A bill extending severance and holiday pay rights to temporary workers will have a “dramatic” impact on IT staffing agencies in Ontario, according to those in the industry. WITH VIDEO

New legislation will drive IT temp jobs out of Ontario, critics say

According to Terry Power, president of one of Canada’s largest temporary staffing agencies, the provincial government got it 80 per cent right. But the 20 per cent it got wrong could be devastating for temporary IT workers in Ontario.

“It” is Bill 139, the Ontario government’s effort to extend benefits and protection to temporary workers placed by agencies.

“The intention of the bill is quite good,” said Power, who runs Randstad Canada Group. Bill 139 protects vulnerable workers from predatory agencies. Especially vulnerable are new Canadians unfamiliar with business culture and practices in Canada; some agencies will charge workers a fee to help them find work, even if work can’t be found. From those who do, these agencies might take a cut of the worker’s salary.

That’s unethical, Power said, and Bill 139 makes the practice illegal. “We’re fully in support of that,” Power said.

But two key provisions of the legislation, which is approaching final reading in the provincial Parliament, will make it more expensive for staffing agencies to do business in Ontario, and could drive temporary jobs out of the province, or even entirely offshore, Power said. And Power said he’s onside with a number of business groups, including the Information Technology Association of Canada, the Ontario Chamber of Commerce and the Canadian Federation of Independent Business.

The first, Power said, is outlawing the practice of collecting a conversion fee when a temp placed with an agency client is hired full-time, if the placement has been longer than six months.

Power said organizations including the Workers’ Action Centre, a Toronto-based workers’ rights organization, have complained that the fee is a barrier to full-time employment.

(WAC did not return phone requests for an interview. However, in its December newsletter, WAC calls Bill 139 “an incredible victory for all of our members and allies who have worked long and hard to bring the concerns of temp workers to the attention of the Ontario government.”)

Power vehemently disagrees the fee is a barrier.

“That’s crazy,” he said. Temp workers are often hired on full-time in IT, and while there are a number of criteria on which a client might base a decision – business growth, seasonal fluctuation, excessive layoffs – the fee isn’t one of them, Power said.

“The fee has nothing to do with them moving into a full-time job,” Power said.

Meghan Ferguson, an associate with labour law firm Hicks Morley Hamilton Stewart Storie LLP in Toronto, said conversion fees paid to agencies when an employee is hired on full-time are often intended to cover the agency’s training and recruiting costs. The ban on fees after six months of placement means “the agency has lost all its recruiting costs.”

The second provision extends severance and statutory holiday benefits to workers if they haven’t had an assignment for a certain length of time.

“After 35 weeks, if an employee is not offered an assignment, it will trigger termination and severance pay,” Ferguson said. That includes pay for statutory holidays in that window that the employee didn’t work.

Power said a temp could work for one month, not receive an assignment for 35 weeks, and then have to be terminated, receiving a week’s pay plus payment for statutory holidays. In a case like that, the agency’s costs would increase by 50 per cent, Power said.

“It’s dramatic,” Power said.

It’s common for temp workers to go without an assignment for long periods of time; in the general staffing world, the average temporary assignment is six weeks. While it’s longer on the IT side of the house, many entry-level jobs are often short term, he said.

However, if an agency offers an employee work and the employee refuses, the 35-week period begins all over again, said Ferguson. “It’s an administrative hassle and it’s difficult to track,” she said.

Before Bill 139, an employee could sit on the books of a temporary agency for years without triggering termination and severance, Ferguson said. The employee could have been working elsewhere, but maintaining employee status with the agency.

Power said the gains for workers under the bill will be wiped out because Ontario temporary workers will be too expensive. He pointed out that while Canada’s economy shed about 200,000 jobs in February, 28,000 temporary jobs were created.

Kevin Dee, CEO of Eagle Professional Resources Inc. in Ottawa, notes in his blog that the average profit of a staffing firm in Ontario is 2.8 per cent, according to Statistics Canada. The extra costs associated with Bill 139 “will very likely result in staffing companies going out of business … particularly in light of the current economic conditions,” he wrote.

Barry Marfleet, chief operating officer and Ontario president of ITAC, said the business model of temporary IT staffing agencies revolves around being able to supply workers on a project-by-project basis. Marfleet, with 17 years’ experience in the staffing business, said on most IT projects, about 20 per cent of staff is hired on a flexible basis.

“Even the province of Ontario itself uses these services,” he said.

Paying benefits for workers who are “sitting on the bench” makes the industry in Ontario less competitive, he said.

The Ontario Ministry of Labour introduced the bill in December 2008 to amend the Employment Standards Act. In a backgrounder to the legislation released in December, the Ministry wrote that “elect-to-work” employees – those who “may elect to work or not (to work) when requested to do so” – are exempt from ESA requirements regarding public holiday entitlements, notice of termination and severance pay. The legislation is a step toward eliminating those exemptions, according to the backgrounder.

Repeated calls to the Ministry of Labour for comment were not returned.

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