Staffing agreements with clients stated that agency was employer
A temporary help agency is liable for wages owed to workers it assigned to client sites instead of a subcontractor that didn’t actually exist, an Ontario court has ruled.
Temporary Personnel Solutions (TPS) was a temporary help agency in St. Catherines, Ont. It had its own core employees that it deployed as assignment workers to agricultural and manufacturing clients and also relied on assignment employees dispatched by subcontractors to fulfill staffing needs of TPS clients.
Soon after TPS started business in 2016, one of its corporate directors met a Mr. Tieu, who claimed to represent several subcontractors who were all located at the same address in Hamilton. In spring 2017, TPS entered into a “secondary supplier agreement” with Tieu, who in turn said that he had an agreement with one of the subcontractors, CBH Agency.
On Jan. 2, 2019, TPS entered an independent contractor agreement with Tieu, who was apparently acting on behalf of CBH Agency. The individual listed as sole proprietor of CBH Agency was not involved in the discussions and no one from TPS met with him. CBH Agency was also not a registered business name and it was not referenced in the documents to the independent contractor agreement.
The agreement characterized the subcontractor – Tieu on behalf of CBH Agency – as the employer of its employees and as having responsibility for recruitment, selection, deployment to TPS clients, and maintaining personnel and payroll records.
Staffing services agreement
On April 15, 2019, TPS entered into a staffing services agreement with Van Egmond and Sons, a wholesale florist. The agreement stipulated that workers assigned to Van Egmond would be employed by TPS with no explicit authorization or reference to third-party subcontractor workers.
Tieu dispatched workers supplied by TPS to Van Egmond and three other companies with similar staffing services agreements, with all agreements indicated that TPS would be the employer of the assigned workers. In all but one of the relationships, TPS provided timesheets for workers to sign in and out.
TPS representatives also attended client sites at the beginning of shits to ensure that Tieu dispatched enough workers and they were in the right locations. TPS also conducted random spot checks of the workers at client sites, with no one from CBH Agency interacting with workers. IF a client business had a concern about a worker, TPS dealt with the matter.
As for paying the workers, TPS created invoices for CBH Agency based on its timesheets and issued cheques to CBH’s proprietor based on its invoices. However, the proprietor never received the cheques as CBH Agency did not have a business infrastructure of its own.
Unpaid wages complaint
Twelve workers who had been assigned to work for Van Egmond filed an employment standards complaint alleging unpaid wages. An employment standards officer determined that TPS was their employer and was therefore liable for their wages. TPS failed to establish that the workers were paid so the officer issued an order to pay.
TPS took the matter to the Ontario Labour Relations Board, which found that there was no evidence that CBH Agency was “a legitimate enterprise with whom TPS might enter into an arm’s length business relationship.”
The listed proprietor of CBH Agency said that, on Tieu’s prompting, he had agreed to act as a front for CBH Agency under his name with Tieu having signing authority for the company’s bank account. He claimed that he had nothing to do with hiring employees or business relations with TPS.
The board noted that the evidence indicated that the relationship between CBH Agency and the workers that TPS alleged CBH employed was “scant and superficial.” In addition, the staffing services agreements did not indicate the use of third-party subcontractors to supply workers, which suggested that TPS wanted clients to believe that “it was in control of the workers and directly accountable for their conduct and performance,” the board said.
The board determined that Tieu arranged for workers to report to client sites at the direction of TPS and neither he nor CBH Agency were subcontractors. As a result, TPS was the employer of the 12 workers, said the board.
Employment relationship
TPS sought judicial review of the board’s decision, arguing that the board erred in finding that there was an employment relationship with the 12 workers, that CBH Agency wasn’t a legitimate enterprise that employed the workers, and that it didn’t consider the impact of such a decision on the temporary help industry if agencies could be deemed employers to unknown workers when contracting with separate legal entities.
The Ontario Divisional Court noted that the Ontario Employment Standards Act, 2000 (ESA) stipulates that, where a temporary help agency and a person agree that the agency will assign the person to work on a temporary basis for clients of the agency, the agency is the employer and the person is an employee of the temporary help agency. In such circumstances, if the employee isn’t paid, the agency and the client are jointly and severally liable for the wages.
The court found that it was reasonable for the board to interpret the ESA broadly in relation to the employment relationship, as that was consistent with the ESA’s objective to protect the interests of employees. The court also found that all the indicators – TPS presented itself as the employer of the workers to clients, it stipulated the location and time for the workers, it used its own timesheets, and its own representatives checked in with the workers – were that the workers were employees of TPS and TPS was the employer under the ESA.
The court also found it was reasonable for the board to determine that CBH Agency was not a legitimate enterprise, as it wasn’t a registered business name and the listed proprietor wasn’t involved in directing it. It also had no influence or responsibility over the workers that TPS assigned to the client sites, the court said.
In addition, the court dismissed TPS’ contention that the board’s decision would have an impact on the temporary help industry. The case didn’t involve “two legitimate [temporary help agencies] entering into a subcontract relationship” and their liability for wages, because CBH Agency didn’t exist as either a temporary help agency or a legitimate business, the court said in dismissing TPA’s application for judicial review. See 2517906 Ontario Inc. v. Ontario Labour Relations Board, 2023 ONSC 4890.
