loblaw, told the hearing that she sent her competitors a “courtesy email” several days before she cancelled the pay premiums for frontline staff. Metro chief executive Eric La Flèche also told the committee that he called competitors ahead of the cancellations, asking about their plans for the Hero Pay bonuses.
Empire chief executive Michael Medline said he opted to have legal counsel on the call with La Flèche and did not provide a definitive answer to the question.
All three grocery chains said they independently made the decision to cut the benefit and denied any wrongdoing in the case.
But Liberal MP Nathaniel Erskine-Smith sparred with the executives in the July 2020 hearing, asking each executive how much money they earned.
“When a company earns record profits, when you are individually earning millions of dollars,
when the risk and anxiety that persists among your essential workers has not gone away,
how can you in good conscience put profits before people in a pandemic?” he said.
After the hearing, Erskine-Smith pressed the Competition Bureau to launch an investigation. But the bureau’s commissioner, Matthew Boswell, declined. In a letter to Erskine-Smith, Boswell said the requirement to prove that a wage-fixing scheme resulted in reduced or prevented competition was “not a low threshold.”
Pushback against change
If the government succeeds in making wage-fixing illegal, the Competition Bureau will no longer have to meet that threshold. But Jennifer Quaid, an associate professor at the University of Ottawa who specializes in competition law, said criminalizing such schemes won’t make them go away. The threshold for bringing a criminal prosecution is also high — too high to go after every offender.
“You’re just never going to get enough impact from criminal enforcement,” she said.
“My larger, law-professor criticism is:
Stop trying to solve social problems with the criminal law.
It doesn’t work, because the structure of the criminal law is not designed for it to be applied systematically.
It’s supplied selectively for maximum impact.”
Business lobbyists and lawyers have started pushing back against the government’s proposed amendments as well. In a brief to a parliamentary committee, the Canadian Chamber of Commerce said the government shouldn’t assume all no-poach agreements are anti-competitive.
In some cases, they can give franchises incentives “in training employees, knowing rival franchisees will not poach them,” said Mark Agnew, the chamber’s senior vice-president of policy and government relations.
Agnew also warned that the government’s attempt to outlaw no-poach and wage-fixing schemes could lead to a “proliferation of frivolous class actions.”
• Email: jedmiston@nationalpost.com | Twitter: jakeedmiston
Tim Hortons, hero pay and the long battle against wage suppression in Canada | Financial Post
My company has an open wage fix policy with many companies, it is well known. They have all agreed that a employee cant leave one company and go to another. If I stop working for one I have to wait for a period before applying for the other. It is a clearly stated policy.
What my company does that is worse is they have found a way around minimum wage laws. They offshore jobs at 2-4 dollars a hour rather than paying the close to 15 dollars a hour many provinces have established as minimum wage. So it does not matter if you up the minimum wage, people dont make more here, we cant ask for raises as we can't compete.
We have contractors as well that work for the company it is like clock work as their wages rise, the company does one of two things. They offshore the job and lay off the Canadian staff or the use the low wage TFW program to stack the system with TFWer's preventing wage increases.
They keep putting up their prices and profits soar. The employee dare not speak for any new benefits.
Jun. 28, 2022 "How the COVID 'hero pay' scandal prompted Ottawa to make wage-fixing illegal": Today I found this article by Jake Edmiston on the Financial Post:
Nathaniel Erskine-Smith, a Liberal MP from Toronto, woke up on his birthday in 2020 and wrote out an email on his phone.
Two days earlier, on June 13, 2020, Canada’s top three grocery chains simultaneously cancelled their $2-per-hour “hero pay” bonuses for front-line workers — the store clerks and warehouse staff who continued showing up to keep supermarkets running despite lockdowns, uncertainty, and widespread absenteeism in the first few months of the COVID-19 pandemic.
“It was just outrageous, I think, on a basic level,” Erskine-Smith said. “I was just mad.”
So he wrote the email, at 8:59 a.m., with the subject line: “I’m giving notice of this motion today.”
That email appears to have set off a chain reaction that lasted for two years, culminating last week in a significant change to the way Canada protects workers from wage suppression.
On June 15, 2020, Erskine-Smith’s motion asked the House of Commons industry committee to summon grocery executives to explain why they cut the bonuses and “how those decisions are consistent with competition laws.”
Within weeks, top executives from each of the three chains — Loblaw Companies Ltd., Sobeys parent Empire Co. Ltd., and Metro Inc. — appeared before the committee, where they revealed they had been in contact with one another before cancelling the hero bonuses.
