Northern Exposure

Transitioning to the new temporary foreign worker rules

by Gilda Villaran

There have been many changes to Canada’s immigration program in the past two years. The result? Hiring temporary foreign workers in Canada is more complex than ever before.

Perhaps the most significant of the recent changes came in June 2014, when the Canadian government introduced another series of changes to its Temporary Foreign Worker Program, described in our previous posting, Putting Canadians first: overhaul of the 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 prevailing wage is at or above the provincial median hourly wage; and
  • “Low-wage” if the prevailing 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 labor 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 Canadian 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).

Keep in mind that the rate of pay does not determine whether a position is high-wage or low-wage. Instead, the prevailing wage for the position (as determined by the corresponding NOC code) does. If the prevailing wage is higher than the provincial/territorial median hourly wage, it is “high-wage.” If the prevailing wage is lower than the median hourly wage, it is “low-wage.”

High-wage—must submit a transition plan

With limited exceptions, Canadian 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 10-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 a Canadian 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.

Low-wage—subject to caps

Employers with 10 or more employees applying for a new LMIA are subject to a cap of 10 percent 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.

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

  • Effective immediately, they are limited to 30 percent 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 percent.
  • On July 1, 2016, it will be reduced to 10 percent.

What this means for employers

All these new obligations and administrative requirements clearly place an additional burden on Canadian 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 that 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 labor market.