In recent years, investigations by Ministry of Labour, Immigration, Training and Skills Development (the “Ministry”) officers have reportedly uncovered issues related to the payment of minimum wage and to the respect of other basic employment rights in certain sectors. Accordingly, in an effort to better protect vulnerable employees from exploitation, the Ontario government has introduced a new licensing requirement for temporary help agencies (or “THAs”) and recruiters.
Although THAs and recruiters will only be required to have a licence to operate in Ontario as of January 1, 2024, online applications are now open. It is vital that employers who are subject to this new requirement give themselves ample time to properly complete the application process. Notably, those who do so before January 1, 2024 will benefit from the application of a transitional rule, detailed further below, which will allow them to avoid an abrupt operational shutdown in the event that they are not issued a licence by the deadline.
Legislative and Regulatory Framework
In October 2021, the Ontario government introduced the Working for Workers Act, 2021 – also known as Bill 27. Amongst other things, Bill 27 made amendments to key employment legislation, including the Employment Standards Act, 2000 (the “ESA”), in order to create a new requirement for THAs and recruiters to be licensed to operate within the province.
More recently, on July 1, 2023, the first stage of these amendments came into force. Included in this initial stage were primarily provisions that allow THAs and recruiters to submit their licence applications ahead of time. The second stage, which will come into effect on January 1, 2024, will cover the remaining provisions related to the new licensing requirement.
In support of these amendments, the government also published several regulations under the ESA. These include:
- Reg. 99/23: Licensing – Temporary Help Agencies and Recruiters, which provides additional information and guidance on the new licensing requirement under the ESA;
- Reg. 100/23: Penalties and Reciprocal Enforcement, which amends the current Penalties and Reciprocal Enforcement regulation under the ESA so as to detail the types of contraventions that could result in an administrative monetary penalty being issued against a THA or recruiter, or against their clients; and
- Reg. 101/23: Termination and Severance of Employment, which amends the current Termination and Severance of Employment regulation under the ESA in order to specify that if an employee’s employment is terminated or severed because of a decision of the Director of Employment Standards (the “Director”) to refuse to issue or renew, or to revoke or suspend, a licence to operate as a THA or as a recruiter, the employee’s contract has not been frustrated.
The New Licensing Requirement under the ESA: An Overview
As of January 1, 2024, the ESA will:
- Require a THA to hold a valid licence to operate as an agency;
- Prohibit clients from knowingly engaging or using the services of a THA unless the agency holds a valid licence;
- Require a recruiter to hold a valid licence to act as a recruiter; and
- Prohibit employers, prospective employers and other recruiters from knowingly engaging or using the services of a recruiter unless the recruiter holds a valid licence.
Who Does the New Licensing Requirement Apply to?
Both “temporary help agency” and “recruiter” are defined terms under the ESA and its regulations.
A temporary help agency refers to 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 refers to 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. It does not, however, include any of the following:
- An employee who performs the functions described above as a duty of his or her position;
- An employer who finds or attempts to find employees to be employed in his or her own organization;
- Certain educational institutions;
- Trade unions;
- Registered charities;
- A person who is party to an agreement with the federal, provincial or municipal government to find or attempt to find employment in Ontario for prospective employees or to find or attempt to find employees for prospective employers in Ontario, and who does not perform these functions outside of the scope of these government agreements; and
- A person who finds or attempts to find employment in Ontario for prospective employees who are eligible to receive services and supports under the Services and Supports to Promote the Social Inclusion of Persons with Developmental Disabilities Act, 2008 and who receive funding to purchase those services and supports in accordance with a program funded by the Ministry of Children, Community and Social Services, and who doesn’t find or attempt to find employment in Ontario for prospective employees except in those specific circumstances.
If a THA is located outside of the province but assigns employees to work in Ontario, the new licensing requirement will apply. Likewise, a recruiter does not have to be physically located within the province in order for the new licensing requirement to apply, as long as the work in question will be performed in Ontario.
It is important to note that each legal entity that operates as a THA or as a recruiter is required to apply separately for a licence, including legal entities that are treated as one employer under the ESA. Moreover, if a single legal entity operates as both a THA and as a recruiter, it is required to apply for two separate licences: one to operate as a THA and one to act as a recruiter. Each application requires its own application fee and letter of credit.
The Application Process
As mentioned earlier, applications for licences may now be made online.
