Canada Issues Labour Guidance Restricting Temporary Help Agency Fees and Mandating Equal Treatment

Current rules

1. Temporary help agencies cannot charge workers for access to covered employment: A temporary help agency covered by the federal rules cannot charge a person a fee in connection with becoming its employee. It also cannot charge its employee for an assignment, an attempt to find an assignment, assignment-related preparation, job-preparation services or establishing an employment relationship with one of its client businesses. A fee does not become permissible simply because it is called a placement charge, job-preparation fee or administration fee. The legal question is whether the charge falls within one of the prohibited categories. The restriction covers different forms of payment. It can apply to a direct one-off charge, a larger lump sum, a percentage taken from a worker's wages or another type of charge for the prohibited purpose. This is important because an agency cannot avoid the rule simply by collecting the money through a different payment method. The guidance also states that, if an employee pays a prohibited fee, the agency must repay an amount equal to that fee. A worker who wants to make a monetary complaint through the federal Labour Program must meet the eligibility conditions, including that an employer-employee relationship existed when the fee was paid. The guidance says that such a complaint may be filed by a current or former employee of a federally regulated temporary help agency. 2. Restrictions apply to some fees charged to client businesses: The new rules also regulate what agencies can charge the businesses that use their services. A temporary help agency is prohibited from charging a client a fee for establishing a direct employment relationship with an agency employee when the statutory conditions make that fee prohibited. There is a specific exception: the prohibition on the client-conversion fee does not apply where the period between the worker's first assignment with the client and the date the client hires the worker is six months or less. Consequently, the precise timing of the direct hire matters. It would be inaccurate to report that every fee charged to a business when it hires an agency worker is now illegal. An agency is also prohibited from preventing or attempting to prevent an employee from establishing an employment relationship with a client. The purpose is to prevent agency arrangements from being used to block covered workers from moving into direct employment in circumstances where the law protects that transition. Whether a particular contractual arrangement or action breaches the provision depends on its facts and the applicable legal requirements. 3. Temporary agency workers can qualify for equal wage rates: A temporary help agency cannot pay its employee a lower rate of wages than the rate its client pays to the client's own employee unless the comparison falls outside the statutory criteria or a permitted exception applies. The comparison requires the agency employee and client employee to work in the same industrial establishment, perform substantially the same kind of work, require substantially the same skill, effort and responsibility, and work under similar conditions. The applicable regulations also require the rates to be calculated using the same type of wage rate, such as hourly pay, mileage, piecework, payment per load or commission. The comparison is about the rate of wages for comparable work, not necessarily the total amount of money people take home. For example, one employee may earn less overall because they work fewer hours while still receiving the same hourly rate. Conversely, part-time or temporary status cannot automatically justify a lower rate where all the relevant comparison criteria are met and no exception applies. The wage comparison is based on the actual work performed, not job titles alone. Two people with the same title may perform materially different duties or have different levels of responsibility. Equally, workers with different titles may perform substantially the same work. The assessment must consider the requirements of the role, the level of skill and effort required, responsibility and working conditions. The rules also prevent the client business from reducing the wages of its own employee simply to make it easier for the agency to comply with the equal-treatment requirement. The intended response to a qualifying wage gap is to bring the lower rate up to the applicable level, not to lower the rate of the better-paid worker. 4. Differences in pay can still be justified in specified circumstances: Equal treatment is not an absolute requirement that every employee receive exactly the same pay. The law allows certain differences where they arise from a qualifying system, including one based on seniority, merit or the quantity or quality of an employee's production. The rules also recognise specific additional grounds, including certain pay protections following reclassification or demotion, recruitment or retention difficulties during a shortage of skilled workers, geographic differences and certain differences for workers on travel status. For an exception to apply, the relevant system must meet the statutory and regulatory requirements. It must apply to the employees whose rates are being compared, and the details must have been communicated in writing or be readily available for employees to examine. A business cannot necessarily justify a lower wage after the fact by merely stating that a performance or seniority system exists. The system and the reason for the rate difference must satisfy the applicable requirements. Existing collective agreements also receive a transition period. Where an agreement in force when the relevant provisions commenced allows wage differences that conflict with the new equal-treatment requirements, the existing terms can continue to prevail for up to two years after commencement. The same type of transition applies to qualifying collective agreements covering temporary help agency employees. This means that certain conflicting terms in eligible existing agreements may continue until 20 October 2028. 5. Workers can request a review of their wage rate: An employee who believes their wage rate is lower because of their employment status may make a written request for the employer to review the rate. The employer must conduct the review and provide a written response within 90 days. The response must either confirm that the wage rate has been increased to comply with the law or explain why the existing rate complies. Where the employer increases the rate to comply, the employee must receive the difference in wages from the date of the written review request until the higher rate begins to be paid. Employers cannot dismiss, suspend, lay off, demote or discipline a worker for making the request, or use the request against the employee when making decisions about promotion or training. An employee who has requested a review generally must wait until receiving the employer's response or until the 90-day response period expires before filing a complaint about the relevant equal-treatment breach. The law also sets a six-month complaint period, calculated according to whether a wage-review request was made and when the response period or relevant knowledge of the issue arose. The rules allow for an extension in specified circumstances. Workers should therefore keep copies of their written request and the employer's response, and seek guidance promptly if they believe they are being underpaid. 6. The federal rules apply only where the jurisdictional conditions are met: The temporary help agency provisions apply where the agency is the worker's actual employer and the agency is federally regulated. The Labour Program may need to investigate to establish who the real employer is and whether federal or provincial labour standards apply. Simply placing a person in a job at a federally regulated business does not, by itself, settle every question about which law governs the agency's employment relationship. Federal labour standards cover particular sectors, including banks, airlines and airports, interprovincial and international transportation, railways, shipping, port operations, telecommunications and broadcasting, certain industries declared to be for Canada's general advantage, and First Nations band councils. The Canada Labour Code provisions discussed here do not govern every Canadian workplace, and the federal public service is also outside the Part III regime described in the supporting order. Most other workplaces are governed by provincial or territorial labour standards. The guidance states that employees include interns for purposes of the temporary help agency provisions, while student interns are excluded from those provisions. The equal-treatment guidance likewise excludes student interns from the equal-treatment provisions. Eligibility should therefore be checked against the worker's legal status, the nature of the placement and the jurisdiction involved.

