Buying a Business that Has Foreign Workers

As an increasing number of Canadian employers employ foreign workers, and the Government of Canada is taking an increasingly strict approach in enforcing the rules regulating the employment of foreign workers, the issue of how companies can protect themselves when they buy companies that employ foreign workers is becoming increasingly significant.

As well, as explained in detail on the Immigration, Refugees and Citizenship Canada (“IRCC”) website, corporate restructurings, mergers and acquisitions may themselves trigger work permit-related issues for employer compliance.

It is accordingly important for all companies that are considering merging with or acquiring another company to consider whether (a) the transaction will result in the need for new work permits for existing employees and (b) whether the company that will be employing these foreign workers will become liable for any non-compliance of the previous entity.



Understanding the “Successor in Interest” Concept

While the IRCC website is clear that employers become responsible for compliance post restructuring, merger or acquisition, the issue of whether the new employers become liable for previous non-compliance is more nuanced, and depends on whether the new employer has become the “successor in interest” for the portion of the organization where the temporary foreign workers were employed.

A “successor in interest” occurs where the new company or the purchaser substantially assumes the interests and obligations, assets and liabilities of the original owner and continue to operate the same types of business as the original owner.  There is no fixed definition of what “substantially assumes” entails, but companies should consider whether the new entity post restructuring, merger or acquisition has assumed the current assets, long term investments, property, human resources, patents, accounts payable, current liabilities, long-term liabilities, and continued employment of employees.

If the take-over organization is a successor in interest in that it has substantially assumed the interests, obligations, assets and liabilities of the original organization (wholly or partially) and continues to operate the same type of business as the original organization, the take-over organization remains the “employer” for the purpose of the existing work permit as well.

Are New Work Permits Needed? 

Where the new organization is a successor in interest, a change in ownership structure will not require a new LMIA or offer of employment.  If it is not, then a new LMIA or offer of employment and new work permits are required, and the employees should cease working for the take-over organization until new work permits have been obtained.

Where there is a corporate restructuring, merger or acquisition, the holder of a Labour Market Impact Assessment (an “LMIA”) should contact the Department of Employment and Social Development Canada to inform them of the change.  Whether a new LMIA will be required will depend on a variety of factors, including whether the corporate restructuring, merger or acquisition impacts the prevailing wage, job description and job duties of a foreign worker.

The same is true for IRCC’s International Mobility Program (the “IMP”).  The employers of Intra-Company Transferees, for example, will need to determine whether a qualifying relationship continues to exist following a restructuring, merger or acquisition.  As well, after the restructuring, merger or acquisition the new employer will have to carefully review the terms and conditions on each foreign worker’s work permit to determine whether there are any limitations on changes to job title, location, wages and duties. If there are, then new work permits may be necessary, depending on the work permit program that the foreign worker is employed under.


Generally, where the new entity is not a successor in interest, then they assume the responsibility of complying with the Temporary Foreign Worker Program or the IMP on a going-forward basis, but do not assume the liabilities of the previous employer with respect to foreign worker compliance.  Where the new employer is a successor in interest, then they do assume these liabilities.

Steps Companies Should Take

There are several steps that companies can take to minimize risk when acquiring or merging with a company that employs foreign worker.

First, once the restructuring, merger or acquisition is done, then the new company may want to notify IRCC.  For example, if an organization changes its name or address, and there are no other changes to the structure of the company or to its Canada Revenue Agency business number, then the organization should contact IRCC to update their employer compliance portal information.  Where there is a change in CRA number, the employer should ask IRCC to link the new CRA number to their employer portal account. Requesting such changes do not delay the issuance of new work permits.

Second, prior to completing the purchase or merger, the organization should audit the other entity’s compliance with the employment of foreign nationals.  This includes obtaining a list of all foreign workers that the company has employed within the past six years (as this is the period that the government assesses), scrutinize whether the previous company complied with the laws regulating foreign workers and then determine what steps are needed going forward.