As part of the application process, applicants are required to submit a non-refundable application fee of $750. They are also required to provide a variety of relevant information and documentation, including but not limited to the following:
- Contact information, including email addresses, for one or more individuals who may be contacted if the Ministry has questions about the application;
- The address of every location where the applicant carries on business, including nationally and internationally;
- Where the applicant is a corporation, the name and address of each corporate officer and director;
- Where the applicant is a partnership, the name and address of each partner;
- Information with respect to the applicant, corporate officers and directors, and partners about similar applications and licences in other Canadian jurisdictions;
- Information about certain criminal convictions of the applicant, its corporate officers and directors, or its partners, and whether they are subject to a ban under the Ontario Immigration Act, 2015;
- Information about other legal persons, whether businesses or individuals, that the applicant engages or uses in connection with the recruitment or employment of foreign nationals;
- Information about compliance with various employment statutes, including the ESA, the Employment Protection for Foreign Nationals Act, 2009, the Occupational Health and Safety Act, and the Workplace Safety and Insurance Act, 1997;
- Tax compliance verification number from Ontario’s Ministry of Finance showing tax compliance; and
- An electronic irrevocable letter of credit that can be used to repay owed wages to employees.
The electronic irrevocable letter of credit is subject to certain specific requirements, including that it must:
- Be made out in favour of the Director;
- Be issued by a bank in Canada or credit union;
- Total $25,000;
- Automatically renew upon expiry;
- Permit unconditional “partial drawings”, such that the Director would be allowed, for prescribed reasons and in accordance with the prescribed processes, to seek and obtain payment in an amount less than $25,000; and
- Not be subject to any other conditions.
The Transitional Rule
As previously noted, THAs and recruiters will be required to have a licence to operate in Ontario beginning on January 1, 2024. As of that date, THAs and recruiters who do not have a licence will be prohibited from operating within the province altogether unless the transitional rule applies.
The transitional rule provides that if a legal entity that operates as a THA or as a recruiter applies for a licence before January 1, 2024 but has not yet received a decision on the application from the Ministry by that date, it may continue operating as a THA or as a recruiter until such time as a licence has been issued or the application for a licence has been denied.
The transitional rule does not apply if a legal entity that operates as a THA or as a recruiter applies for a licence on or after January 1, 2024. In those circumstances, the THA or recruiter will simply be prohibited from operating as such altogether as of January 1, 2024, unless and until they are issued a licence.
Recourse in the Event of a Denial
In terms of recourse, applicants whose application for a licence is denied will be permitted to file an application with the Ontario Labour Relations Board (the “Board”) seeking a review of the Ministry’s decision, as long as they do so within 30 days.
Applicants who submitted their initial licence application before January 1, 2024 and who have been denied a licence will generally only be allowed to continue operating as a THA or as a recruiter for a period of 30 days from the date the Ministry serves them with notice of the denial. However, applicants who elect to lodge an application with the Board will be allowed to continue operating as a THA or as a recruiter throughout the course of the review process, unless the Board orders otherwise.
Prohibition on the Use of Unlicensed THAs or Recruiters
Once the new licensing requirement is in effect, clients of THAs will be prohibited from knowingly engaging or using the services of a THA unless the agency holds a licence to operate as such. Similarly, employers, prospective employers, and other recruiters will be prohibited from knowingly engaging or using the services of a recruiter who does not hold the required licence. Helpfully, information on the status of both applications and licences is available to the public and can be found here.
These prohibitions are, of course, subject to the application of the transitional rule. Additionally, in cases where the THA or recruiter submitted their initial licence application before January 1, 2024, the prohibitions will not be in effect during the 30 day period immediately following receipt by the THA or recruiter of the Ministry’s notice of denial, as well as during the course of any review process before the Board, unless the Board orders otherwise.
Any violations of the new licensing provisions in the ESA could lead to enforcement action on the part of the Ministry, which could include ordering compliance, issuing monetary penalties, or even prosecution.
In particular, if any person provides false or misleading information during the application process, an employment standards officer may issue a notice of contravention with penalties ranging from $15,000 for a first contravention, to $25,000 for a second contravention within a three-year period, to $50,000 for a third contravention in a three-year period. Starting on January 1, 2024, similar penalties will apply in respect of any contravention related to operating as a THA or acting as a recruiter without a licence, or knowingly engaging or using the services of an unlicensed THA or recruiter.
In Our View
Although this article focuses primarily on the process for submitting an initial licence application in light of the forthcoming requirement, THAs and recruiters should note that they will also have to apply to renew their licences on an annual basis.