Loblaw president Sarah Davis said she sent a “courtesy email” to let competitors know about her decision ahead of time. Metro CEO Eric La Flèche said he called executives at competing chains trying to get information about when they planned on cutting the bonuses. All three companies stressed that they made their decisions on hero pay independently, and denied any wrongdoing.
“Business is booming,” Erskine said at the hearing. “Profits are coming in in record numbers and, Mr. La Flèche, you are proactively reaching out to your competitors to say, ‘When can we cut pandemic wages?'”
“With all due respect, again I disagree with that,” La Flèche responded.
“I’ll leave the remainder of those kinds of questions to the Competition Bureau,” Erskine-Smith said.
But the Competition Bureau — the agency that enforces competition law in Canada — didn’t investigate. In a letter to Erskine-Smith in 2020, Competition Commissioner Matthew Boswell explained that the Competition Act did not consider it to be a criminal offence when employers collude to fix wages or agree not to hire each other’s staff — known as “no-poach agreements.”
That’s because, at least in the eyes of the law at the time, collusion between businesses to lower the cost of inputs isn’t always a bad thing for consumers.
If, for example, independents pool their resources to get a deal on ingredients, then their customers potentially benefit from lower retail prices.
The bureau was still able to go after wage-fixing in civil cases, but first it had to prove that the behaviour hurt competition. Proving that, Boswell argued, “is not a low threshold.”
In response, the House of Commons industry committee in 2021 asked the government to tack wage-fixing and no-poach agreements onto the list of criminal offences.
This month, the federal government complied. The Liberals tucked a series of Competition Act amendments into its spring budget bill. And that bill received royal assent on June 23, including a change that will criminalize wage-fixing and no-poach agreements. That amendment comes into effect in June, 2023.
Michael Kilby, a competition lawyer in Toronto, said the new rules will seriously change the way he advises employers on labour issues.
Before, he would have told clients that the bureau can only pursue wage-fixing in civil cases, and even then “there’s no real track record of them doing so and there are no real penalties associated with them doing that.”
Now, he said, employers convicted of wage-fixing or no-poach agreements could face unlimited fines, jail time, and class action lawsuits.
“This isn’t a little stick, or a slap on the wrist,” said Kilby, who heads the competition and foreign investment group at Stikeman Elliott LLP. “In the worst case, this is huge liability.”
Kilby said he expects the ban on wage-fixing and no-poach agreements will also apply to franchisees operating under the same brand. Those franchises can sometimes be subject to rules that forbid them from stealing each other’s staff. For example, Tim Hortons used to include a no-poach clause in its standard franchise agreements. The coffee chain, however, says it stopped using the clause in 2018 and doesn’t enforce it in older agreements.
The Canadian Chamber of Commerce lobbied against the criminalization of no-poach agreements, arguing that franchisees can spend more money on employee training if they don’t have to worry about losing those employees to fellow restaurant owners.
“At the end of the day, they’re a business. So they have to decide, where do they invest their dollars?” said Mark Agnew, the chamber’s senior vice-president of policy and government relations.
“If there’s a risk that the folks that they’re hiring could be poached, then that is a disincentive for them to say, I’m going to invest this into my employee training.”
But Vass Bednar, an outspoken advocate for competition reform in Canada, said the franchise model shouldn’t mean “you can have your cake and eat it too.”
“You can pretend you’re an independent business operator, you can buy into this model, and we’re going to make sure that we’ll collude to suppress the wages of your workers?” said Bednar, an adjunct professor of political science at McMaster University.
“Sorry but maybe that’s just a raw deal and maybe you should have to compete for attracting and retaining talent.”
Erskine-Smith said he wasn’t expecting all this debate two years ago. When he wrote that email on his birthday, he didn’t think the hearing with the grocery executives would become some sort of turning point. He said he was surprised to hear about “communication between CEOs” at competing companies.
“It wasn’t just me. You could see the reaction from colleagues representing all parties at the committee hearings who were frustrated and shocked,” Erskine-Smith said. “And so I think that did ultimately lead to a much more serious conversation around wage-fixing.”
• Email: jedmiston@postmedia.com | Twitter: jakeedmiston
How the 'hero pay' scandal prompted Ottawa to make wage-fixing illegal | Financial Post
Only the canadian government will treat its citizens as second class. Time to clean house and get this country back to the morale and honourable system it once was. This divisive government attitude needs to change.
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