Third, the purchasing entity may want to contain in their purchasing agreement wording that indemnifies them of any non-compliance by the previous foreign worker.  For example, we have acted for purchasers where they successfully negotiated indemnifications against the consequences of any government inspections or audits of the new employer regarding the previous entity’s non-compliance, and also to cover the legal fees and costs of any voluntary disclosures to ESDC or IRCC had to be made following the discovery by the new employer of non-compliance by the previous employer.

Finally, where non-compliance is discovered, the purchaser should take detailed records, and consider making a voluntary disclosure to the Government of Canada. This could greatly reduce the consequences of non-compliance.


The consequences of not complying with Canada’s laws and regulations regarding the employment of foreign nationals can be severe, and include fines and prohibitions on hiring foreign workers.  Depending on the circumstances, existing work permits may be revoked. The purchaser of a business could find themselves financially devastated if, for example, the Government of Canada were to find them non-compliant.  For example, an individual who purchases a restaurant where all of the cooks are foreign workers could find themselves swiftly out of business if the previous employer’s non-compliance means that the new employer is both fined and prohibited from employing foreign workers.  As such, it is important that they take steps to protect themselves.



Strict Interpretation of Compliance in the Foreign Worker Program

[The following article appeared in the May edition of The Canadian Immigrant. I have slightly modified it for this blog post.]

Back in 2013, Canada’s temporary foreign worker program was rocked by wellpublicized stories of abuse. As a result, the Government of Canada introduced a comprehensive compliance regime for employers of foreign workers, and promised to ban companies from being able to hire temporary migrants for two years if they breached the new conditions. In 2015, Canada’s Immigration and Refugee Protection Regulations were further amended to introduce an administrative monetary penalty regime, which would also fine employers for non-compliance.

The number of Canadian employers who have either been banned or fined for non-compliance is currently quite small, although both Immigration, Refugees and Citizenship Canada (IRCC) and the Department of Employment and Social Development (ESDC), the two main government agencies that manage Canada’s foreign worker programs, have indicated that the number is likely to grow in the near future, especially considering new funding announced with Budget 2017 to better protect vulnerable workers and to encourage employers to do more to hire Canadians first.

On March 23, 2017, the Federal Court of Canada released its first publicized decision on an ESDC decision to ban a company from hiring foreign workers for two years. The decision, Farms v. Canada (Employment and Social Development), provides much-needed guidance to both companies and to the government on how foreign worker compliance regime should be interpreted.

 Conditions for hiring foreign workers

Employers of foreign workers must agree to comply with numerous conditions outlined in Canadian immigration legislation. The most significant one is the requirement to provide foreign workers with wages and working conditions that are substantially the same as — but not less favourable than — those set out in their offers of employment. Essentially, this means that employers must strictly follow their employment contracts with regards to wages, working hours, duties and benefits.

Other requirements employers must follow include complying with all federal and provincial laws that regulate employment and making reasonable efforts to provide workplaces that are free from abuse. In cases where employers made certain labour market promises (such as job creation or skills transfer to Canadians) to receive permission to employ foreign workers, they must they fulfill those commitments.

Canadian employers of foreign workers can also be subject to both inspections and audits by government officers, and must provide any documentation relevant to their compliance on demand. In fact, the government announced it will be increasing onsite inspections of workplaces that employ foreign workers.

Non-compliance with any conditions will only be justified in certain circumstances, including changes in federal or provincial law, new measures by the employer in response to dramatic changes in economic conditions, or errors that were either made in good faith or as the result of administrative error (if the employer subsequently made sufficient efforts to provide compensation to foreign employees).

Since 2015, the consequences of non-justified non-compliance are administrative monetary penalties and bans on hiring foreign workers.

 Conditions have strict interpretations

In Farms v. Canada, the Federal Court held that the justification provisions mentioned above must be interpreted strictly so the Canadian government can prevent the abuse of foreign workers. The often tenuous circumstances of their employment can lack the normal safeguards preventing abuse otherwise available to most Canadian workers.

