'There will be more scrutiny around each and every application,' says expert, as Ottawa looks to reduce number of permanent and temporary workers
“The biggest one is really the reputational harm,” says Jonathan Green, barrister and solicitor at Green and Spiegel in Toronto, in discussing the repercussions for employers if found non-compliant with Canada’s Temporary Foreign Worker Program (TFWP).
The federal government has amped up its enforcement and investigations of employers, leading to an increase in fines – and a public list of offending companies.
“A lot of clients have come to us because it is a public list. The concern is ‘We don't want to be on that public list. This is our reputation,’” he says.
“The public's view on immigration has changed dramatically in the past, I would say, over the last year or two, and so businesses are really wary of ensuring that they're compliant, and that reputational piece.”
There are definitely more audits and more inspections by government with these programs, says Julie Lessard, partner at BCF Business Law in Montreal.
“They’re being more stringent. They said they would, and they are,” she says. “I think that there will be more scrutiny around each and every application. What they want to do is reduce the number of both permanent and temporary foreigners. So, they will be looking at that.”
A total of 20 employers have been banned from using the Temporary Foreign Worker (TFW) Program as the federal government intensifies its efforts to protect the health and safety of temporary foreign workers.
So, how can employers stay compliant with the evolving rules of the TFWP? Green and Lessard provide insights and tips for HR.
Range of industries using TFWP
The TFWP allows Canadian employers to hire foreign workers to fill temporary jobs when qualified Canadians are not available. Employment and Social Development Canada (ESDC) assesses applications from employers through Labour Market Impact Assessments (LMIAs) to determine how these workers might affect the Canadian labour market.
There are several streams to the TFWP, such as high- and low-wage positions (based on the provincial or territorial wage threshold), applications to support permanent residency, and global talent including skilled or in-demand workers.
And a wide range of industries make use of the program, including fast food, retail, technology, construction and agriculture.
“We have small mom and pop businesses who are expanding in a really specialized, niche area, and there isn't necessarily the talent [available] in Canada, and then we have larger businesses as well,” says Green of the employers hiring TFWs, from entry level to management positions.
TFWs can also alleviate labour shortages because, on average, one-third of work permit holders transitioned to permanent residency (PR) within five years after receiving their initial work permit, says Ottawa.
Despite the increasing scrutiny – and growing complexity of the program -- there are still good things about the TFWP, says Lessard, who is also head of the Business Immigration Group at the firm.
“It's still way more open than the US system. It's just not as it was, and it requires more and more thinking, more strategy,” she says, as hiring foreign workers cannot be a spontaneous decision and employers must understand their obligations.
“It's new talent that you need to manage that new situation as well, HR people need to develop new skills.”
Understanding LMIAs
In submitting an LMIA application, there are two big distinctions concerning the advertising and the wages, says Green.
For one, employers are required to advertise for a position and prove that there are no qualified Canadian citizens or permanent residents available. However, Lululemon was allowed to hire temporary foreign workers for the expansion of its headquarters in British Columbia without seeking local labour first, according to a report.
In Quebec, there is a list of professions in demand for which employers don't have to advertise, which is reviewed every February, says Lessard.
“It’s kind of straightforward, but, at the same time, it doesn't necessarily match the real recruitment efforts that people would do,” she says; for example, if you’re advertising for a person with five years’ experience, and a foreign candidate has four years and 11 months’ experience, they won’t qualify.
Secondly, employers can't just choose whichever wage they want — it has to be commensurate with what Canadians would expect, says Green.
“So, at the end of the day, the business [must] prove to the government ‘We've provided a job posting for this position, the wage is exactly what we’ve set as prevailing or higher, we still can't find qualified people for this role.’”
The government also wants to make sure that it's a true job offer, he says, meaning the business is legitimate and “there's a genuine need for the role.”
Once the LMIA is approved, the employer applies for a work permit and the government will check several concerns, such as the wage promised is being paid, that they're working the hours specified, that the workplace is free of harassment and abuse, and that you've told the temporary foreign worker about their employment rights under Canadian law, says Green.
“It's a long-winded process, but the government wants to make sure you're not bringing in people promising that you'll pay them certain amounts, avoiding Canadian citizens and permanent residents for that job as a result, and then they come here and you undercut them.”
Greater enforcement of wages
An additional challenge for employers involves the wages. As of Nov. 8, 2024, the wage threshold used to determine the high-wage or low-wage stream was increased by 20%.
And starting Sept. 26, 2024, certain LMIA applications submitted for low-wage positions were affected by the following measures:
- certain LMIA applications for low-wage positions in census metropolitan areas with an unemployment rate of 6% or higher are no longer processed
- in some sectors, the previous 20% cap on the proportion of low-wage positions was reduced to 10%
- the maximum employment duration for low-wage positions was reduced from two years to one year.
“The government's restricted the low-wage LMIA to places where the unemployment rate is very low. If it's high, then the government believes that people may work in jobs that they aren't accustomed to, and there are local, Canadian citizens or permanent residents who can fill that role,” says Green.
“That wage cutoff is really the primary hurdle. If you can't pay the prevailing wage for the role, then the LMIA program and the temporary foreign worker program isn't really available once that hurdle is overcome.”
TFWP challenges in Quebec
With these recent changes, obtaining a low-wage LMIA is very challenging, says Lessard. In Quebec, for example, the low wage went from about $28 an hour to $32.96 an hour, so many high-wage positions became low-wage ones.