Overview

Employment and Social Development Canada (ESDC) has published Interpretations, Policies and Guidelines IPG-123 to govern the administration of Division VI.1 of Part III of the Canada Labour Code. Taking effect on 20 October 2026, the guidance strictly prohibits federally regulated temporary help agencies from levying any fees on workers for employment onboarding, work assignments, job preparation, or direct placement with client businesses. It also prevents agencies from barring clients from hiring agency workers directly, restricting agency-to-client transfer fees to situations where the hiring occurs within six months of the first assignment. Crucially, the policy mandates equal wage rates between agency personnel and direct employees performing substantially identical work under equivalent conditions.

What changed in the latest version

Temporary employment agencies connect workers with businesses that need staff for a limited period. The arrangement usually involves three parties: the worker, the agency that employs them, and the business where the worker carries out the assignment. This model can help people find work, but it can also create problems when workers are charged money to secure assignments or paid less than comparable employees at the business where they work. The new rules specifically address those risks within the federal labour system. One important change is that covered workers must not be charged for obtaining an assignment, receiving job-preparation help, or moving into a direct employment relationship with a client. Such fees can cut into a worker's earnings before they have had a chance to benefit from the job. Where a prohibited fee has already been paid, the agency must repay an equivalent amount. This provides a specific remedy under the new framework, though whether a formal complaint can be made depends on the conditions set out in the guidance. The rules also address situations where an agency worker does substantially the same work as an employee hired directly by the client business but receives a lower wage rate simply because they are employed through an agency. If the required comparison conditions are met, the agency must pay the worker at least the rate the client pays its own comparable employee. This is intended to stop employment structures from being used to justify wage gaps between people doing substantially the same job. The broader equal-treatment provisions also matter to part-time, temporary, casual, and other workers whose employment status might otherwise be used to justify lower rates. They do not guarantee that every employee receives identical pay. The actual work, required skill, effort, and responsibility, working conditions, and type of wage rate must all be taken into account. Permitted differences may still exist when backed by qualifying systems or circumstances recognised in the law. For migrant workers, recruitment and pay arrangements can influence whether a job provides a realistic route to financial stability. Rules banning certain agency fees can help stop covered workers from losing money simply to secure work, while equal-treatment protections may improve pay for those in temporary assignments. However, a worker's nationality or immigration status does not determine whether these rules apply. The decisive points are the employment arrangement, the employer's regulatory status, and whether the statutory criteria are met.

Explained simply

Imagine a temp agency acts like a booking agent connecting you to a company that needs extra help. Starting on 20 October 2026, federally regulated agencies in Canada are banned from charging you any fees to sign up, find you a placement, write your CV, or help you practise for interviews. If they take your money, they have to pay it back. Agencies also cannot stop the company from hiring you full-time, and they can only charge the company a transfer fee if you are hired within your first six months there. Finally, if you do the exact same work under the same conditions as regular staff at that company, the agency must pay you the same wage rate.

Frequently asked

Version history

1. v1Effective 20 Oct 2026PublishedMedium impact
   Canada Issues Labour Guidance Restricting Temporary Help Agency Fees and Mandating Equal Treatment

   Employment and Social Development Canada published Interpretations, Policies and Guidelines IPG-123 on 6 May 2026, setting out operational guidance for the Temporary Help Agencies provisions under Division VI.1 of Part III of the Canada Labour Code. Effective 20 October 2026, federally regulated temporary help agencies that act as the real employer in a tripartite relationship are strictly prohibited from charging workers any fees for employment, assignment, CV drafting, interview preparation, or transition to client employment. Agencies are also prohibited from blocking employees from accepting direct employment with client businesses, and may only charge a client a transfer fee if the hiring takes place within six months or less of the worker's initial assignment. Additionally, agencies must provide equal treatment by paying their assigned personnel a wage rate equal to that of the client's own employees who perform substantially the same work under similar working conditions, while client businesses are barred from reducing their existing staff wages to facilitate compliance. The guidance applies to federally regulated agencies, their employees, and client businesses, whilst explicitly excluding student interns and agencies falling under provincial jurisdiction.