The court further found that a good faith justification only works where the non-compliance conduct can be seen to benefit the foreign worker and is in the worker’s interest. As well, where a labour market impact assessment application form or a contract employing foreign workers lists conditions and terms of employment, an employer will be unable to claim a good faith lack of knowledge of any conditions or requirements.

Even where non-compliance may factually be justified, employers will not be able to claim that a breach was justified if they do not document any modifications to employment contracts.  In Farms v. Canada, for example, the employer deducted pay from its foreign worker employees’ first paystubs in order to provide them with cash advances, and even produced a letter from a former employee that confirmed that he had received the cash payment. However, the Federal Court determined that such proof was not sufficient, and that employers had to keep records of changes, and obtain written consent from their employees as it occurred.

 Not enough guidance for employers?

At the same time that the Federal Court upheld ESDC’s decision to ban the employer from hiring foreign workers for two years, the Federal Court also chastised ESDC for not providing clear guidance on its website as to what employers had to do to demonstrate compliance with certain conditions, and specifically noted that small businesses may not know what is required.

The most important thing they should recognize, however, is the need to strictly follow the contractual obligations in their employment agreements with foreign workers. Given the decision in Farms v. Canada, it is important that any ambiguities be interpreted strictly and in favour of the foreign workers.

IRCC Clarifies Non-Compliance in the International Mobility Program

It is imperative that employers hiring foreign workers in the International Mobility Program (“IMP“) understand the consequences of non-compliance. Immigration, Refugees and Citizenship Canada (“IRCC“) has finally published information on its website which summarizes how it will determine when non-compliance has occurred and what the consequences will be.

Since December 1, 2015, IRCC has had the legislative authority to apply administrative tools, including warning letters, administrative monetary penalties (“AMPs“) and bans on employers accessing the IMP to certain employers where an IRCC officer has determined that an employer has breached the terms and conditions of participating in the IMP. 

Breaches that Occurred Before December 1, 2015

It is important to note that the AMP and the bans described below only apply to employer breaches that occurred after December 1, 2015.  The penalty to an employer for unjustified breaches that occurred prior to December 1, 2015 is a two-year ban on that employer from being able to hire foreign workers under the IMP. However, while the consequences to an employer for being found non-compliant changed on December 1, 2015, the way in which IRCC assesses whether non-compliance has occurred remains substantially the same.  

The Administrative Monetary Penalty Regime

Under IRCC’s AMP regime, employer non-compliance is divided into three types of violations.  

Type A violations include where an employer:

  • is unable to demonstrate that any information that it provided in respect of a foreign national’s work permit application was accurate during a period of six years beginning on the first day of the foreign national’s employment;
  • did not retain document(s) that relates to employer compliance during a period of six years, beginning on the first day of the foreign national’s employment
  • did not report at any time and place specified by IRCC to answer questions and provide documents during an IRCC inspection of the employer’s compliance with the IMP;
  • did not produce required documents during an IRCC inspection; and
  • did not attend an IRCC inspection, nor give all reasonable assistance to the IRCC officer conducting the inspection.

Type B violations include where an employer:

  • did not comply with federal and provincial laws that regulate employment;
  • did not comply with federal and provincial laws that regulate the recruiting of employees in the province in which the foreign national works; and
  • did not provide the foreign national with employment in the same occupation and substantially the same, but not less favourable, wages and working conditions as outlined in the foreign national’s offer of employment.

Type C violations include where the employer:

  • was not actively engaged in the business in which the offer of employment was made; and
  • did not make reasonable efforts to provide a workplace that was free of abuse.

Once IRCC determines which type of violation an employer’s violation falls under, IRCC will assign points under the AMP regime based on the employer’s compliance history and the severity of the violation.

