'Significant consequences' for employers who don't comply, says employment lawyer
In looking to hire temporary help, employers in Ontario are going to have to do some extra homework.
That’s because the government is following through on its promise to better protect workers by introducing new rules around licensing.
As of Jan. 1, 2024, temporary help agencies are required to hold a licence to operate in the province, under the Employment Standards Act, 2000 (ESA).
And their clients – meaning employers – cannot knowingly engage or use the services of one of these agencies or recruiters unless they hold a license.
Even if a temporary help agency (THA) is located outside of Ontario, but assigns employees to work in Ontario, the licensing requirements apply.
Employers “will want to be sure that they are engaging with recruiters or temporary help agencies who are licensed because if not, they could be found in violation based on these regulations and subject to fines. So there definitely is a reason to want to be in compliance,” says Nicole Naglie, an associate in the labour and employment group at McCarthy Tétrault in Toronto.
“It shouldn't change the overall landscape of the availability of temporary help agencies and recruitment agencies. I think it gives the government a little bit more ability to regulate the industry, and hopefully ensure that workers are more protected than maybe previously they were as often people who are working through temporary help agencies are more of the vulnerable population.”
It’s the government’s “latest attempt to clean up the temporary help agencies and really, more than anything, protect the workers out there that potentially get taken advantage of,” says Kelsey Orth, partner at CCPartners in Brampton, Ont.
But there are “significant consequences” for employers, he says, as the fines escalate as the number of offences rise.
The new rules around licensing THAs in Ontario’s (ESA) – introduced back in 2021 — are similar to other parts of Canada such as British Columbia, Alberta, Quebec, and the Northwest Territories.
What is a ‘recruiter’ under Ontario’s ESA?
Under the new legislation, a “recruiter” is “any person who, for a fee, finds or attempts to find employment in Ontario for prospective employees, or finds, or attempts to find, employees for prospective employers in Ontario,” says the government, though there are exceptions.
The rules concern external recruiters as opposed to those in-house, says Naglie.
“One of the key exceptions that would apply to people in-house is for an employer who finds or attempts to find employees to be employed by the employer’s own organization. So this would be like internal talent people, or HR people who are working on recruiting and hiring for their own organizations. So those individuals won't need to be licensed.”
These new rules don’t apply to internal hiring people, says Orth. “That's just hiring, that's kind of nomenclature within large organizations of course — this is a recruiting division or that kind of thing — but that doesn't meet the definition of the recruiter under the ESA.”
“If you've got your own internal recruiting department, it's not going to apply,” he says.
Another exception? Individuals who work for businesses that provide services for temporary help agencies or recruitment services do not need to be licensed, says Naglie.
“There are a lot of larger recruitment agencies that have a lot of individuals whose job title, in fact, is ‘recruiter.’ And for these people, they might be wondering, ‘Well, does this apply to me personally? Do I need to go out and get a license? Do I need to fill out the application?’ (and there's a $750 fee for the application). ‘And do I need to provide the letter of credit?’ because under the letter of credit, it must be in the amount of $25,000, which is pretty significant if you're just an employee.
“But these people don't have to be licensed, which I think will ease some people's minds.”
There were roughly 2,300 placement agencies and temporary help business locations operating in Ontario in December 2022, according to Statistics Canada.
How to comply with Ontario’s rules for THAs
Ontario’s Ministry of Labour, Immigration, Training and Skills Development is maintaining a website that lists certain licensing information for the temporary help agencies, including:
- licence holders, along with the status of their licence
- applicants seeking a licence
- any other information that is required to be published under the ESA or its regulations.
The implication for employers is that they really need to vet these recruiters and agencies “before they sign on with them, and keep that going as they go,” says Orth.
“Just like any other contractual situation, if there are preconditions to qualify, that should be one of them: ‘Show me your license and the fact that it's in good standing.’ If they don't have that, you should be wary,” he says.
“One would hope that if you're signing up with somebody who's in good standing, that they continue to operate that way, but you never know.”
While so far the government has provided information on where agencies and recruiters can find the application for a license, how to check their status, and what the fees are going to be that kind of information, there is no information yet about renewing a license, says Naglie.
“As of right now, I'm not sure what those terms are,” she says, but as long as employers have checked for a licence, “there's no large risk to the business and the financial risks are also not significant at this time.”
If an employment standards officer finds a contravention of the new rules by an agency or an employer, they can issue a notice of contravention with the following penalties:
- $15,000 for a first contravention
- $25,000 for a second contravention in a three-year period
- $50,000 for a third contravention in a three-year period
Implications for employment agreements
With the new rules in Ontario, one question may arise for HR: If an agency or employer is not in compliance, how might this impact people hired by the agencies?
At this point, there's no indication from the regulations or the changes to the act that there would be any application to individual employees, says Naglie.
“All of the enforcement mechanisms under the regulations are enforcing against either the temporary health agencies, the recruiters, or the business that engages with them,” she says.
“There probably [isn’t] going to be any impact on the individual employment relationship between the either temporary help person or the full-time employee who has been recruited if something was amiss in the process because either the temporary help agency or recruiter wasn't licensed.”
It’s all going to depend on the contractual language used in signing up with one of the agencies, says Orth.
“If you employ someone or agree that it's either co0employment or direct employment as the employer, then you're going to have your own obligations. And I think at that point… you'd be well served to review it with a lawyer to see what your obligations are, and where there might be liability, either for you or from the agency as per their other contracts with the employer. So there are different levels of it.”
Ontario also recently introduced legislation to strengthen penalties for withholding worker passports. Businesses and people who are convicted of withholding a foreign national’s passport or work permit could face a $100,000 to $200,000 penalty for every worker whose rights are violated.
