Canada changes rules for foreign workers, bars staffing agencies from sponsoring work permits

Foreign workers in Canada will no longer be able to use staffing agencies or Employers of Record (EORs) to obtain Labour Market Impact Assessments (LMIAs) when they will ultimately work for another business, according to a report by Fragomen.

The Government of Canada has clarified entities that can qualify as employers under the Temporary Foreign Worker Program. Employment and Social Development Canada (ESDC) will look at which entity actually controls and manages the employment relationship when deciding who can apply for an LMIA.

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Staffing agencies, EORS cannot sponsor workers

Staffing and employment agencies that recruit workers for other businesses cannot obtain LMIAS for foreign workers who will ultimately work for a third-party business in Canada.
The government has also clarified that Employers of Record cannot act as LMIA sponsors.

This effectively ends the use of the EOR model for LMIA-based work permits. The restriction applies specifically to LMIA applications. EORS can continue to operate in other employment arrangements, subject to applicable provincial employment laws.

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Temporary foreign workers also cannot be classified as independent contractors to avoid payroll, tax or other obligations under the programme.

Employers must check who controls the worker

Canadian businesses will need to assess which entity directs and supervises a foreign worker in their day-to-day work, particularly in cross-border arrangements.

If a foreign sending entity continues to control the worker while they are in Canada, the Canadian entity may not meet the employer-employee relationship requirement for an LMIA.

Employers that already have foreign workers on LMIA-based work permits should review their existing arrangements before applying for an LMIA renewal or seeking a work permit extension.