Points for the employer’s compliance history are calculated as follows:

Compliance History
Criteria Points
Type A and B violations, first violation 1
Type A, second or subsequent violation 2
Type B violation, second violation 2
Type C violation, first violation 2
Type B violation, third or subsequent violation 3
Type C violation, second violation 3
Type C violation, third or subsequent violation 4

Assessing the Severity of a Violation

Points for the severity of the violation are calculated as follows:

Severity of the Violation
Criteria Points
The employer derived competitive or economic benefit from the violation. 0 – 6
The violation involved abuse of a foreign national. 0 – 10
The violation negatively impacted the Canadian labour market or the Canadian economy. 0 – 6
The employer did not make reasonable efforts to minimize or re-mediate the effects of the violation. 0 – 3
The employer did not make reasonable efforts to prevent recurrence of the violation. 0 – 3

In considering whether the employer derived competitive or economic benefit from the violation, IRCC considers the economic gain derived from non-compliance (total gain to the employer), the money that the employer saved from non-compliance with program requirements, and whether the employer’s practices (led to a competitive advantage over other employers who were following IMP rules.

Examples of economic gain include:

  • significant underpayment or non-payment of foreign worker wages as well as wages for overtime for an extended period of time; and
  • an employer refusing to pay required benefits (e.g., health benefits/transportation costs) as outlined on the offer of employment.

Examples of competitive benefit include evidence that an employer won a bid or contract by underpaying foreign workers.

In considering whether an employer’s violation involved abuse of a foreign national, IRCC will assign points where abuse actually occurs.  IRCC will assign lower points where once the abuse was discovered, the employer was responsive in obtaining assistance for the foreign worker (i.e., notifying police or health care professional), the employer provided training to staff to prevent reoccurrence; or the employer developed policies and procedures that address situations of abuse in the workplace (e.g., steps to be taken if an employee or supervisor is aware of experiencing abuse).

In considering whether the violation negatively impacted the economy, IRCC will consider whether the employer’s actions resulted in a foreign national completing work that did not warrant a Labour Market Impact Assessment (“LMIA“) exemption.  Higher points will be assigned where the employer did not take steps to rectify the situation once it determined that it should have obtained a LMIA. 


Calculating the AMP

IRCC adds the number of points based on the employer’s compliance history and the severity of the violation to determine the AMP.  In calculating the AMP, employers are divided into “large businesses” and “small businesses.”  

A “small business” is any business, including affiliated entities, that have fewer than 100 employees or less than $5,000,000 in annual general revenue.

For Type A violations, the size of the AMP is as follows:

Type A
Points Individual or Small Business ($) Large Business ($)
0 or 1 None None
2 500 750
3 750 1000
4 1000 2000
5 4000 6,000
6 8,000 10,000
7 12,000 20,000
8 20,000 30,000
9 or 10 30,000 45,000
11 or 12 40,000 60,000
13 or 14 50,000 70,000
15 or more 100,000 100,000

For Type B violations, the size of the AMP is as follows:

Type B
Points Individual or Small Business ($) Large Business ($)
0 or 1 None None
2 750 1,000
3 1,250 2,000
4 3,000 7,000
5 7,000 12,000
6 12,000 20,000
7 20,000 30,000
8 35,000 45,000
9 or 10 50,000 60,000
11 or 12 60,000 70,000
13 or 14 70,000 80,000
15 or more 100,000 100,000

For Type C violations, the size of the AMP is as follows:

Type C
Points Individual or Small Business ($) Large Business ($)
0 or 1 None None
2 1,000 2,000
3 5,000 10,000
4 10,000 20,000
5 15,000 30,000
6 20,000 40,000
7 35,000 50,000
8 45,000 60,000
9 or 10 60,000 70,000
11 or 12 70,000 80,000
13 or 14 80,000 90,000
15 or more 100,000 100,000

In addition to fines under the AMP, the number of points that an employer receives determines the ban length as follows:

Total number of Points Type A Violation Type B Violation Type C Violation
0 to 5 None None None
6 None None 1 year
7 None 1 year 2 years
8 1 year 2 years 5 years
9 or 10 2 years 5 years 10 years
11 or 12 5 years 10 years 10 years
13 or 15 10 years 10 years 10 years
15 or more Permanent Permanent Permanent

Where an employer fails to comply with multiple conditions, each unjustified failure to comply is treated as a separate violation.  As well, violations of a single condition that involve more than one foreign worker will be treated as separate violations for each foreign worker affected. For conditions that have separate elements, a failure to comply with each element that is not justified will be treated as a separate violations.

