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Part II - Labour Market Opinion Analysis

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10. Employment Relationship

For the purpose of the Temporary Foreign Worker Program (TFWP), the employer must have an employment (employer-employee) relationship with the foreign worker who agrees to work for him/her for a specified or indeterminate period of time in return for salary or wages.

The employer:

Can be a company, organization or individual.
Has the authority to decide where, when and how the work will be done.
Directly benefits from the work performed by the foreign worker.
Is obligated to meet all the requirements of the Labour Market Opinion (LMO) and employment contract (in cases where a signed contract is required).
Pays the workers wages or has hired a company to do so on his/her behalf.

The employment relationship provides some assurance that:

A genuine job exists with a set wage rate and clear working conditions.
The worker will be employed full-time and will be covered by provincial labour laws, medical coverage and worker’s compensation.
Deductions for Income Tax, Employment Insurance and Canada/Québec Pension Plan purposes will be made.

10.1 Non-Traditional Employment Relationship

There are instances when the employer does not have a traditional employment relationship with the foreign worker. Exceptions generally apply to managerial and professional occupations and highly specialized and well remunerated technical occupations.

Examples of non-traditional employment relationships

Entertainment industry

Due to the unique nature of the entertainment industry, an individual or company may be considered the employer (except if the entertainer works in the television and film industry or as an exotic dancer), even though there is no traditional employment relationship between the worker and the employer.

An agent has contractual agreements with other parties involved in an entertainer’s performance (e.g., the venue operator, promoter, club owner). These contractual agreements include the number of hours of work and wages to be paid to the foreign entertainer. The agent is a middleman; he is paid for the entertainer’s performance by other individuals or companies in exchange for arranging work and wages. In this respect, an employment relationship exists between the agent and the entertainer since the agent is ultimately responsible for paying the entertainer’s wages.

Medical practitioners

A provincial authority may be identified as the employer when requesting LMOs to hire medical doctors. Although many doctors and other medical professionals are technically self-employed, they are usually invited by health authorities to set up practice and bill provincial/territorial public health care plans.

Foreign worker related to the employer

For the purposes of an LMO, whether the employer is related to the foreign worker is immaterial when assessing job offers.

Financial interest in the business

TFWP officers can issue a positive LMO when a foreign worker owns less than 50 percent of the business – as long as there is an offer of employment specifying the wages, duties and requirements of the position, and an employment relationship is established.

When a foreign worker owns 50 percent or more of the business, an LMO may not be required. Citizenship and Immigration Canada (CIC) determines whether or not to issue a work permit using the significant benefit to Canada exemption (Section 205(a) of the Immigration and Refugee Protection Regulations (IRPR)). CIC may ask Human Resources and Skills Development Canada HRSDC/Service Canada for labour market information as part of its process.

10.2 Third-party Representatives

There are instances when companies in Canada who benefit from the services provided by foreign workers, hire employment referral, hiring or placement agencies to find and recruit foreign workers. These agencies are referred to as third-party representatives.

For example:

Employers may enlist third-party representatives to represent them throughout their dealings with HRSDC/Service Canada. In these situations, third-party representatives must have received authorization from employers to submit LMO applications on their behalf.
Employers may use recruiting agencies or ‘labour brokers’ to assist them in finding foreign workers. The third-party representatives may also represent them throughout the LMO application process.
Employers may choose to use third-parties to perform some or all of the functions identified above and issue pay cheques to foreign workers on their behalf.

In all of the examples provided above, the company who hired a third-party representative is the “employer” for the purposes of an LMO application under Section 203 of the IRPR.

The company who wants to hire foreign workers (not the third-party representative) is ultimately responsible for making sure the information provided to HRSDC/Service Canada is accurate and that they meet their obligations and responsibilities. The worker is employed by the company (not the third-party representative) and reports to the employer named on the application form.

