Hiring temporary foreign workers in Canada is only becoming more complex.  Employers have more hoops to jump through, must acquire and disclose more information and will be subject to increasing fines and penalties.  As we have repeatedly reported, there have been many changes to Canada's immigration program in the past two years.  Perhaps the most significant changes came in June 2014, when the Canadian Government introduced another series of changes to its Temporary Foreign Worker Program (TFWP), described in our previous posting, Putting Canadians first - overhaul of the Canadian Temporary Foreign Worker Program.  Things were confusing enough in June, and they have only become more confusing since.  The following will help you understand where some of the confusion comes from and help clear it up. 

High-wage/Low-wage Distinction Does Not Replace Higher Skilled/Lower-Skilled Distinction

In June, we were led to believe that the Labour Market Impact Assessment (LMIA) process would be based on wage level instead of being based on the National Occupation Classification (NOC), a matrix based on skill level.  Under the new regime, temporary foreign workers are divided into two groups:

  • "high-wage" if the wage is at or above the provincial median hourly wage; and
  • "low-wage" if the wage is under the provincial median hourly wage.

We have since learned that the high-wage/low-wage distinction does not replace the former distinction between higher-skilled and lower-skilled workers.  Instead, there is still a higher-skilled stream and a lower-skilled stream (each with its particular rules), which depends on the 2006 NOC code under which the position to be filled falls.  The new high-wage/low-wage distinction is in addition and determines how an employer has to transition to a Canadian labour force.  It is entirely possible for an application to fall under the higher-skilled stream, but for a "low-wage" position. 

How does the High-Wage/Low-Wage Distinction Work?

If a foreign worker is being hired to fill a high-wage position, the employer has to submit a transition plan (more information below). If the position is "low-wage", there is no obligation to submit a transition plan, but the employer must respect the new caps imposed for low-wage positions (more information below).  Since June, Employment and Social Development Canada has changed its mind twice regarding the distinction between high-wage and low-wage. In July, it "clarified" that it was not the rate of pay which determined whether a position was high-wage or low-wage, but the prevailing wage for the position (as determined by the corresponding NOC code).  If the prevailing wage was higher than the Provincial/Territorial median hourly wage, it was "high-wage".  If the prevailing wage was lower than the median hourly wage, it was "low-wage. But that seems to have changed as of September 18, 2014 when the forms and website were changed to return to the original distinction - whether the actual wage being offered is "low-wage" or "high-wage".

High-Wage - Must Submit a Transition plan

With limited exceptions, employers wishing to hire temporary foreign workers in high-wage positions must now submit a transition plan with their LMIA application. The transition plan is a ten-page form in which employers must describe the present and future activities and investments made to replace foreign workers by Canadians or permanent residents and help them develop new skills and competencies. It may also describe steps taken to help temporary workers transitioning to permanent residence status. 

When an employer applies for a subsequent LMIA in the same occupation and in the same work location, the employer's compliance with the activities described in the transition plan will be verified. Compliance with the transition plan could also be verified if the employer is selected for an inspection (which could be random).

Employers can apply to be exempted from the transition plan when the work is for 120 days or less (for instance, repair technicians or emergency workers) or no more than two years (e.g., for project-based work) and the position will no longer exist after the temporary foreign worker leaves Canada. There is also the possibility of applying for an exemption if the position requires truly unique skills - such as a CEO or nuclear physicist. For the time being, employers in the province of Québec are also exempted from the transition plan.

Low-Wage - Subject to Caps

Employers with ten or more employees applying for a new LMIA are subject to a cap of 10% on the proportion of the workforce that can consist of low-wage temporary workers.

The cap applies per worksite.  In other words, if an employer has operations in several parts of the country, it is not possible to average numbers of hours worked by temporary foreign workers in different locations. 

Employers whose current temporary foreign workers work more than 10% of the time in low-wage positions do not have to comply with the 10% cap immediately.  Transition measures are in place for the next two years:

  • Effective immediately, they are limited to 30% of the time worked by foreigners in low-wage positions or they are frozen at their current level, whichever is lower.
  • Beginning July 1, 2015, the cap will be reduced to 20%.
  • In July 1, 2016, it will be reduced to 10%.

What this Means for Employers

All these new obligations and administrative requirements clearly place an additional burden on employers wishing or needing to hire foreign workers. There is also a huge increase in the cost for employers who want to attract and retain skilled international talent. Employers who have foreign workers who are eligible for permanent residence in Canada and who are interested in remaining in Canada should encourage the latter to proceed as soon as possible to apply for Permanent Residency status. Of course, this is a very partial solution that offers little consolation to affected employers - particularly those who are forced to hire foreigners because they cannot find enough local supply or who have very specific needs not available in the Canadian labour market.