Small recruiting firms push back on new Ontario licensing aimed at temp agencies

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Some small recruitment agencies say it is unfair that they are being caught up in Ontario’s new licensing standards for staffing agencies, which are aimed at cracking down on exploitation of temporary workers.

Ontario Labour Minister Monte McNaughton announced in July that businesses in the recruiting and staffing industry would need to apply for licences by Jan. 1, 2024, pay $750 application fees and put up $25,000 letters of credit that the government could draw upon, if needed, to cover wages owed to employees.

Any independent business that helps people find jobs, or helps businesses find job candidates, is covered under the new regulations. Some types of businesses are exempted, such as in-house recruiters or agencies working for the government.

The Ontario Ministry of Labour said in a statement that it had identified instances of labour trafficking in 2020 and 2021 that added up to $4.2-million in unpaid wages. In a CBC interview after the announcement, Mr. McNaughton said the recruiting industry was operating in a grey area that allowed “criminals to prey on our most vulnerable workers.”

But some small recruiting firms say there is no obvious reason the new rules should apply to them.

Jason Noble, founder of the Noble Search Group, said his business model is totally different from that of a temp agency. He earns a fee not by supplying businesses with temporary employees, but by helping companies permanently hire managers or executives. Unlike a temp agency, his company doesn’t handle paying these workers after they are placed in jobs. Instead, the employees are paid directly by the hiring companies.

“If the problem is only in the temporary staffing agency business, why are we all guilty by association?” Mr. Noble said.

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Suky Sodhi, president of Professional Selection Inc., another recruiting agency, said the new regulations should only cover staffing companies that pay workers directly, and are therefore in a position to exploit them.

“Any agency that is handling the temps’ payroll, source deductions, safety, all of that stuff – 100 per cent, this law, I’m all for it,” she said.

Executives of small firms also said the new costs are too high and should be scaled based on the size of the agency.

Jessica Smith, founder of Savant Recruitment, said tying up $25,000 in a letter of credit will be a big hit to her business, which she launched in 2022 after years of working for larger companies.

She said the changes come at a difficult time for the industry. Hiring has slowed down and many companies are laying off workers. “This year, business has changed for a lot of staffing agencies,” Ms. Smith said.

The Ontario government says the new rules are deliberately broad, to make it harder for bad actors to skirt them.

“While the majority of temporary help agencies and recruiters follow the rules, inspections by our ministry have found some firms charging illegal fees, paying people below the minimum wage, and denying them other basic rights,” Ontario Ministry of Labour spokesperson Anuradha Dhar said in an e-mail.

Mary McIninch, executive director of the Association of Canadian Search, Employment and Staffing Services (ACSESS), said the industry group was consulted on the regulations and supported them. She said the new rules would bring Ontario in line with regulations in Alberta and British Columbia.

Ms. Sodhi and Ms. Smith, who are not members of the association, said they were blindsided by the new rules when they found out about them recently. They organized a call with more than 150 other small firms last week and said the participants were not supportive of the changes. They also said they felt the association and large recruiting firms supported the changes because they allow them to more effectively control who works in the industry.

Ms. McIninch said more than half of ACSESS’s membership is made up of small or medium-sized companies. She said the organization saw a need to “raise the bar” to protect industry standards.

Mr. Noble said he hopes Ontario Premier Doug Ford is open to amending the rules.

“Here you have a guy like Doug Ford, who is supposed to be for small business, and if he’s actually for the small-business owner, why is he adding red tape, why is he adding cost that will put some of us out of business?” Mr. Noble said.