A Canadian Recruitment Agreement is a legally binding contract between a recruitment or staffing agency and a client company that defines the terms under which the agency will source, screen, and present candidates for employment positions within the client's organization. This agreement is essential for establishing the fee structure, the obligations of each party, candidate ownership rules, and the legal framework governing the recruitment relationship.

Canadian recruitment agreements must comply with federal and provincial employment standards legislation. In Ontario, Part XVIII.1 of the Employment Standards Act, 2000 (S.O. 2000, c. 41) specifically regulates temporary help agencies and recruiters, including mandatory licensing requirements that took effect on July 1, 2024. Under these provisions, temporary help agencies must hold a valid licence issued by the Director of Employment Standards, and clients are prohibited from knowingly using the services of an unlicensed agency. Similar regulatory frameworks exist in British Columbia, Alberta, and Quebec.

A critical aspect of Canadian recruitment law is the prohibition against charging fees to job seekers. Ontario ESA s. 74.8 explicitly prohibits temporary help agencies and recruiters from charging any fee to a candidate in connection with finding or attempting to find employment. This prohibition is consistent across Canadian jurisdictions and reflects the principle that the cost of recruitment is borne by the employer, not the worker.

The agreement must also address privacy obligations under the Personal Information Protection and Electronic Documents Act (PIPEDA) and applicable provincial privacy legislation. Candidate personal information — resumes, employment history, references, and assessment results — constitutes personal information that must be collected with informed consent, used only for the stated recruitment purpose, and protected with appropriate security safeguards. Both the agency and the client are accountable for their handling of candidate data.

A Recruitment Agreement is needed whenever a company engages a third-party agency to assist with hiring. The most common scenario is contingency recruitment, where the agency is paid a percentage of the hired candidate's first-year salary only upon successful placement. Companies use contingency recruiters when they need to fill positions quickly but want the flexibility to work with multiple agencies simultaneously and pay only for results.

Retained search engagements require a formal agreement because the client pays a non-refundable retainer upfront, typically one-third of the estimated total fee. Retained searches are used for senior executive positions, specialized technical roles, or confidential searches where discretion is paramount. The agreement must clearly define the retainer amount, payment schedule, and whether the retainer is credited against the final fee or charged in addition to it.

Temporary staffing arrangements are another common trigger. When a company needs workers on a short-term or project basis, the staffing agency acts as the employer of record, handling payroll, source deductions (CPP, EI, income tax), and T4 reporting obligations to the Canada Revenue Agency. The agreement must define the hourly bill rate, the markup structure, and the respective responsibilities of the agency and client regarding workplace safety, workers' compensation (WSIB in Ontario, WCB in other provinces), and employment standards compliance.

Contract-to-permanent arrangements require special attention because the candidate initially works as a temporary employee of the agency before being offered permanent employment by the client. The agreement must specify the conversion fee — the amount the client pays to hire the worker permanently — and the timeframe after which no conversion fee applies.

Without a written agreement, disputes over candidate ownership, fee entitlement, and guarantee obligations are common and difficult to resolve. Courts have consistently held that the terms of the recruitment relationship must be documented in writing to be enforceable.

Scope of Services: Define whether the engagement is contingency, retained, temporary staffing, or contract-to-permanent. Specify whether the arrangement is exclusive or non-exclusive, and list the types of positions the agency will recruit for.

Fee Structure: Clearly state how fees are calculated. For percentage-based fees, specify the base (first-year gross annual salary including base, guaranteed bonuses, and signing bonuses). For flat fees, state the fixed amount per placement. For temporary staffing, define the hourly bill rate and any overtime or holiday premium rates. All fees are subject to GST/HST under the Excise Tax Act.

Guarantee Period: Define the replacement guarantee window (typically 60-90 days) and the remedy — free replacement candidate, pro-rated refund, or full refund. Specify the conditions that void the guarantee, such as the client terminating the candidate without cause or changing the job terms.

Candidate Ownership and Non-Solicitation: Establish that candidates formally introduced by the agency belong to the agency for a defined period (typically 6-12 months). Prohibit the client from hiring introduced candidates directly without paying the agency's fee. Define what constitutes a valid introduction.

Privacy and PIPEDA Compliance: Both parties must comply with PIPEDA when handling candidate personal information. The agency must designate a privacy officer, obtain candidate consent before sharing information with the client, and limit collection to what is necessary for the recruitment purpose.

Employment Standards Compliance: In Ontario, confirm the agency holds a valid licence under ESA Part XVIII.1. Confirm that the agency does not charge fees to candidates. For temporary staffing, clarify which party is the employer of record and which is responsible for source deductions, T4 reporting, and workplace safety.

Term and Termination: State the agreement's duration, renewal terms, and how either party can terminate with written notice. Specify that fee obligations and non-solicitation restrictions survive termination.