As the size of the AMP can soar dramatically depending on the number of foreign workers involved and the number of condition(s) breached, the maximum AMP that IRCC can impose is $1,000,000.00 for a breach.  As well, the total AMPs imposed on a single employer cannot exceed $1,000,000 in the one-year period preceding the date of the final determination.

Voluntary Disclosure

If an employer voluntarily discloses non-compliance, then IRCC, at an officer’s discretion, may reduce the number of points, depending on the circumstances.

Warning Letters 

When IRCC determines that total points of an employer’s non-compliance are fewer than two, IRCC will issue a warning letter to the employer.  Warning letters count as violations for the purpose of calculating points on future violations.

Best Practices

As of writing there is one employer listed on the IRCC website for having not complied with the IMP. The consequence to the employer was a $750.00 fine.  It is anticipated that there will be many employers subject to the AMP in the future. The regime is still new, and the rigidity with which IRCC assesses compliance within the IMP is still being developed.  In the meantime, it is imperative that employers completing their employer compliance portal job offers understand the terms and conditions that they are attesting to complying with.


Proposed Regulations Add Teeth to the CIC/Service Canada Employer Blacklist

On June 7, 2013, the Government of Canada introduced regulatory changes which will take soon effect at a date to be determined (the “New Regulations”).  The New Regulations will impact all employers of foreign nationals in Canada.  Specifically, the New Regulations will impose new conditions on employers and increase the government’s ability to ensure compliance with those conditions.

Previous Announcements

The New Regulations follow a previous Government of Canada announcement on April 29, 2013, in which it announced the following changes to the Temporary Foreign Worker Program, which will also soon take effect at a date to be determined:

  • The Government of Canada will begin working with employers to ensure that temporary foreign workers are relied upon only when Canadians genuinely cannot fill those jobs;
  • Increasing the recruitment efforts that employers must make to hire Canadians before they will be eligible to apply for temporary foreign workers, including increasing the time span and reach of advertising;
  • Helping employers who legitimately rely on temporary foreign workers, due to a lack of qualified Canadian applicants, find ways to ensure that they have a plan to transition to a Canadian workforce over time;
  • Restricting the identification of non-official languages as job requirements when hiring through the Temporary Foreign Worker process; and
  • Introducing user fees for employers applying for temporary foreign workers through the Labour Market Opinion (“LMO”) process.
The New Regulations

Contacting Employers Directly

Once the New Regulations take affect, Citizenship and Immigration Canada (“CIC”) will have the statutory ability to contact employers directly to verify information contained in work permit applications.  Previously, all officer requests for additional information went through the applicant.

Clarifying Substantially-the-Same 

The New Regulations affirm that officers must be satisfied that employers who are seeking to employ foreign nationals have employed their previous and current foreign nationals in substantially-the-same positions as what was in their Labour Market Opinions and/or offers of employment (“STS”).

The New Regulations increase the period of STS monitoring from two-years preceding a an application to six.  As well, in most cases, an application will no longer be required to trigger an STS assessment.  An implication of this is that workplace inspections (discussed in more detail below) may be conducted of employers from the first day of employment of a foreign worker up until six years after the last day of that employment.

In addition, the New Regulations reword STS from “substantially the same” to “substantially-the-same, but not less favorable then.”  This presumably means that any reduction in foreign worker pay can result in a negative STS finding.

Finally, in 2011 the Government of Canada announced that employers with negative STS findings which the employers could not justify would be added to what has colloquially been referred to as the “employer blacklist” (the “Blacklist”). Employers on the Blacklist will be prohibited from employing any foreign nationals for two years.  To date, no employers have been added to the Blacklist.  This, however, is likely to change.  The New Regulations provide that officers who determine that an employer has a negative and non-justified STS finding must add the employer to the Blacklist.

