Worker’s Compensation – Province aims at Temp Agencies once again

A study conducted by Statistics Canada suggested that, in 2014, over 747,000 Ontarians were employees of a Temporary Help Agency (“Agency”). More recent statistics published by the Workplace Safety and Insurance Board (“WSIB”) appear to suggest a significant increase in the number of Ontarians employed at Agencies since then.

Where once employed mainly in clerical office jobs, the majority of Agency workers are now assigned to work in non-clerical sectors of industry, including manufacturing, construction, retail, health-care, foodservice, logistics and transportation.

The recent focus on Agency Workers

In 2016, the WSIB released statistics which suggested that temporary workers were up to two (2) times more likely to be injured at work than their permanently employed counterparts.

In 2017, the Toronto Institute for Work and Health advised that employers were more likely to contract out very dangerous work to temporary employees because of loopholes built into the current worker’s compensation system. Because of these loopholes, temporary workers were more likely to be assigned to higher injury-rated jobs than their permanently employed counterparts. Further, many of the job classifications in which temporary workers were overrepresented involved a substantial degree of manual labour.

Similar conclusions were made in the recently published Ontario Changing Workplaces Review, which described temporary workers as “among the most vulnerable and precariously employed of all workers”.

The foregoing concerns were brought into sharp focus when, in a March 8, 2018 article, the Toronto Star reported on the death of a 23-year-old temporary worker who was fatally injured on the job just two weeks after she was assigned to the client employer. The horrific incident involved the worker being strangled because her head scarf was caught in the mechanism of an unguarded machine. The article stated that the WSIB “struggled in the wake of the temporary worker’s death to hold [the client employer] accountable, because the necessary legislation was not in place”.

The status quo – worker’s compensation loophole

Currently, if a temporary worker is injured at a client employer’s workplace, the worker’s compensation costs of that injury are assumed, in their entirety, by the worker’s “employer of record” – the Agency. As a result, if a temporary worker is injured on the job while assigned to a client’s workplace, the Agency’s WSIB premiums increase, not the client’s. This arrangement has, for many years, provided a significant cost-saving advantage to client employers.

In recent years, members of the Ontario legislature have called for the imposition of rules and regulations which would require a greater level of financial accountability from Agencies and client employers.

Ontario’s Legislative Response

Bill 148

Effective April 1, 2018, in addition to improving the ability of Agency employees to unionize, the ESA now guarantees temporary workers “equal pay for equal work”. Temporary workers can now file complaints and/or initiate “pay reviews” if they feel that they are being underpaid while performing “substantially similar” work by comparison to a client employer’s permanent employees.

Although the ESA indicates that an Agency bears primary liability for any unpaid wages owing to its employees, the potential operation of these new “equal pay for equal work” rules can, in extreme cases, result in significant unanticipated liability for client employers. It is important to keep in mind that Employment Standards Officers have the legal authority to order an Agency to retroactively adjust an affected employee’s wages for up to two (2) years prior to the date of an alleged contravention of these rules.

These issues may be of significant concern to client employers because the ESA deems both Agencies and client employers to be “jointly and severally liable” for any unpaid wages owed to temporary employees that the employees’ primary employer (i.e. the Agency) fails to pay.

Bill 18

Effective April 6, 2018, the Ontario legislature “proclaimed into force” Schedule 5 of Bill 18, otherwise known as Ontario’s Stronger Workplaces for a Stronger Economy Act, 2014. Bill 18 was enacted in 2014, but Schedule 5, which significantly amends the Workplace Safety and Insurance Act (the “WSIA”), was not proclaimed into force for another four (4) years.

Bill 18 could significantly modify the status quo as it relates to temporary workers, Agencies and client employers. Now that it has been proclaimed into force, Schedule 5 of Bill 18 permits the legislature to create and file Regulations which would require the WSIB to “impose costs” on client employers as a result of any workplace injuries suffered by temporary workers assigned to them.

