What happens if your recruiter is no longer licensed?
As of July 1, 2024, temporary help agencies and recruiters in Ontario are required to hold a license to operate.
For employers, that means they are prohibited from “knowingly engaging or using” the services of these agencies and recruiters unless they hold a licence, which expire annually.
If an employer is found in contravention of the new rules, they could face a penalty of:
- $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
It’s not necessarily welcome news for many employers, says Steven Dickie, partner at Osler in Toronto, citing the additional administrative burden.
“My impression is that the legislative changes were motivated materially by the concerns regarding vulnerable workers, especially vulnerable, temporary foreign workers.”
But for certain sectors of the economy, such as agriculture, there may be a degree of added comfort for employers using the services of now-to-be licensed recruiters and temporary help agencies.
“There's some assurance that there's checks and balances, and government oversight in that industry,” he says.
“But for other employers in more traditional industries, and … the gamut of recruiters all the way up to the high-end tech talent and executive recruiters, this is not really additive in any meaningful sense, we're not talking about vulnerable workers, or fly-by-night recruitment operations.”
It’s also notable that the definition of recruiter does not include an employee who performs the functions of a recruiter as part of their duty or their position with an employer, says Andrew Movrin, associate at Hicks Morley in Toronto.
“So, if they're working in-house and their job at the employer… is to recruit people to bring into the company, that's not going to fall within the definition.”
The legislation also allows any agencies or recruiters to continue to operate while their application is under review, after it's been submitted the first time, he says. This transitional rule applies until the ministry notifies the agency/recruiter either that a licence has been issued or that the application for a licence has been refused.
“That's the key thing, so even if your application isn't approved as of July 1, just make sure the application gets in.”
Checking licenses of recruiters, agencies
For employers using the services of external recruiters and temporary help agencies, there are two key risk mitigation items, says Dickie.
“Number one is to do their due diligence, certainly past the July 1 deadline, by checking the online registry to make sure that the entity with whom they're considering doing business is licensed.”
As part of the changes to the Employment Standards Act, 2000 (ESA), Ontario’s Ministry of Labour, Immigration, Training and Skills Development has set up a website or portal that lists relevant information including:
- licence holders, along with the status of their licence
- whether a recruiter licence is subject to any terms and conditions
- applicants seeking a licence.
For the recruiters and agencies, there's an annual renewal process with a $750 application fee applying each time, says Movrin.
Ultimately, there are “consequences” for an end user client who uses an agency or recruiter who's not licensed.
“We are advising organizations that they'll want to build in regular checks on their vendors for such services. That's likely going to come in the form of an annual check as to whether they are still licensed or a contractual obligation to give notice of non-compliance following any appeal rights that the agency or recruiter has exhausted.”
Ontario has made several changes lately as part of its Working for Workers Act, including greater transparency around hiring and pay.
Updating commercial agreements with recruiters
However, a temporary help agency or recruiter in Ontario could be licensed at a point in time, and then either have their license revoked or fail to renew it, says Dickie.
“And I don't think it's realistic for employers to be constantly checking that updated registry, although it's good hygiene.”
So, employers should think about building protective terms into their commercial agreements with the recruiters and agencies, he says, “that require a positive obligation on the part of the temporary help agency or recruiter to maintain their license and to provide notice, in the event that their license is revoked, and to fully indemnify the employer for any liability that the employer is on the hook for, as a result of the agency’s or recruiter’s failure to maintain their license.”
Thinking down the road, employers are going to have to consider if their agreements with agencies or recruiters include a condition that they'll continue to be licensed in Ontario, says Movrin.
“Eventually, I could foresee contractual disputes about that, if a user client enters into a services agreement with an agency or recruiter, but then they no longer [are] licensed, and they're signed on for a number of years — how will that be dealt with?” he says, and did the commercial agreement contemplate that?
If an agency or recruiters loses their license
Under Ontario’s new rules, recruiters and agencies must give written notice to their clients if their license has been refused, revoked or suspended, and they have 30 days to seek review by the Ontario Labor Relations Board, says Dickie.
“If they don't seek that review, or they fail to, or they're unsuccessful, the employer would have to end the assignments of the agency employees, because they would otherwise be condoning or participating in a breach of the Employment Standards Act.”
In addition, the agency would be on the hook for the termination and severance pay, he says.
“Interestingly, the government anticipated an argument that the agencies in those situations would potentially make, saying that the employment relationship has been frustrated, which would then disentitle the agency employees to termination and severance pay, both under statute and under common law.
“But the government… anticipated that potential argument and deemed that a loss of an operating license does not frustrate the employment relationship in that case. And so the entity then becomes unlicensed to the extent that they have a bunch of employees that they would then owe termination and severance pay to, and still has to make good on those obligations.”
Overall, there are requirements or consequences imposed on both sides, says Movrin.
“To me, that speaks to why the legislation is effective, because it's not just impacting the agencies and recruiters, but also it's putting it on the mind of the end user clients.”