A placement or employment agency can be considered the “employer” for the purposes of an LMO application if it hires a temporary foreign worker for its own human resource requirements in which the knowledge and skills of the foreign worker will directly contribute to the day-to-day business activities of the agency. A temporary placement agency that recruits workers but does not offer a guaranteed salary or wages with full-time hours (I.e., the agency will only pay the worker if it can find a job for the worker) will not be approved.

The employer directly benefits from the services provided by a foreign worker. A third-party representative provides services to the employer such as finding, recruiting and/or issuing cheques to foreign workers on behalf of the employer, he does not benefit directly from the services provided.

Application process for employers who hire a third-party representative for the submission of an LMO application?

While hiring steps vary, they generally follow this pattern:

Step 1:
An employer fills out and signs the Appointment of Representative Form - PDF (236 KB, 1 page), authorizing the third-party to represent the employer through the application process with HRSDC/Service Canada.

Step 2:
The third-party submits an application to HRSDC/Service Canada (on behalf of the employer) for an LMO and may be required to submit an employer-employee contract.

Step 3:
A TFWP officer assesses the application based on program criteria and develops an LMO.

Step 4:
The officer provides a written response (confirmation letter) to the employer and the third-party.

Step 5:
The employer informs the foreign worker and, if the LMO is confirmed, forwards a copy of the confirmation letter.

Step 6:
The foreign worker applies to CIC for a work permit and fills out the Application for a Québec Acceptance Certificate for Temporary Work form. The employer (or his third-party representative) is allowed to represent the worker in dealing with the Ministère de l'Immigration et des Communautés culturelles (MICC) if the worker signs the last section of the form entitled Optional authorization to employer. For more information visit MICC (in French only).

10.3 Verifying the Employment Relationship

TFWP officers take the following into considerations when determining if an employment relationship exists.

Who benefits from requesting the services of the temporary foreign worker? Who pays the worker wages? Has the employer hired a third-party representative company to recruit the worker do so on his/her behalf?

The employer is the individual or company who hired the third-party representative and who benefits directly from the foreign worker’s services.
Who determines how the work will be done?

Generally, the employer determines (directly or indirectly) the way the work will be done and methods to be used. The employer has the right to hire or fire workers, determines the wage rate or salary, and decides on the time, place and manner in which the work is to be done.

In situations where the authenticity of the employer is unclear, TFWP officers can request a copy of the service agreement(s) that the employer has with his/her clients, as well as the foreign worker’s duties and who is accountable for the worker.

With respect to the requirement that the employer provide full-time hours of work (and payment), the employer would be eligible for a positive LMO only if he/she had existing or newly signed contracts with its clients.

Example: Security Firm ABC requests five temporary foreign security guards and is offering guaranteed full-time hours of work at a guaranteed wage that meets the prevailing wage rate. Security Firm ABC is located downtown, however the security guard services are needed at five different buildings in the suburbs. Each guard will be required to report to a senior staff member at the beginning and end of each shift at the building where the shift was completed. Security Firm ABC is ultimately responsible for all of their employees working in various locations around the city, including temporary foreign workers.

In this case, for the purpose of clarifying the employer-employee relationship, the TFWP officer could request a service agreement from Security Firm ABC that outlines the working arrangements between ABC, its clients (the various office buildings in the suburbs) and the temporary foreign workers.

In general, the foreign worker’s salary, bonuses and vacation pay are paid by the employer identified on the LMO application form. The employer must guarantee a salary for a defined number of full-time hours and pay the prevailing wage rate for the occupation in the region(s) where the worker will be located. Wages cannot be contingent upon the employer securing contracts for the services of the foreign worker after he/she arrives in Canada.

TFWP officers do not necessarily issue a negative LMO when the employer has hired a third-party representative to issue pay checks on his/her behalf. In these instances, the employer must demonstrate to HRSDC/Service Canada that the worker will be paid the wages agreed to in the LMO process.

Example: A temporary foreign worker is hired by Company ABC to work in its Nova Scotia factory. Company ABC has hired Firm YZ in New Brunswick to issue pay cheques to all of its workers including temporary foreign workers. The employer is still Company ABC and it must demonstrate that workers are being paid the agreed upon wages.

