Williams HR Law LLP

NEW LICENSING REQUIREMENTS FOR TEMPORARY HELP AGENCIES AND RECRUITERS

August 11, 2023

Ontario’s Working for Workers Act, 2021 introduced several new changes to the Employment Standards Act, 2000 (the “ESA”) including the implementation of a licensing framework for temporary help agencies (THAs) and recruiters. The amendments will come into force on January 1, 2024, requiring THAs and recruiters to have a license to operate in Ontario. It will also be a violation of the ESA for employers to knowingly use the services of unlicensed THAs or recruiters beginning January 1, 2024. Applications for licensing opened on July 1, 2023, allowing for a six-month period during which applicants can prepare and apply for licenses for a fee of $750.00, in addition to a $25,000 irrevocable letter of credit to be used as security against any amounts owing under the ESA.

Temporary Help Agencies Versus Recruiters

Temporary Help Agencies employ workers who then perform work for a third-party employer on a temporary basis. The workers are legally employed by the agency and the employer contracts with the agency, not the worker themselves. THAs can benefit employers in several ways, including helping to meet staffing demands while keeping costs down.

Recruiters, on the other hand, generally specialize in finding employees for prospective employers, in exchange for a fee. The recent amendments to the ESA provided an updated definition of “recruiter”, as

  1. any person who, for a fee, finds, or attempts to find, employment in Ontario for prospective employees, or
  2. any person who, for a fee, finds, or attempts to find, employees for prospective employers in Ontario.

However, there are exceptions to this definition. Notably, employees responsible for hiring as a duty of their employment and employers seeking to employ workers in their own business are not classified as recruiters and are exempt from the licensing requirements.

The Licensing Framework and the Transitional Rule

The licensing framework introduces a new, stringent set of criteria that THAs and recruiters must meet in order to operate in Ontario. Licensing criteria includes providing information confirming compliance with the ESA, the Occupational Health and Safety Act, and the Workplace Safety and Insurance Act, 1997, as well as verification that the organization is in good standing with regards to its tax obligations.

Employers who use THAs or recruiting agencies should be aware of the transitional rule allowing for some THAs and recruiters to continue to operate without a license past January 1, 2024. The transitional rule applies if a THA or recruiter has already submitted their application and have yet to receive a decision, and permits the THA or recruiter to continue operations until the date they receive notice from the Ministry that their application has been refused. Applicants can apply to the Ontario Labour Relations Board to review a refusal. THAs and recruiters can continue to operate for an additional thirty days after the date the Ministry provides notice of refusal and while the refusal is pending review, unless ordered not to by the Board.  It is not a violation of the ESA for an employer to use or continue to use their services if the transitional rule applies.

Employers and prospective employers can efficiently verify if a THA or recruiter is licensed or if the application for a license is under review through an online portal currently available through the Ministry of Labour, Immigration, Training and Skills Development of Ontario’s (the “Ministry”) website.

Significantly, THAs and recruiting agencies do not have to be located in Ontario for the licensing requirements to apply.

Penalties

Violations of the licensing framework under the ESA may result in enforcement action, which can include:

  • Ordering compliance;
  • Issuing monetary penalties, ranging from $15,000 for a first contravention and up to $50,000 for subsequent contraventions; and
  • Prosecution.

Takeaways for Employers

Starting January 1, 2024, employers who knowingly use the services of unlicensed THAs or recruiters to meet staffing needs will be in violation of the ESA. After January 1, 2024, to ensure compliance with the licensing requirements, employers who use the services of THAs or recruiters will be required to verify the licensing status of the THA or recruiter either by contacting them or using the Ministry’s online portal.

Employers should also be aware that some THAs and recruiting agencies may not be able to pay the fee or provide the substantial letter of credit in order to apply for a license, and as a result, may either be unable to provide services or will increase the fees they charge to employers.

Organizations that operate as a THA or recruiting agency must be aware of their licensing obligations under the ESA and should make preparations to ensure compliance with the licensing framework well in advance of January 1, 2024.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.

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