Tips for Employers: How to navigate the new licensing requirements for temporary help agencies and recruiters

In the past several years there have been concerns that some temporary help agencies (THAs) and recruiters have been underpaying employees, not complying with the Employment Standards Act, 2000 (ESA), and engaging in other shady business practices. On December 2, 2021, Ontario’s Working for Workers Act (Act) became law, modifying the ESA in several ways to try to address this concern. Mostly notably, the Act introduced new licensing requirements for THAs and recruiters, as well as fines on employers who knowingly work with unlicensed recruiters or THAs after a certain date. These new requirements will hold recruiters and THAs accountable. Understanding your obligations as an employer who works with recruiters or THAs is important to ensure you do not unknowingly breach the ESA.

The government recently passed regulations which set firm timelines for when certain sections of the legislation will come into force. The first came into force on July 1, 2023, while others will be coming into force on July 1, 2024. The regulations also provide more details on what THAs, recruiters and those who work with them must do to comply with the ESA.

What are the changes and timelines?

As of July 1, 2024, THAs and recruiters must be licensed by the Ministry of Labour to operate in Ontario. With some limited exceptions, unlicensed THAs and recruiters will not be allowed to operate their businesses after that date. Employers (and clients) will be prohibited from working with recruiters or THAs that they know are unlicensed from July 1, 2024 onwards.

As of July 1, 2023, THAs and recruiters were able to start applying for their licenses. The steps include submitting an application through the Ministry of Labour with a $750 application fee, and an irrevocable letter of credit.

Every legal entity that operates as a THA or recruiter must apply for a license.

What is a THA or recruiter according to the ESA?

A THA is an employment agency or company that hires people and temporarily contracts them out to work at their client companies. These assignments can vary in length depending on what the THA and client decide is required.

A recruiter is a person who gets paid to find or try to find a job for another person looking for new work, or for a company looking to hire new talent. This can be a recruitment agency or company.

If you have employees that fall into these categories or own/manage one of the following types of organizations, the THA/recruiter rules under the ESA do not apply:

• employees who perform recruiting as a duty of their position (e.g., being an internal HR professional or a recruiter at a recruiting company);
• an employer who finds or attempts to find employees to work at their own company;
• a school board, or person operating a private school, college, university, certain designated institutions or certain Indigenous institutes;
• a trade union;
• a registered charity; and
• a person who has an agreement with the government, or performs their work under the Services and Supports to Propose the Social Inclusion of Persons with Developmental Disabilities Act, 2008.

The licensing requirement applies to all THAs and recruiters who place or assign employees to work in Ontario.  Employers will need to pay special attention to this if they are using out of province THAs and recruiters and ensure they are registered.

Impacts on your business

Fines for breaching the ESA

THAs, recruiters and employers/clients will be subject to various fines for breaches of the licensing requirements in the ESA. For THAs and recruiters, this includes operating without licenses or providing false or misleading information to clients/employers. For employers/clients of THAs/recruiters, you can be subject to fines for knowingly using the services of an unlicensed THA or recruiter. The fines range from $15,000 for the first offence to $50,000 for a third or subsequent offence within the same three-year period.

If a THA or recruiter’s license is suspended or not renewed, there is a 30-day grace period when you can continue working with them without being fined.

Termination for license revocation/cancellation not frustration

Under the new regulations, if a THA or recruiter loses their license, they are still required to provide their employees their minimum termination and severance entitlements under the ESA, as it is not frustration of employment.

If you are working with a recruiter or THA, you should check your agreement with them to make sure that you are not responsible for paying any statutory termination entitlements if a temporary worker or recruiter stops performing services for you. If you are responsible for paying termination entitlements, you may have to pay this out if the THA or recruiter loses their license and has to or chooses to terminate.

Tips for Avoiding Liability

In order to avoid breaching the ESA, employers can:

1. Contact your THAs and recruiters before July 1, 2024, to ensure they are licensed, or in the process of getting licensed.
2. Review your agreements with any THAs and recruiters to ensure your organization is not liable for paying out statutory termination or severance pay.
3. Maintain regular contact with your THAs and recruiters to determine whether their licenses have been revoked, suspended, or if there is a refusal to renew. THAs and recruiters are required to notify their employees, clients and prospective clients of such a decision in certain circumstances.
4. Check the Ministry of Labour’s database of registered THAs and recruiters to ensure that they are and remain licensed before you engage them for a new matter and at regular intervals if you use them on an ongoing basis.
5. Speak with any out of province recruiters and THAs that you use to ensure they understand their obligations, and do not use their services if they refuse to get licensed.