Further, upon the filing of supporting Regulations to Bill 18, the WSIB will be able to:

  • Deem all wages paid by an Agency to a temporary worker for the “current year”, for work performed at the client employer’s premises, to have been paid by the client employer;
  • Attribute any injury and accident costs as a result of an injury at the client employer’s workplace to the client employer, as opposed to the Agency; and
  • Increase or decrease the client employer’s WSIB premiums and NEER ratings.

The filing of supporting Regulations under Bill 18 would also create notice requirements for client employers in the event of a workplace injury. We would anticipate that client employers would be responsible for providing notice of any workplace injury requiring health care, or preventing a worker from earning full wages, to the WSIB (as the client employer would if its own employee were injured).

Further, if supporting Regulations under Bill 18 are enacted, it is likely that notices of injuries regarding temporary workers will have to be filed on WSIB-approved forms, and client employers will be obligated to cooperate with the WSIB during any required investigation(s) into the circumstances surrounding the injuries.

It stands to reason that, where a client employer fails to meet such notice requirements, the WSIB will be granted the authority to impose administrative fines and penalties to deter future offences.

Concluding Remarks

Over the course of the past five (5) years, the Ontario legislature has implemented legal and financial measures directly aimed at reducing the number of temporary workers in the province. The government has done so by making it more and more challenging for businesses to retain temporary workers. The legislature’s most recent amendments to the ESA and WSIA continue that trend.

With respect to the new equal pay rules under the ESA, it is noted once again that Agencies still bear “primary” responsibility for ensuring that their employees receive “equal pay for equal work”. While employers are “jointly and severally liable” for unpaid wages that an Agency fails to provide to its employees, the costs associated with accounting for these shortfalls would generally only arise if an Agency experiences serious financial difficulty or winds up its operations.

Employers should be aware that, at this point in time, there is very little stopping the Liberal government from filing a relevant supporting Regulation under the WSIA. If filed, the Regulation would likely take effect immediately (i.e. without prior warning). It is noted that there could also be a brief delay between the filing of a Regulation under the WSIA and implementation by the WSIB.

If the legislature files Regulations that “impose costs” on client employers for accidents suffered by temporary employees, a single compensable WSIB claim filed by a temporary worker could result in a sharp increase in an employer’s worker’s compensation premiums, and a detrimental change to the employer’s WSIB NEER rating. Keeping in mind that the WSIB’s NEER window is presently set at four (4) years, it stands to reason that a temporary worker’s compensable injury could very negatively affect a client employer’s WSIB premiums for an equivalent period of time.

This also ties back to the concept of “joint and several liability” under the ESA – in our view, it is not unreasonable to assume that Agencies will lose contracts, particularly once employers realize that many of the cost-saving advantages previously associated with retaining an Agency have been removed by operation of the foregoing legislation. Further, it is not unreasonable to assume that an Agency suffering a significant reduction in cash flow will be unable to pay its employees’ wages. Taking these possibilities into account, employers might have significant cause to be concerned about the fact that they are “jointly and severally liable” for any and all unpaid wages owed to temporary workers that are not paid by an Agency.

We will continue to monitor this issue and provide follow-up coverage if any relevant supporting Regulations under the WSIA are enacted by the provincial government.

Co-authored by Tushar Anandasagar and Lucas Hendsbee.

Tushar Anandasagar is an Associate Lawyer at LeClair and Associates P.C. He works in all areas of Labour and Employment law, with a particular focus on Workplace Health and Safety compliance and related issues. For further information or discussion, please contact Tushar by email at Tushar@leclairandassociates.ca. 

Lucas Hendsbee is a Research Assistant at LeClair and Associates P.C. He provides research and analysis regarding all areas of the law, with a focus on regulatory compliance, policy analysis and emerging legal issues. For further information or discussion, please contact Lucas by email at Lucas@leclairandassociates.ca.


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