Hiring a Foreign Company to Provide Services in Canada? 3 Immigration Issues
Published:
July 27, 2021
Author(s):
Canadian entities regularly contract with foreign companies to provide services in Canada. To complete its obligations under the contract, the foreign company must deploy its workers to Canada and, by necessity, these workers must work on-site at their Canadian client’s premises and alongside its Canadian workers. It’s tempting for the Canadian entity to assume that all responsibility for those foreign workers lies with the foreign contractor. But the truth is more nuanced – and gives rise to immigration law non-compliance risks to the Canadian entity. To mitigate these risks, and the related liability exposure, it’s important that the Canadian entity be fully engaged in the immigration process with the foreign service provider.
Here are three key immigration law issues a Canadian entity must consider when it contracts with a foreign company to provide services – and workers to deliver those services – in Canada.
1. The foreign workers likely need an (appropriate) Canadian work permit.
There are a number of practical issues for both the Canadian entity and the foreign service provider to consider when it comes to work permits, including:
- Do the foreign workers require a work permit?
- How long will it take for the work permits to be issued, allowing them to actually get “boots on the ground” in Canada?
- Have all necessary steps to obtain the work permit been taken?
Work Permit. Some foreign workers performing specific types of work, such as emergency service providers and after sales service business visitors, are permitted to enter and work in Canada without a work permit. However, in most cases, the foreign workers will require a work permit.
Appropriate Permit. If work permits are required, the Canadian entity and the foreign service provider should work together to determine which immigration program fits the unique fact situation. The federal government can issue work permits under two separate immigration programs: the International Mobility Program (IMP) and the Temporary Foreign Worker Program (TFWP). To determine the work permit program that applies, it’s necessary that the foreign service provider and the Canadian entity look at:
- The specific occupations – and the corresponding National Occupation Codes (NOCs) – involved.
- The actual services the foreign workers will provide in Canada.
- The foreign workers’ nationality.
For example, as a result of the Canada-United States-Mexico Agreement (CUSMA), an engineer from the United States might be able to enter Canada under the IMP and obtain a work permit at the port of entry. In contrast, a worker with similar training and experience, but a different passport, might be required to enter Canada under the TFWP, and wait weeks or even months for a work permit to be processed and approved.
Risk. It’s important for the Canadian entity to know whether the foreign workers need a work permit and to make sure they get the right one: if the work being performed in Canada requires a work permit, Immigration, Refugees and Citizenship Canada (IRCC, the Canadian federal government agency primarily responsible for immigration applications and processing) can penalize the Canadian company that contracted with the foreign service provider for the unauthorized work carried out on its premises or worksite. For example, the foreign service provider might determine – incorrectly – that their workers are eligible to enter Canada as work permit-exempt business visitors. Further, the Canada Border Services Agent (CBSA) might even approve the foreign workers as business visitors at the port of entry. But unfortunately, even CBSA approval doesn’t mean the characterization is correct. It’s therefore critical that the Canadian entity is involved in the work permit process.
2. The Canadian entity might have to assist the foreign service provider to obtain work permits by registering a job offer in the federal Employer Portal.
Depending on the immigration program that best fits the facts, the Canadian entity might need to participate in the work permit process.
TFWP. The Canadian employer of a foreign worker under the TFWP must apply for a Labour Market Impact Assessment (LMIA) as part of the work permit process. In some cases, the foreign service provider can obtain an LMIA and corresponding work permits for its workers. This might be advantageous for the Canadian entity, since it means it need not get involved in either the LMIA or the work permit process. However, it’s typically a lengthy and arduous process; the IMP is more efficient.
IMP. The Canadian employer of a foreign worker under the IMP doesn’t need to apply for an LMIA – but it is required to submit a job offer for the foreign workers in the Canadian federal government’s Employer Portal, effectively allowing the government to collect comprehensive information to ensure all parties have complied with the IMP. Registering the job offer involves submitting information about:
- The Canadian “employer”.
