Buying a Business that Has Foreign Workers

31st Mar 2018 Comments Off on Buying a Business that Has Foreign Workers

Last updated on June 20th, 2018

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,

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