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Canada | Publication | November 30, 2021
In Latifi v The TDL Group Corp. (Latifi),1 the British Columbia Supreme Court struck portions of a proposed class action claim alleging that a no-hire clause in the standard Tim Hortons franchise agreements violates section 45 of the Competition Act by unlawfully suppressing wages.
This decision is based on the fact that agreements between or among employers regarding employees are treated as buy-side agreements. In buy-side agreements (such as the no-hire clause at issue), purchasers of a product (in this case employers) agree to fix the price of products they purchase. Latifi also conforms with the Competition Bureau’s November 2020 statement clarifying that, unlike in the United States, buy-side agreements are not caught by the criminal provisions of the Competition Act as a result of 2009 amendments that removed the word “purchase” from the definition of “agreements” under section 45.2
Latifi comes after the Federal Court’s recent decisions in Mohr (striking an action) and Jensen (declining certification).3
In 2019, the plaintiff, representing employees of Tim Hortons franchises, commenced a proposed class action alleging the no-hire clause in Tim Hortons’ standard franchise agreements prevented franchisees from inducing employees to leave their employment at other Tim Hortons locations without consent. The plaintiff alleged the no-hire clause breached section 45 by unlawfully suppressing wages, benefitting Tim Hortons’ bottom line. The plaintiff also alleged Tim Hortons committed civil conspiracy and/or the tort of unlawful means in enforcing the no-hire clause. Tim Hortons brought an application to strike the claim. The application was heard in May 2021.
In a reasoned decision, Justice Sharma struck the Competition Act portions of the claim, holding it was plain and obvious that the plaintiff’s claim that the no-hire clause violates section 45 is bound to fail. Consistent with the Competition Bureau’s guidance, the court found that section 45 of the Competition Act does not apply to the clause because it does not restrict output “for the supply of a product.” In reaching its decision, the court held that:
Latifi is the latest in a consistent series of developments on the treatment of buy-side agreements, including no-poaching, no-hire and wage-fixing agreements, all of which confirm that buy-side agreements are not caught under the criminal provisions of Canadian competition law. Importantly, this represents a significant difference between Canadian and US law in this area and companies with cross-border operations where employee poaching is an issue (in particular within a franchise or dealership system) may want to consider taking a different approach in Canada than they take in the US or other jurisdictions.
The authors wish to thank articling student Katarina Wasielewski for her help in preparing this legal update.
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