Temporary Help Agencies and Recruiters – ESA Changes (What You Need to Know)

Posted on 1 January 2024 Back to News

 

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Recent changes to the Employment Standards Act (ESA) have altered the landscape for Temporary Help Agencies and Recruiters who carry on business in Ontario. Many companies across the province provide staffing and recruitment services by finding and assigning qualified candidates to perform work for their clients on a temporary basis. By passing Bill 27, Working for Workers Act, 2021, the Ontario government has established that, by January 1st, 2024, Temporary Help Agencies, along with Recruiters, will be required to hold a valid licence in order to operate their business in Ontario. As of July 1, 2023, Temporary Help Agencies and Recruiters are able to apply for their licences by following the process set out in the ESA.

In addition to the licencing requirements above, Temporary Help Agencies should be aware that their workers may be considered employees for the purposes of the ESA. Workers for Temporary Help Agencies have often been working under independent contractor agreements. While this has been advantageous for Temporary Help Agencies, the ESA now contains a provision stating that workers who have an agreement with a Temporary Help Agency to be assigned to perform work for the Agency’s clients are deemed to be the employees of the Temporary Help Agency (Section 74.3, ESA). This means that assignment employees, like those under independent contracts with Temporary Help Agencies, will likely have certain entitlements under the ESA.

Who is a Temporary Help Agency and who is a Recruiter?

A Temporary Help Agency is defined in the ESA as an employer that employs persons for the purpose of assigning them to perform work on a temporary basis for clients of the employer.

A Recruiter is considered 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.

While it is possible to interpret these definitions in such a way that a staffing or recruitment firm would fall outside their scope, the ESA is considered benefits-conferring legislation meaning its purpose is to provide benefits and standards to protect the interests of employees and will therefore be interpreted broadly and generously to include businesses that are meant to be captured by the definition.

Deemed Employees

Once an organization is considered a Temporary Help Agency, any worker who has entered into an agreement with the agency to be assigned to a client to perform work will be deemed an employee of the Temporary Help Agency pursuant to Section 74.3 of the ESA set out below. The form of agreement is irrelevant to the application of S.74.3.

Employment relationship

74.3 Where a temporary help agency and a person agree, whether or not in writing, that the agency will assign or attempt to assign the person to perform work on a temporary basis for clients or potential clients of the agency,

(a)  the temporary help agency is the person’s employer;

(b)  the person is an employee of the temporary help agency.

An independent contractor agreement would likely constitute an agreement between a worker and the agency to assign such worker to perform work for a client. Since the ESA cannot be contracted out of, even by way of independent contractor agreement, it is likely that any person contracted with a Temporary Help Agency via an independent contract will be deemed an employee and entitled to the statutory minimums under the ESA and potentially the common law. Evidence of any agreement between the parties to assign workers to clients may result in finding those workers to be employees.

Transition Period for Applicants

Temporary Help Agencies and Recruiters are required to be licensed by January 1st, 2024. Without a valid licence, Temporary Help Agencies and Recruiters will not be able to operate.  There is a transition/grace period for those that submit an application before January 1st, 2024, but do not receive confirmation of their licence by January 1st, 2024. These applicants may continue to operate without a licence into the new year. The risk in delaying the application until later in the year is that if your application is rejected, you may no longer be permitted to operate as a Temporary Help Agency or Recruiter. This grace period is meant for those who have applied on time but are not approved on time due to volume. There is no grace period for those who wait until after the 2024 deadline to submit their application.

In addition to the requirement for Temporary Help Agencies and Recruiters to hold a valid licence, customers or clients of the business will no longer be able to use the services of an unlicensed Temporary Help Agency or Recruiter, even if they are aware they are unlicensed.

What is a Temporary Help Agency or Recruiter required to do?

By January 1, 2024, a Temporary Help Agency or Recruiter must hold a valid licence in order to operate. If a business falls under both definitions of Temporary Help Agency and Recruiter, they must apply for both a Temporary Help Agency license AND a Recruiter license. Each license requires a separate application, an application fee of $750.00, and a separate letter of credit.

The application must include contact information, corporate information including the names and addresses of officers and directors, information regarding criminal convictions of the applicant and relevant persons, information regarding compliance with specified legislation including the ESA, tax compliance verification, and other information as may be required.

Along with the application, an applicant must submit an irrevocable letter of credit worth $25,000.00 meeting specific requirements. These include being made in favour of the Director of Employment Standards, issued by a Canadian financial institution, automatically renew, and other requirements. Each application will require a separate letter of credit.

Once the application is submitted for review, Temporary Help Agencies and Recruiters will be listed in the registry for clients and other stakeholders to view. You can see which companies are currently in registry here: Public Facing Registry.

Information regarding the application process and what is required of an applicant can be found on the Ontario website linked here: Licensing for temporary help agencies and recruiters.

Temporary Help Agencies and Recruiters may begin their application through the Ontario website here: My Ontario

Conclusion

While January 2024 is still a few months away, there is uncertainty regarding how long the application process may take or whether every applicant will be successful. An early application will put companies in the best position to handle any uncertainties that may arise as we approach the new year.

With concerns regarding independent contractors, it may be the case that any independent contractors working with a Temporary Help Agency will be deemed employees of the agency. Without valid employment contracts, these workers may therefore be entitled to both ESA and common law entitlements. Further, there may otherwise be no contact governing the employment relationship.  Having proper employment contracts for these workers can be valuable to both the employee and employer.

 

At HGR Graham Partners LLP, our experienced corporate and employment lawyers are happy to provide assistance to both the Temporary Help Agency and Recruiter licencing processes as well as drafting employment contracts to ensure you are limiting any unnecessary liabilities while maintaining ESA compliance.

 

Email Our Corporate Lawyers

 

This article is current as of August 18th, 2023, and is intended for general information purposes only and is not intended to provide legal advice. Readers with concerns about how this information may affect particular situations or transactions should obtain the independent review and advice of legal counsel.

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