Canada: Employer Eligibility Clarified and Employer of Record Model Restricted for LMIA Applications

The federal government has clarified which entities qualify as employers for Labour Market Impact Assessment (LMIA) purposes under the Temporary Foreign Worker Program. Employment and Social Development Canada will focus on which entity controls the employment relationship in practice. Notably, staffing and employment agencies that recruit workers for other businesses are not considered employers under the program and therefore cannot obtain LMIAs for foreign workers who will ultimately work for a third-party business in Canada. Temporary foreign workers also cannot be classified as independent contractors to avoid payroll, tax or other program obligations.

The government has also clarified that Employers of Record (EORs) do not qualify as LMIA sponsors. This effectively ends the use of the EOR model for LMIA-based work permits - a significant change from the previous approach, under which EOR arrangements were generally permitted if they complied with applicable immigration and labor laws. This restriction applies specifically to LMIA applications. EORs may continue to operate in other employment contexts, subject to applicable provincial employment laws. 

Employers should carefully assess which entity directs and supervises a foreign worker on a day-to-day basis, particularly in cross-border arrangements. If the foreign sending entity retains control over the worker while they are in Canada, the Canadian entity may not meet the employer-employee relationship requirement. 

Employers with foreign workers holding LMIA-based work permits should review their existing arrangements before pursuing an LMIA renewal or work permit extension. 

This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen.