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Archived - Discussion Paper on the Review of Labour Standards in the Canada Labour Code

I. Responding to the Evolving Workplace

I. Coverage under Part III

3. Agency Workers

Commission Recommendation:

Part III should make federally regulated enterprises jointly and severally liable with temporary employment agencies for non-payment of wages or benefits owing to agency employees who work in those enterprises. (R. 10.2)

Temporary employment agencies may be described as intermediaries in the employer-employee relationship, since they recruit workers and dispatch them to client employers on assignments. The Commission heard evidence that about 1.3% of persons working in federally-regulated industries have contracts through temporary employment agencies that dispatch them on a short-term basis, mostly to large client employers. These workers are paid by the agency, which is paid by the client employer. In general, workers who are placed by employment agencies are considered to be employed by the agency rather than by the client employer who retains their services. (However, the client employer can sometimes be considered the “true” employer of the workers, depending on factors such as the client’s degree of control over the work and the duration of the placement.)[13]

The Commission highlighted several problematic aspects of temporary agency work in its report. For instance, it noted that agency workers often receive less remuneration than they would if they were employed directly by the client firms for doing the same type of work. Moreover, such workers may also be prevented from applying for permanent jobs with client firms due to their contract with the agency or because of contractual terms between the agency and client employer. Temporary agency workers also have reduced access to statutory or contractual benefits that are based on a minimum length of service with the employer.

As the Commission pointed out, it is difficult for the federal government to regulate temporary employment agencies directly. This is because the licensing of businesses and the regulation of working conditions largely fall under the constitutional authority of the provinces. In the Commission’s view, direct federal regulation of temporary employment agencies is probably unconstitutional, except in respect of agencies that specialize in placing workers in the federal sector.

However, it is not known whether agency workers who are placed in federally-regulated workplaces are treated in accordance with federal or provincial labour standards, or to what extent labour standards are even being complied with. The Commission recommended that the government undertake, in cooperation with the temporary employment industry, a study of employment practices in that industry in order to determine the degree of compliance with federal and provincial labour standards and ascertain whether there are any inappropriate practices that can be regulated under Part III, to the extent feasible. It also recommended that the federal government, in consultation with interested parties, encourage placement industry associations to establish a code of conduct. The code of conduct would require agencies to comply with all relevant legislation, and prohibit practices that deprive agency workers of access to proper pay or benefits, interrupt their tenure of service after each assignment, or prevent them from taking permanent jobs with client firms after a defined interval.

Although the federal government cannot regulate many employment agencies directly, it can regulate a client employer in the federal sector where workers are placed. In the Commission’s view, Part III should make a client employer jointly and severally liable with temporary employment agencies for non-payment of wages or benefits owing to agency workers. This is because the client employer has had the benefit of work performed, it has the leverage to insist on compliance by the agency, and it can protect itself from adverse consequences by insisting that the agency provide a bond or other financial guarantee of compliance. As well, the client employer may be in a better position than the workers are to assess whether the agency is reputable in the industry.

The Commission’s recommendation is not unprecedented. There are two provinces, Quebec and Saskatchewan, where a client employer is deemed liable for any unpaid wages due and owing to agency workers who have performed work for the client employer.[14]

The Commission’s recommendation, however, may make a client employer pay twice for work (to the agency and to the workers placed by the agency). Some would argue that this is unfair. These individuals would say that a client employer should only be held liable for unpaid wages if it is collaborating with the agency to deprive workers of their pay or, at the very least, is aware of the agency’s intention not to pay. On the other hand, it may be difficult to prove whether or not a client employer was acting in concert with the agency or was aware of the agency’s intention not to pay workers.

For discussion:

• Should a client employer be deemed jointly and severally liable with a temporary employment agency for non-payment of wages or benefits owing to agency employees who perform work for the client employer? If so, should there be any pre-conditions to holding a client employer liable?
• If the Commission’s proposal is rejected, are there any other measures that can be taken under Part III to safeguard the interests of temporary agency workers placed in federally-regulated workplaces?
• Should the federal government work with the placement industry to adopt a code of conduct in order to achieve good practices through self-regulation? If a code of conduct is insufficient, what other measures could be taken to directly regulate the activities of temporary employment agencies?

[13] The Supreme Court of Canada observed in Pointe-Claire (City) v. Quebec (Labour Court), ([1997] 1 S.C.R. 1015) that in a temporary placement situation, the characteristics of an employer are shared by both the agency and the client employer. The tripartite relationship between the worker, the agency and the client employer may make it difficult to determine who is the “real” employer. Depending on factors as the client’s degree of control over all aspects of the work and the duration of the worker’s placement, the client employer may be considered as the “real” employer. See also Judy Fudge, “New Wine into Old Bottles? Updating Legal Forms to Reflect Changing Employment Norms,” University of British Columbia Law Review, Vol. 33, 1999, pp. 129‑152 (pars. 43-45).

[14] Saskatchewan’s Labour Standards Act stipulates that where an employer contracts with any person for the performance of an employer’s work, the employer must provide in the contract that the employees of the other person must be paid the wages to which they are entitled according to law. If the other person fails to pay the wages, the employer is liable to the employees of that person the extent of the work performed under the contract as if they were employees of the employer.

Quebec’s Act respecting labour standards provides that an employer who engages the services of a subcontractor is jointly and severally liable with the subcontractor for the pecuniary obligations the latter owes to its employees.

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Date Modified:

2012-02-15