On May 12, the Court of Appeal handed down a long-awaited decision on the legality of certain provisions of the Regulation respecting personnel placement agencies and recruitment agencies for temporary foreign workers (the “Regulation”). This article summarizes the key takeaways from this decision, which may have implications for companies involved in staff leasing and for their clients.
Background
In 2018, the Québec government amended the Act respecting labour standards (the “LSA”) in order to regulate personnel placement agencies. Bill 176 essentially proposed to establish, by regulation, a licensing system for personnel placement agencies and to regulate their operations and obligations. However, the bill did not define the term “personnel placement agency.” The definition eventually appeared in the Regulation, which came into force on January 1st, 2020. According to section 1 of the Regulation, a personnel placement agency is “a person, partnership or other entity that has at least one activity consisting in offering personnel leasing services by providing employees to a client enterprise to meet its labour needs.” Companies that meet this definition must obtain a licence from the Commission des normes, de l’équité, de la santé et de la sécurité du travail (the “CNESST”) in order to be able to carry out their activities.
A group of employer associations asked the Superior Court to strike down the Regulation’s definition of personnel placement agency on the grounds that it is imprecise and illegally broadens the scope of the LSA provisions governing such agencies. As a result, companies would be required to obtain a licence even if they were not specialized agencies, as soon as at least one of their activities involved leasing personnel to third parties. At trial, the Superior Court ruled in their favour.
The Attorney General of Québec, the CNESST, and a workers’ rights organization appealed the ruling. In a decision dated May 12, 2025, the Court of Appeal overturned the Superior Court’s decision and confirmed the legality of the Regulation’s definition of placement agency.
It should be noted that the Court of Appeal also upheld sections 10 and 11 of the Regulation. However, for the purposes of this article, we will focus exclusively on the findings concerning the definition in section 1.
The Decision
The Court of Appeal did not consider the definition of placement agency to be imprecise. Although it is not possible to list all the types of businesses that this definition could cover, the regulatory provision allows for an interpretive debate: it will be up to employers and the CNESST to consider and debate its application to each situation.
Notwithstanding the foregoing, the decision still offers a number of lessons that will certainly guide future decision-makers in interpreting the definition.
What is a staff leasing contract?
The Regulation’s definition is based on the following elements: a “person, partnership or other entity” “that has at least one activity” consisting in offering “personnel leasing services” to a client enterprise to meet its “labour needs.” In its decision, the Court of Appeal made some interesting points about what constitutes a staff leasing contract, while noting that this is not a new legal concept.
This type of contract generally refers to an arrangement in which a company “leases” personnel, i.e., provides employees to other client companies. The leasing company hires and pays the workers, but they go on temporary assignments to other companies, where they work for the client alongside the client’s other employees. The subject of the contract between the leasing company and the client is therefore the work capacity of the employee made available to the client.
The definition of an agency includes another key element: the purpose of leasing staff is to meet the client company’s labour needs.
These elements distinguish staff leasing contracts from a contract for services, which applies to the performance of work on the client’s premises or the provision of a service to the client.
The Court of Appeal used the example of cleaning services to illustrate the difference between these two types of contracts. A company that already has its own cleaning staff may use the services of employees from another company (the agency) to temporarily replace an absent employee. This situation would constitute a staff leasing contract, since the agency’s employees would be placed with the client company to supplement its usual team. On the other hand, if the client company hires a specialized firm to handle all the cleaning on its premises, this type of contract would be more akin to a contract for services. A parallel could also be drawn between the latter situation and that of a subcontractor who travels to a client’s premises to inspect and maintain machinery, or an engineer sent to a client site by their employer to provide consulting engineering services. In both of these cases, the subject of the contract is not the employee’s ability to work, but rather the provision of a service.
A company would therefore be required to obtain a licence to operate only in the case of a genuine staff leasing contract, and not in the case of a contract for services.
How often must staff leasing activities be carried out?
Section 1 of the Regulation provides that a company is a personnel placement agency subject to the licensing requirement if at least one of its activities consists in offering staff leasing services. Without specifying a precise frequency, the Court stated that the definition implies that the activity is carried out with “some regularity.” Therefore, the definition covers companies that engage in staff leasing, either as their primary or secondary activity, without necessarily specializing in this field.
Conclusion
The Court of Appeal’s decision confirms the legality of the definition of personnel placement agency set out in section 1 of the Regulation. For companies, this ruling is an important reminder: a company can be considered a placement agency if it offers staff leasing services, even as a secondary line of business.
This has legal consequences for both the company providing the services and the client company. Firstly, the placement agency must hold a licence issued by the CNESST to carry out the activity. Secondly, the LSA prohibits a client enterprise from doing business with an unlicensed placement agency. In the event of a breach of their respective obligations, the placement agency and the client enterprise are liable to a fine of between $600 and $6,000, and between $1,200 and $12,000 for any repeat offence.
It is therefore essential to carefully examine the nature of one’s contractual relationships with clients or partners. The distinction between a contract for services and a staff leasing contract is an important one that can have real impacts on a company’s regulatory compliance.
The author would like to thank law student Thierry Charlebois for his contribution to the drafting of this article.