“And when it's low wage, you have more responsibilities, like you have to pay for the plane tickets back and forth, you have to help them find affordable housing… so, there's more obligations.”
Since restrictions are applied to low-wage workers in metropolitan areas with an unemployment rate of 6% or higher, many work permits coming to expiration cannot be extended, she says.
“There are no grandfather provisions. For employers, it means that they may be employing workers that have been with them for six, seven years and now their work permit cannot be extended anymore. You cannot keep them.”
And the impact of the cap going from 20% to 10% is even worse in Quebec because if an employer used the simplified process — not needing to advertise — workers were not counted toward the 20% cap, even if they were low-wage workers.
“For some companies, they had up to 40% of their workers who were low-wage workers, including the ones under the simplified process, and in one day, it had to go from 40% to 10%,” she says.
“It was a benefit when we added it, but now it's more of a catastrophe.”
Problem areas: Start/end dates, hours of work
Once employers have successfully brought temporary foreign workers onboard, a couple of the problem areas for compliance can include hours of work, start and end dates, and lack of authorization.
For example, if a person’s hours of work changed because they switched from one factory to another for one day, and there was no new work permit, says Green, that could be a problem.
Or, if someone starts work without authorization, says Lessard.
“The concept of implicit status is pretty [common]. People think, ‘I did file for that so I can start working’ — that's a big mistake. Or having students working more than 24 hours, or students working without [the employer] knowing that they stopped studying. If they stopped studying — even if they still have a valid study permit — they're not authorized to work because they're not respecting the conditions of their study permit.”
Minor, major modifications to TFWP
Another problem area? If a job is modified from the original LMIA, the change may be considered minor or major by the government, says Green. Minor modifications don't require the business to inform Service Canada of any changes, such as a software engineer switching coding systems or a small increase in wages to keep up with inflation.
If there is a material modification, the government should be notified, he says. This could include, for example, someone moving from being a software engineer to a cyber security expert, or “drastic increases” in wages, such as offering to pay someone $75,000 to get them to Canada, and then paying them $150,000.
“The government's position may be, ‘Well, if this position was advertised for qualified Canadians, they may have applied,’” says Green.
It can also be a challenge for businesses because a material change may arise in normal annual salary reviews, he says. If someone performs well in their first year and you want to move them to a senior role, for example, “understanding the nuance of the conversation is important because you may require a new LMIA — or you may not,” he says.
Labour agreements versus immigration rules
Another hurdle with the TFWP is the contradictions that can arise in following both immigration rules and labour law rules, says Lessard.
“Sometimes in terms of immigration, there are things you can do or cannot do... but the bargaining agreement would say something different. But you cannot go by the bargaining agreement because you would infringe the immigration rules. So, you're stuck.”
For example, if a unionized company is planning to do layoffs, people who are laid off may have the right to bump other workers in other occupations, according to the bargaining agreement. But if you have a closed work permit, that’s for one position as one salary, so you cannot bump the others.
“They will just be laid off and not prioritized for other roles because they cannot change roles,” she says, so they won’t benefit from the provisions of the agreement and be treated differently.
And with the new restrictions, there may be low-wage workers with more seniority, but the employer cannot extend the work permits, because that would put them over the cap of 20%, says Lessard.
Voluntary disclosure
If an employer has not been complying with the conditions of the TFWP, it can voluntarily tell the government about the compliance issues before an inspection is launched.
The employer will also need to take corrective action to fix the compliance issues, and the government may still do an inspection — but the penalty may be reduced.
There are three types of inspections by Ottawa: random, non-compliance in the past, or a reason to suspect non-compliance, says Green.
“The best voluntary disclosures are when the business has been made aware of the issue and has taken some steps to resolve that issue,” he says such as paying wages owed after months of underpayments, and being diligent about the issue going forward.
“It's likely that that may trigger an inspection — they'll want to know ‘What about work hours? What about work location?’ things like that — but that can be a really helpful way to reduce any prospective penalties.”
If the employer discovers anything wrong, it should respond immediately, says Lessard.
“You document it, you correct it, and you also document ‘How will I make it not happen again?’ So even if you did not do voluntary disclosure… you're still in a better position.”
Penalties, bans and appeals
If an employer is found to be non-compliant for a violation of the TFWP, it could face:
- a warning
- penalties up to $100,000 per violation, to a maximum of $1 million per year
- a permanent ban from the TFWP and IMP
- publication of their business name and address on IRCC’s Employers who have been found non-compliant page
- suspension or revocation of previously issued LMIAs.
A Canadian Tire store in Toronto made headlines when it faced an investigation by both provincial and federal authorities following allegations of mistreatment and financial exploitation of employees hired under the TFWP.
The financial penalties are quite significant and it’s likely the government will leverage those more, says Green.
“They've publicly stated they've increased the amounts and I suspect that they'll increase any penalties into the future there… and those are really reserved for businesses that are purposefully dodging the requirements under the program.”
But if the business is quite large and brings in a lot of specialized workers through the TFWP, “a ban can be quite disastrous,” he says.
In some circumstances, the employer might have insurance for these type of infractions, but their reputation is still important, says Lessard.
“You can be seen as a bad employer, which, in the context of talent war, you don't want to be the uncompliant employer who's doing all things wrong — people will be scared, and they won't want to go work for you. But the worst is that you could be banned from using the LMI A program. And to me, that's even worse than paying money.”