- The foreign worker.
- The occupation.
- The terms and conditions of employment.
- An explanation of why the employment is LMIA-exempt.
Perhaps surprisingly, this requirement also applies to a Canadian entity contracting the services of a foreign company. IRCC requires that the Canadian entity submit to IRCC an offer of employment for the foreign service provider’s workers – despite the fact that they don’t employ or pay those foreign workers:
“If you are a Canadian company that contracts the services of a foreign company, you must complete and submit the offer of employment, not the foreign company. This is because it is your Canadian company that is creating the need for the temporary worker to enter Canada. You must submit the offer even if:
the temporary worker is, and will stay, an employee of the foreign company, and/or
the foreign company is paying the temporary worker’s wages.” (emphasis added)
Risk. This puts the Canadian company in the legally precarious position of making commitments as the “employer” of a foreign worker that it doesn’t, in fact or in law, employ. There’s also an obvious contradiction in the IRCC policy: the federal government explicitly acknowledges that the Canadian entity isn’t the employer of the foreign workers and isn’t responsible for paying their wages, while at the same time requiring the same Canadian entity to register a job offer to those foreign workers and acknowledge its obligations as their “employer”.
3. Your dual role as client, and as named “employer” for immigration purposes, creates real risk.
This obvious contradiction in government policy around the IMP creates real risk for the Canadian entity. The Canadian entity is the employer for immigration purposes and is therefore responsible to ensure the foreign service provider’s workers have the necessary Canadian immigration law authorization – and is thus liable for any non-compliance under the Canadian immigration employer compliance regime. And that regime, administered jointly by IRCC and Employment and Social Development Canada (ESDC, responsible for LMIAs and for LMIA Enforcement and Audit) is robust. It authorizes the Canadian government to inspect employers for compliance with immigration programs, including by conducting random inspections. It also authorizes them to impose penalties on non-compliant employers that are proportionate to the severity of the breach. Key features of the penalties under the regime include:
Ban from Program Use. Employers that don’t comply with the conditions of the TFWP or IMP could be subject to a penalty of a one, two, five or 10 year ban from use of the programs.
Administrative Monetary Penalties. The regime also includes a system of administrative monetary penalties (AMPs) with fines ranging from $500 to $100,000 per violation. AMPs are cumulative and distinct: the same violation relating to multiple foreign national workers counts as separate violations. For purposes of determining the appropriate amount of the AMP, violations are categorized into three “Types”:
- Type A. Examples of a Type A violation include: failure to demonstrate that any information provided in a work permit application, such as proposed salary, proposed job title, proposed job duties, employee’s educational background, or employee’s professional experience, was accurate; and failure to provide documents required for a compliance review.
- Type B. Examples of a Type B violation include: failure to comply with federal and provincial laws relating to the employment or recruitment of employees; and failure to fulfill obligations that led to the issuance of the work permit, including hiring, retaining or training of Canadians or permanent residents, transferring skills and knowledge to Canadians or permanent residents and creating jobs for Canadians or permanent residents.
- Type C. Examples of Type C violations include: failure to make a reasonable effort to provide a workplace that is free of abuse; and failure to establish that the company is actively engaged in the business in which the offer of employment was made.
In addition to the violation type, the amount of the AMP will be determined based on factors such as the employer’s compliance history and the severity of the violation.
Voluntary Disclosure & Justification. The employer compliance regime encourages employer voluntary disclosure by reducing the severity of the penalty for employers that disclose violations before ESDC initiates an investigation. If ESDC does make any preliminary findings of non-compliance, employers will also have the opportunity to make written submissions to justify that non-compliance. ESDC will consider a limited range of justifications, such as errors made in good faith, reasonable efforts to comply, or violations that resulted from a genuine misinterpretation of an employer’s obligations.
Please contact your McInnes Cooper lawyer or any member of our Immigration Law Team @ McInnes Cooper to discuss this topic or any other legal issue.
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