is legal just a matter of not getting caught
Staffing firms do give work out to one man limited companies and they are allowed to do it as long as the limited company fits the rules of an true contract providing a service to a client (the agency) the problems come about when the relationship between agent and contract is more one of employer and employee (see below tests) then the agency has to change the contract or method of payment to that of tax deducted employee and employer. CCRA are really clamping down on these matters.
Have more than one client (as Simon says) as well as be in control of the service you provide, carry out work for a fee (not simply hourly paid) have the potential to loose money on the project (finical risk) be able to pass the work on to somebody else to carry out (at your discretion) and provide your own tools (be that a hammer or a computer or whatever) and the list goes on.
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