Conditions on Employers

Most employers of foreign nationals must comply with the following conditions during the course of the employment of the foreign nationals:

  • Be actively engaged in the business in respect of which the offer of employment was made;
  • Comply with federal and provincial laws which regulate employment;
  • Provide the foreign nationals with employment that meets STS requirements;
  • Make reasonable efforts to provide a workplace which is free of abuse, including physical abuse, sexual abuse, psychological abuse, and financial abuse;
  • Not be convicted of human trafficking, unless there has been a pardon granted or a record suspension;
  • Not be convicted, or receive a discharge, of any offence trafficking in persons (or related offence), an offence of a sexual nature (or an attempt) against an employee, an offence causing death or bodily harm to an employee, uttering threats to cause death or bodily harm against an employee, or an offence involving the use of violence (or an attempt) against an employee. In addition, the employer must not be convicted outside Canada of an offence that would constitute one of the above offences if committed in Canada, unless there has been a final determination of an acquittal.

In addition to the above, employers of Live-in Caregivers must also:

  • Ensure that their caregivers reside in a private household in Canada and provide child care, senior home support care or care of a disabled person in that household without supervision;
  • Provide their caregivers with adequate furnished and private accommodations in the household; and
  • Have sufficient financial resources to pay their caregivers the wages that were offered.

Employers who received a Labour Market Opinion must also:

  • Ensure that the employment of the foreign nationals will result in direct job creation or job retention for Canadian citizens or permanent residents, if that was one of the factors that led to the issuance of the work permits;
  • Ensure that the employment of the foreign national will result in the development or transfer of skills and knowledge for the benefit of Canadian citizens or permanent residents, if that was one of the factors that led to the issuance of the work permits, and
  • Hire or train Canadian citizens or permanent residents, if that was one of the factors that led to the issuance of the work permits.

Absent a reasonable justification to comply with any of the above conditions, the failure to comply with most of the conditions above will result in the employer being added to the Blacklist.

Enforcing Compliance

New powers are being given to CIC and Human Resources and Skills Development Canada (“Service Canada”) to enforce compliance with the above conditions.  Under the New Regulations, an inspection may be triggered if:

  • a CIC officer or Service Canada Officer has a reason to suspect that the employer is not complying or has not complied with any conditions imposed;
  • the employer has not complied with the conditions in the past; or
  • the employer is chosen for random verification of compliance with the conditions.

Depending on the scenario, both Service Canada and CIC can require an employer to report at any specified time and place in order to provide documents and answer questions that relate to compliance with the above conditions. As well, employers who are subject to the above conditions must report at the specified time and place when requested to do so.  Unless there is reasonable justification to not attend, failure to do so will result in a finding of non-compliance.

Service Canada and CIC are also being given the power to enter and inspect any premise or place in which a foreign national performs work.  Employers must give reasonable assistance to officers conducting inspections, and provide inspectors with any documents or information that they require.  Indeed, the New Regulations even specify that employers must allow inspectors to use their photocopies to make copies of relevant documents, and, where this is not possible, officers can remove original documents from an employer’s premise.  The New Regulations also specify that employers must provide inspectors access to computers and other electronic devices located on the premise.

The New Regulations empower officers to pass through and enter private property for the purpose of conducting inspections.   In the case of a dwelling-house, a warrant can be issued ex parte if an individual does not consent to an officer entering the premise.

The proposed inspection authority will allow Service Canada and CIC to verify whether the information provided by the employer at the time of the LMO request or work permit application was accurate, and whether the employer complies with the conditions imposed on them during the period of employment of foreign workers.

Other Changes

Individuals will not be eligible to participate in the Federal Skilled Trades Class if at least one of the prospective employers is on the Blacklist

Finally, the regulations codify that no temporary residents, regardless of whether they need a work permit to work in Canada, may enter into employment agreements with employers who on a regular basis offer stripping, erotic dance, escort services, or erotic massages, or work for an otherwise non-compliant employer.

The above changes will obviously have significant implications for employers, and we will update you as more information becomes available.

More information about the New Regulations can be found here.