10.3.1 Employers interested in hiring self employed foreign nationals

With few exceptions, HRSDC TFWP guidelines require that there be an employer-employee relationship in order to provide a LMO. Section 203 of the IRPR makes various references to “employers” hiring workers, and there is a requirement for an assessment of wages and working conditions.

The requirement for the establishment of an employment relationship provides some assurance that there is a contracted arrangement relating to a specific job with a set wage and clear working conditions, and provides assurance as well to help determine that the salaried worker will be employed full-time, will be covered by applicable federal or provincial labour laws, will be insured by worker’s compensation, and that deductions for income tax, Employment Insurance and Canada/Quebec Pension Plan will be made.

There are, however, certain situations where an employer will wish to hire a foreign national to meet a skill/business need on the basis of a contractual business relationship as opposed to an employer-employee relationship. Some are well-known such as in the cases of medical practitioners, for whom the regional health authority/province can be seen as quasi-employers, and certain entertainers who are in Canada for short periods under specific contracts. Other instances can also be addressed without the need for an LMO if it is considered a significant benefit to Canada under Section 205 (a). (See section 10.3.1.1 below).

The current section on non-traditional employment relationships will also explain how to assess applications in other circumstances where foreign independent contractors/self-employed individuals are hired to meet a temporary business requirement.

10.3.1.1. What is a self employed individual? 1

For the TFWP purposes, a self-employed individual works as an independent contractor for his/her own account and draws income from a business that he/she operates personally. To be self employed is not the same as being a business owner. A business owner is not required to be hands-on with the day-to-day operations of his or her company and usually has paid employees working for him/her.

For the purpose of the TFWP, a self-employed person is directly responsible for the services he/she renders and carries out the work himself/herself. A self-employed individual has a direct contractual agreement with the employer/end user for whom the work is being produced.

Please note that an employee of a foreign company that is performing a service for the end user/employer is not a self employed individual.

10.3.1.2 How to recognize situations where the foreign national is a self employed individual for the purposes of assessing an LMO application under the TFWP?

a) Specialized knowledge

Self employed foreign nationals can be considered by employers for their expertise in a specific managerial, professional or technical occupation or in relation to a niche product or service. This expertise can be defined as having specialized or unique knowledge relating to the production of a good or a service. Specialized knowledge can also be defined with reference to the definition used by CIC such as ²:

An advanced level of knowledge or expertise in the organization’s processes and procedures (product, process and service can include research, equipment, techniques, management, etc.);
Unusual and different from what is generally found in a particular industry. The knowledge need not be proprietary or unique and should be uncommon;
A person who possesses specialized knowledge would usually be in a position that is critical to the well-being of the enterprise;
The knowledge is not generally identified and is of some complexity and cannot be transferred to another individual in the short term.
The FW possesses knowledge that is valuable to the employers competitiveness in the market place;
The specialized technical or managerial expertise could not be sourced within a reasonable period of time by Canadians.

b) After-Sales Services

Self employed foreign nationals can also be considered with reference to after sales services, by doing repair and servicing specialized equipment, supervising installers, setting up and testing commercial or industrial equipment including computer software and robotics, which are not anymore covered by original or extended warranty. These specialized equipments have been usually purchased or leased from a foreign company and the services are being performed once the extended sales agreement, lease agreement warranty, or service contract has expired.

After sales services generally includes cases of equipment or machinery that is either out of warranty or where no contract service exists and where the company needs to purchase someone’s expertise to maintain or to operate previously sold equipment. For example: a specialized service person coming to Canada to install, configure, or to give training on upgraded software.

This directive lists considerations to take into account in addition to those normally considered when assessing an LMO application. These considerations provide clarifications on how to process applications for LMOs in cases in which a self employed foreign national will be providing technical/ professional or management services to an employer/end user for a fixed period, for remuneration, under a contractual “business-to-business” arrangement different from an employer-employee relationship. As a result, the foreign national will not become a salaried employee of the company yet there is an employer and a service provider whose likely impact on the labour market must be assessed.

