Anonymised, illustrative composite. A buyer priced the risk of using an unlicensed staffing supplier and never asked whether it would become one, the day it started running the business it had just bought.
At a glance
An asset purchase of a mid-sized temporary-help staffing agency operating across the Greater Toronto Area: client contracts, the brand, the placement roster and the operating team, for $4,200,000. The buyer had done staffing-sector deals before, always as the CLIENT side of the relationship — confirming that the staffing suppliers a target used were themselves properly licensed, and pricing the joint-liability exposure if one was not. That experience shaped the diligence checklist on this deal too.
The seller corporation, Agency Co., held a current Employment Standards Act licence to operate as a temporary-help agency, verified against the public licensing record before the purchase agreement was signed. The diligence checklist had a line for exactly that verification, and it came back clean: licence current, no suspension, no refusal history.
The checklist verified the wrong entity’s licence for what the deal actually was. This was an asset purchase, not a share purchase: the buyer’s own newly formed corporation, not Agency Co., would be the one operating the staffing business from closing forward — taking assignments, invoicing clients, running payroll for placed workers. Agency Co.’s licence belonged to Agency Co., and ESA, 2000 s.74.1.9 says, in its entirety: a licence is not transferable. It does not travel with the assets, the contracts, the brand, or the staff. It stays with the corporation the Director issued it to, and that corporation was not a party to what the buyer was acquiring.
Section 74.1.1 draws the obligation directly against whoever is doing the operating: “No person shall operate as a temporary help agency unless the person holds a licence for that purpose”. That is a standalone, strict prohibition — it does not ask whether the operator’s predecessor was licensed, whether the operator believed itself covered, or whether any client was harmed. The buyer’s new corporation, the moment it started taking assignments and invoicing clients under its own name, was a person operating as a temporary-help agency. Whether it held its own licence to do that is a question the seller’s licence status never answered.
This is a materially different exposure from the one the buyer’s prior deals had trained it to look for. As a CLIENT of an unlicensed agency, exposure runs through s.74.1.1(2) — “No client shall knowingly engage or use the services of a temporary help agency unless the person who operates the temporary help agency holds a licence for that purpose as required under subsection (1)” — a fault-based offence gated on the client’s knowledge, plus s.74.18’s wage joint-and-several liability. As the buyer OF the agency, none of that wage machinery applies; the exposure is s.74.1.1(1) itself, run against the buyer’s own new entity, for a state of affairs of its own making.
Nor is there a grace period for a first-time applicant the way there is for a renewal. s.74.1.10(2) keeps an EXISTING licence “valid until the licence is renewed or notice of the refusal to renew the licence is served” while a renewal is pending — but that protects a licensee who already holds one. It has no application to a brand-new applicant who never held one at all; the buyer’s corporation would have its own licence in hand by the day it started operating, or it would not be operating lawfully.
The buyer applied for its own licence eleven weeks before the scheduled closing date, once the gap was identified — s.74.1.4 makes issuance conditional on the Director being satisfied the applicant “has complied with any orders issued under this Act… and… meets the requirements set out in this Act and the regulations for the licence”, with no statutory turnaround time attached. The Director’s office confirmed the new licence nine weeks in — two weeks inside closing, with no certainty of that margin when filed. Agency Co.’s roughly 340 weekly placements sat behind that timeline.
Read the unit correctly and the question stops being about Agency Co. at all. The prohibition in s.74.1.1(1) attaches to whoever is doing the operating, at the moment they do it — not to the business, the brand, or the client base changing hands. A share purchase would not have raised this question in the same way: the licensed corporation itself would still be the one operating, its licence undisturbed by a change of shareholder, because s.74.1.9’s bar is on transferring the licence to a DIFFERENT PERSON, and a share sale does not change who the person is. An asset purchase does exactly that — it moves the business to a new legal person entirely, and s.74.1.9 gives that new person nothing to inherit.
See the hub’s licensing-and-client-liability case file for the client-side version — a company that USED an unlicensed agency, exposed under s.74.1.1(2) and s.74.18. That is not the buyer’s own risk here: after closing the buyer is not Agency Co.’s client, it is the operator of the business Agency Co. used to run, under s.74.1.1(1) instead.
The purchase agreement was restructured around the licensing timeline rather than the closing date the parties had originally picked. Closing was made conditional on the buyer’s new corporation holding its own current ESA temporary-help-agency licence, with an outside date long enough to absorb a slower-than-expected Director review. Agency Co. agreed to a short transition services arrangement — continuing to operate the placements itself, under its own existing licence, for a capped period if the buyer’s licence had not issued by the original closing date — so a delay in the Director’s office would not force a choice between missing a deadline and operating unlicensed.
Had the deal closed on the original date without the buyer’s own licence in hand, the buyer’s new corporation would have been operating as a temporary-help agency in contravention of s.74.1.1(1) from day one — every placement, every invoice, every payroll run exposed as the buyer’s own violation rather than an inherited one, with every CLIENT the buyer served in that period separately exposed under s.74.1.1(2) if it knew or ought to have known the buyer was not yet licensed. A finding of past non-compliance is also squarely the kind of history s.74.1.5(2) lets the Director weigh against a FUTURE renewal — turning a timing problem at the start of the buyer’s ownership into a live risk to its ability to keep operating at all.
The tell was a diligence checklist built from client-side deals, verifying the wrong entity’s licence for the structure actually being used. “Is the agency currently licensed” is the right question when you are buying its SERVICES. It is not the right question when you are buying its BUSINESS as an asset purchase, because the licence being verified belongs to a corporation that will not exist on the other side of closing as anything but a seller with cash. The right question for an asset buyer of a licensed business is whether IT will hold its own licence the day it starts operating — a question with its own timeline, its own application, and its own Director discretion, none of which the seller’s clean licence history answers.
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