More than Temporary: New Obligations for Ontario Temporary Help Agencies, Recruiters, and the Employers that Use Them
Update: In November 2023, the Ontario government announced that these changes would be postponed from January 1, 2024 to July 1, 2024. In April 2024, changes were announced to the letter of credit requirement. This blog has been updated to reflect those changes.
New legislative amendments have come into force, affecting temporary help agencies (“THAs”), recruiters, and the employers and employees that engage with them.
According to the Ministry of Labour, Immigration, Training and Skills Development, the goal of the updates to the Ontario’s Employment Standards Act, 2000 (the “ESA”) is “protecting vulnerable and temporary foreign workers” from instances of “illegally paying people below the minimum wage and denying other basic employment rights to gain an unfair competitive advantage over law-abiding agencies by undercutting rates.”
a) What are the new requirements and when do they kick in?
On or before July 1, 2024, THAs and recruiters operating in Ontario must apply for a licence to operate. The application process opened in July 2023 through the My Ontario website. An organization’s licencing status will be posted online.
The Ministry has identified transitional rules regarding applications and their annual renewals. As long as a THA or recruiter applies before July 1, 2024 (or the applicable renewal deadline), they may continue to operate until a licence is issued or the application is refused. If they apply on or after July 1, 2024 (or the applicable renewal deadline), they may not operate until after a licence is issued.
In addition to providing basic background information in an application, the THA or recruiter must disclose any criminal convictions (including convictions of its directors, officers, and partners); share information about related parties who help with the recruitment or employment of foreign nationals; provide security of $25,000 (no longer limited only to a letter of credit) from a Canadian bank or credit union (with two exceptions[i]); and confirm it has complied with its tax obligations to the Ministry of Finance.
[i] If the licensee will (a) not recruit foreign nationals or (b) will only required foreign nationals if the position have wages are or above the “median hourly wage”, an LOC is not required. Details of the wage threshold are here.
The $750 application fee is non-refundable. An application must be made on behalf of each legal entity that is operating, even if they are treated as one employer under the ESA.
In addition, employers (a.k.a. clients of the THA or recruiter) must also record and maintain additional information about assignment employees, as noted in section c) below. These requirements begin earlier than the licensing requirement – i.e. on July 1, 2023.
b) What constitutes a THA or a recruiter?
According to the ESA and one of its regulations (as amended), the following definitions apply:
THA “means an employer that employs persons for the purpose of assigning them to perform work on a temporary basis for clients of the employer”; and
Recruiter means “[a]ny person who, for a fee, finds, or attempts to find, employment in Ontario for prospective employees” and “[a]ny person who, for a fee, finds, or attempts to find, employees for prospective employers in Ontario” (emphasis added)
Note: there are many exemptions specified in the regulation for these broad categories of “recruiter”, including those working in-house and on behalf of colleges or universities
c) How will the new requirements impact “assignment employees” and “clients”?
The intention is that assignment employees who are recruited by or on the roster of THAs and recruiters will benefit from these new requirements – e.g.:
The assignment employees can look up an agency’s status online before applying to or accepting an offer from them.
Unscrupulous THAs and recruiters will not be permitted to engage with assignment employees (assuming their bad acts are caught through the licencing or renewal process or that they are deterred from operating in the first place).
If their employment ends because of the cancellation or refusal of a licence, the assignment employees are eligible for notice/termination pay and, if applicable, severance pay under the ESA.
There are no penalties or sanctions for assignment employees who work with unlicensed THAs or recruiters.
By contrast, and in recognition of the power dynamic in the client-THA-assignment employee relationship, “clients” (usually employers) are prohibited from “knowingly engaging or using the services” of an unlicensed THA or recruiter. Previously, a client was only required to record the daily and weekly hours of work of assignment employees, as of July 1, 2023, they must now also keep a record of the assignment employees’ names along with the daily and weekly hours. (This seems like a clean-up of an oversight rather than a groundbreaking update, in my view.) But together, these changes make clients accountable for the actions of the third parties they engage (and from whose services the clients benefit).
d) What are the penalties and implications of non-compliance?
Employment standards officers (“ESOs”) will enforce these new requirements, through issuing notices and penalties against THAs and recruiters that operate/act without a licence. Monetary penalties are as follows:
$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
If a client knowingly uses an unlicensed THA or knowingly engages an unlicensed recruiter, the ESOs can issue orders of compliance, impose monetary penalties (in line with those above), or recommend prosecution.
e) Key takeaways for employers/clients
For those employers (“clients” under the ESA) that engage THAs and recruiters, it is important that they are proactive about their direct and indirect compliance obligations. PH recommends that they:
Encourage their THAs and recruiters to submit their licensing applications early
Ensure that any THAs and recruiters with which they work submit proof of application and licencing (to the Ministry and to the employer) before July 1, 2024 and, subsequently, on an annual basis
Do a preliminary assessment as to whether their THAs/recruiters recruit foreign nationals, particularly below the “median hourly wage”, and if so, ask whether they have met any applicable security posting requirements
Update temporary help/recruiting service agreements to:
equire the THA or recruiter to provide immediate written notice of a change in licencing/operating status;
address costs and other implications of the THA or recruiter’s failure to comply; and
confirm compliance with other legislation, including the Competition Act (as detailed by PH previously) and An Act to enact Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff.
Enact a back-up plan if the THA or recruiter loses its authority to operate
As with many of the legislative requirements imposed on employers recently, preparing well in advance of the deadline will be key to avoiding business interruption and sanctions.
[1] If the licensee will (a) not recruit foreign nationals or (b) will only required foreign nationals if the position have wages are or above the “median hourly wage”, an LOC is not required. Details of the wage threshold are here.