10.3.1.3 List of considerations

Occupations
The present directive applies to managerial/professional and technical occupations which fall under the National Occupational Classification (NOC) Skills Type O and NOC Skill levels A and B. NOC skill levels C and D occupations are not considered within the scope of this directive. Please note that hands-on building and construction work are not covered by this directive.
Whether an exemption from the requirement for an LMO applies.
There are situations where LMO-exemptions may apply. CIC and Canada Border Services Agency (CBSA) officials (at POEs) can make a final determination on whether an exemption applies. Service Canada officers could ask the employer whether he/she has contacted CIC TFW unit in that regard. . However, when CIC or CBSA require an LMO, an LMO needs to be issued.
Recruitment efforts and advertising requirements
The employer is expected to have conducted recruitment efforts to fill the position as it is the case for other situations and these efforts are assessed as per the regular LMO assessment. It is also possible that the employer is only interested in meeting its business needs through procurement of a contract to a professional/technical self employed individual ³. When this is the case, the employer, just as in the regular process, has to demonstrate what type of recruitment efforts and/or advertisement provided an opportunity to Canadians and permanent residents, including advertisement/procurement efforts for soliciting bids from domestic suppliers.
Signed Contract:
As part of an application to HRSDC, the employer (I.e. service buyers) must provide a copy of the proposed contract signed by the employer. The contract will be showing at a minimum the period covered by the contractual arrangement; rate of pay/remuneration; the services to be performed; the location of the work; and the date of the contract. The information on the LMO application should be consistent with the information provided on the contractual arrangement.
Remuneration:
The contract must demonstrate that the remuneration to be paid to the foreign individual is comparable or higher to the compensation that Canadians and permanent residents would earn in a similar occupation. Considering that self employed individuals generally enter into contracts that do not provide for advantages enjoyed by salaried employees (e.g. employment insurance, disability/medical insurance), the remuneration offered to the foreign national must be higher than prevailing wages by at least 18% ⁴ in order to reflect the fact that the employer does not have to pay for basic deductions covering items such as pensions, employment and disabilities insurance. Otherwise, employers could be lead to use such contractual arrangements in order to avoid providing the protection and other benefits associated with standard employer-employee situations.

10.3.1.4 Processing of application

In cases of requests for LMOs involving self-employed professionals, managerial or highly specialized contracts regarding service or fee for service, employers should submit the LMO application to HRSDC/Service Canada. They should provide supporting evidence showing recruitment and/or procurement efforts that meet the minimum advertising requirements, and that aim at seeking Canadian suppliers . As part of the application, employers should also provide a copy of the employment agreement between the employer and the TFW, including a description of the work to be performed and the remuneration to be paid. The employer is the company or entity for whom the foreign national will be providing the services, and the end-beneficiary who will be paying for the services.

In situations involving an employment agency or recruiting firm, it is important to carefully analyze the role of such agency and the nature of their relationship with respect to both the own account/self employed foreign national and the employer requiring the specialized services/expertise. For example, there are cases where an employer may contact an agency specializing in finding self-employed individuals with specific expertise in some fields. In these cases, the LMO application would be assessed against the criteria set out here with respect to self-employment.

However, where the employment agency is in the business of employing individuals for the purpose of placing them on a temporary basis with clients with whom they have a contractual agreement, the workers are not considered to be self-employed. Rather, in this type of situation the tripartite directive applies and must be followed. For more on this, please refer to the section dealing with tripartite arrangements.

10.4 Tripartite Employment Arrangements

A tripartite employment arrangement is when an employer retains the services of a third-party representative to find, recruit, supply and pay temporary foreign workers to meet their labour requirements.

