A new law in Ontario will require staffing firms in the province to have licenses and it will make other changes as well.

Called the “Working for Workers Act, 2021,” it was passed on Nov. 30 and the legislation received final approval on Dec. 2. In addition to requiring licenses for staffing companies and recruiters, the law will prohibit client companies from using unlicensed firms. The law has other provisions that will impact the staffing industry as well — including a ban on noncompete agreements for employees and a requirement that companies develop policies over after-hours communication with employees.

There were 2,257 temp help agencies operating in 2020, according to the ministry. And the licensing requirement was backed by the industry.

The law will help make things fairer for staffing firms, clients and assignment employees, according to the organization.

“In a nutshell it’s all about leveling the playing field,” George Vassos, a Toronto-based partner at law firm Littler LP, told Staffing Industry Analysts. “What the Ontario government has said publicly, they’ve been seeing agencies that are flouting the law when it comes time to dealing with basic employment rights.”

Right now, however, staffing firms and client companies have time when it comes to the licensing requirement. The government has indicated it won’t begin requiring them until 2024 at the earliest. In addition, the exact regulations on licensing are not yet out, including the definition of recruiter.

Noncompete clauses. Meanwhile, Vassos says other provisions of the law represent more immediate issues for staffing firms. These include the ban on noncompete clauses in employment contracts and the disconnect requirement calling for companies to develop policies for contacting workers after hours.

The ban on noncompetes was effective Oct. 25. Companies can still have noncompete clauses in their contracts for the duration of workers’ employment, but noncompete clauses that prevent workers from taking positions at competing companies after employment ends are not allowed. Ontario is the second province to have restrictions on noncompetes.

With the noncompete clauses, Ontario is also aligning itself with California, where noncompete clauses are also not enforceable. Meanwhile, the province is following in the footsteps of European countries such as France with its disconnect-from-work policy initiative. Ultimately, the government’s thinking is that if noncompetes are banned and there is a policy of disconnecting from work, it will help attract companies to Ontario, particularly tech firms.

Disconnect policies. The law requires that employers with 25 or more employees have a policy covering disconnecting from work relative to workplace communications, Vassos says. The law doesn’t say what companies must put in their policies.

Vassos says regulations covering what disconnect policies should include have not yet been released by the government. However, there are indications that policies might include such things as encouraging employees to turn out-of-office email notifications on after hours and listing expected response times to communications.

The disconnect provision became law on Dec. 2, but companies have leeway until June 2 to have their policies in place.

It doesn’t appear likely that all policies will have a blanket rule where employees cannot be contacted outside of working hours, and it doesn’t seem likely the regulation when it does come will be specific. One complication is the law already allows for differences between employee groups. For example, managers aren’t subject to maximum-hour rules while other employees are. Also, businesses vary with some operating 24/7 and others keeping traditional 9-to-5 Monday to Friday hours.

Licensing Provision

Once the licensing provision of the Working for Workers Act, 2021, takes effect, client companies will likely want staffing firms to represent in their contracts that they have a valid license, Vassos says. In addition, client companies will also likely want an indemnification agreement from the staffing firm if the representation is not true because the legislation includes fines for companies that use the services of unlicensed staffing firms.

Client companies will also want to check the government’s website listing staffing firms with licenses as part of their due diligence. Though one question will be how current information on the site is. If there is a lag, client companies may want to request a copy of the license.

More information on the regulations and government’s online registry of staffing firms will be forthcoming.