The third-party representative assumes some of the responsibilities and obligations of the employer such as issuing pay cheques, accreditation of workers, etc. The company who hired the representative is the employer for the purposes of an LMO; he/she benefits from the services provided by the foreign worker, gives direction and controls the on-site work to be performed, sets the working conditions, and ultimately pays the TFW through a contract with the third-party representative. This ensures that the foreign worker cannot be moved from one employer to another and location once the worker enters Canada, thereby changing the basis under which the LMO was provided. Employers intending to hire workers in NOC skill level C and D must meet all the requirements under the Pilot project for occupations requiring lower levels of formal training including an employer-employee contract.

Example:

FFF Electrical hires the employment agency BBB Select to supply electricians on an as need basis and to issue pay cheques for all of its workers. FFF Electrical needs five electricians to complete a project within six months. BBB advertises for electricians in Canada without success, BBB Select decides to find, recruit and hire electricians through the Temporary Foreign Worker Program.

In this situation, BBB Select and FFF Electrical share attributes of the employer; BBB Select recruits workers and issues the pay cheques and, FFF Electrical controls the on-site work. BBB Select can not be the "employer" for the purposes of an LMO since it does not benefit directly from the services provided by foreign electrical workers and work is controlled by FFF Electrical. The employer, FFF Electrical, must apply for an LMO or authorize BBB Select to apply on its behalf by filling out the relevant section on the foreign worker application form.

The TFWP officer could request additional information to clarify the relationship between a) BBB Select (employment agency) and FFF Electrical, b) BBB Select and the foreign workers, and c) BBB Select and FFF Electrical.

LMO application when a tripartite employment arrangement exists

When a request for an LMO is made by a third-party representative, the employer must fill out the relevant section of the application form HTML - PDF form (236 KB) - that authorizes the third-party representative to act on his/her behalf.

TFWP officers identify in the "CIC Notes Section" that a tripartite employment arrangement exists. Information provided includes the name of the third-party representative, and other information such as the organization that will be issuing pay cheques to foreign workers.

In addition to the information that is normally required from employers when they apply to HRSDC/Service Canada for an LMO, the employer (or third-party representative) must provide the following:

The name of the employment agency and a description of the agency's primary business.
A copy of an agreement or contract between the company and the employment agency that relates to the hiring of the foreign worker.
A copy of an agreement or contract between the agency and the foreign worker.
A copy of the letter of offer to the foreign worker (if it has already been issued).
If not included under 2, 3 and 4, the:
- Name of the organization that will be issuing the payment for the remuneration of the worker.
- Information regarding the wages, benefits and working conditions applicable.
- Confirmation that no placement fees have been/will be charged to the worker for employment in British Columbia, Alberta, Saskatchewan and Manitoba, and that the third-party representative complies with applicable provincial laws regarding licensing.

The TFWP officer advises the employer (or authorized third-party representative) that the foreign worker must provide the above mentioned documentation to the CIC visa office along with the work permit application in order for a work permit to be processed. Failure to provide information or documents that establish a line of accountability between the worker and the employer who will benefit from the worker's services may result in immediate refusal of the application or substantial delays in processing at the visa office. Further, CIC visa officers cannot contact agencies or companies about the details and requirements of work permit applications. HRSDC/Service Canada is not required to contact visa officers on behalf of employers.

1 There are a number of different definitions of what may constitute a self employed situation depending on a given organization or program’s intent. For the purpose of the TFWP, an application relating to hiring a foreign national on a contractual basis as a self employed individual will be assessed , provided it meets the conditions defined under this section of the national Directives.

2 These definitions can also be found in CIC’s Section 5.31 of the Foreign Worker Manual

3 There are various types of procurement processes a business can use. MERX is a commonly known process and covers all levels of government including the Federal and Provincial Governments as well as the MASH sector which covers (Municipal, Academic, School Boards and Hospitals) from across Canada. When such a procurement process is used, a proof, such as a photocopy of the advertisement, should be attached to the LMO request. Requests for proposals can also be made through newspapers, specialized websites or other media and evidence of such advertisements/call for proposals should be provided.

4 As indicated in Statistics Canada Survey on Non-Wage Benefits, of September 25, 2008

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Date Modified:: 2011-06-27

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