The Nuances of Labour Marketing Impact Assessments (LMIA): 2 Key Exemptions to Minimum Advertising Requirements
March 29, 2016
By Meghan Felt, Partner at McInnes Cooper,
Sarah McInnes, Associate at McInnes Cooper
Applying for and obtaining a Labour Market Impact Assessment (LMIA) is a critical step in hiring a temporary foreign worker(s). Employers applying for a LMIA must generally satisfy minimum advertising requirements, an arduous and expensive process. But there are two key exemptions to this requirement: employers that are owner/operators and those that are specialized service providers. There’s no legislative authority for these exemptions; they are provided for in a policy manual written by Employment and Social Development Canada (ESDC). All that’s currently available about these exemptions is vague information listed on the ESDC’s website, although the federal government has promised an updated owner/operator manual for some time. Until then, here are the two key exemptions and practical tips for employers to use them.
Owner/operator employers are exempted from the LMIA’s minimum advertising requirements. This category is a great permanent residency option for Temporary Foreign Workers who are self-employed, but yet don’t meet the narrow and extensive requirements for “self-employed” applicants or for the Entrepreneurial/Investment streams that several provinces offer.
Application. The applicant’s submission letter will request an exemption to the minimum advertising requirements under the owner/operator category. While this is generally straight-forward, several aspects of this exemption category are unclear.
- For the purposes of the Temporary Foreign Worker Program, an “owner/operator” is defined as a foreign national who hold equity in a business located in Canada and is classified under a National Occupation Classification (NOC) type 0, A or B occupation . Beyond this, the requirements ESDC has provided to date are, to say the very least, brief: the owner/operator must demonstrate that she is “integral to the day-to-day operation of the business and will be actively involved in business processes/service delivery in Canada”, and ESDC will give greater consideration to applications that demonstrate the creation or retention of Canadian jobs. However, it’s unclear how an applicant must provide documentation supporting these requirements.
- Ownership Share. Similarly, the required ownership share of an applicant seeking a LMIA in this category is unclear. ESDC says it’s working on updating its owner/operator guidelines; hopefully, they will clarify the minimum ownership requirement. In the meantime, both ESDC officers and lawyers alike are assessing and preparing applications by reference to a 2012 Temporary Foreign Worker Program Bulletin. That bulletin indicates the owner/operator can be any of a 100% owner, a principal owner (51% or more shares), a co-owner (49% or less), or one of multiple people with ownership. But there are inconsistencies both between the guidelines and the actual application assessment, and between different officers’ assessments of different applications. Some immigration experts suggest the higher percentage of ownership (more than 50%), the better. But many take the view that the owner/operator must be a minority shareholder based on the experience that greater than 50% ownership implies self-employment and falling within the “self-employed” work permit category; while this category is LMIA-exempt, applicants must satisfy narrow and extensive criteria to satisfy its requirements. It seems sufficient to have a25% to 40% ownership interest, but an interest as low as 7% has also been met with success. If the Temporary Foreign Worker is the sole owner of the business, the company completes the LMIA application form as the employer and the new owner signs the application in whatever capacity she holds in the company; Service Canada accepts that the Temporary Foreign Worker, as an authorized officer of the company, can make an employment offer to herself.
- Whether the applicant must own the Canadian business when she submits her LMIA application is a sticky chicken and egg issue. Government direction has been ambiguous thus far, with different experiences depending on the officer reviewing the application. Applicants must weigh the risks of purchasing the business outright before a positive LMIA is issued against the risks of purchasing it conditionally. If the applicant purchases a Canadian business before the LMIA is issued, she faces the risk that ESDC will refuse to issue the LMIA, the applicant won’t be permitted to work in Canada and be left as the owner of a Canadian company in which she can’t work. One strategy to counter this risk is for the applicant to enter a purchase agreement for a minority interest in a Canadian business that’s conditional on the issuance of a LMIA and work permit. But there are also risks to this strategy: ESDC officers have questioned the legitimacy of a purchase agreement replete with conditions; for example, it has scrutinized applications in which the purchase of the business is conditional on the issue of a work permit, on the basis the applicant isn’t yet an owner of the business so isn’t an “owner/operator”. If the applicant chooses this strategy and has access to a “Plan B”, such as a Provincial Nominee Program, it would be prudent to prepare that application too.
Required Documents. Applicants must provide the supporting documentation required for a typical LMIA application, including incorporation and tax documentation, proof that the company is actively engaged in business and a job description and copy of the owner/operator’s resume. In addition, however, the applicant employer’s business plan must essentially address the role of the owner/operator in the business and the kind of jobs that will be created or preserved in the Canadian labour market in addition to the conventional aspects of a business plan, such as the business objectives and financial targets. A copy of the employer’s business plan and a letter from an accountant can be helpful. In particular, the additional documents supporting the LMIA application must demonstrate:
- How the applicant will be involved in the business on a daily basis.
- The applicant’s ownership. Share certificates, a share register, a copy of the purchase agreement, a letter from the CEO or any proof of stock ownership are helpful; ESDC officers will also want to see a copy of the commercial lease agreement and tax documentation, if available, as proof that the company is actively engaged in business.
- Evidence that the issuance of a LMIA and work permit to the applicant will have a neutral or positive effect on the Canadian labour market. In assessing the application, ESDC will seriously consider whether the temporary entry of the applicant will result in the creation or retention of employment opportunities and/or in the transfer of skills for Canadians and permanent residents. A clear picture of how Canadians will benefit and how jobs or skills will be transferred, such as the number of Canadians/Permanent Residents currently employed and information on future plans to hire and/or train new employees, can greatly benefit an application.
- Sufficient profitability to pay the wages of the new owner/operator as well as its existing employees. An officer may ask for more documentation, such as bank statements and additional tax/payroll documentation, to demonstrate that the business is viable enough to support the new partner. It’s important, however, to be aware that once the LMIA application is approved and the owner/operator receives her work permit, some ESDC officers are requiring that the employer pay the new owner/operator the prevailing wage rate for the applicable NOC code – even though the practice of doing so is inconsistent, the 2012 Temporary Foreign Worker Program Bulletin (see Ownership Share above) indicates that Owner/Operators should not be required to pay the prevailing wage and ESDC shouldn’t take this into consideration in assessing an Owner/Operator LIMA application, and many argue it’s unreasonable because business owners don’t normally pay themselves a set salary but get whatever profit is left at the end of the day after expenses are paid.
Transition Plan. Generally, ESDC requires the employer to commit to a transition plan before approving the hiring of a foreign worker, including for owner/operator LMIA applications. But there are cases in which ESDC will waive the transition plan requirement. In most cases, a transition plan will be provided in support of the owner/operator’s application for permanent residency; however, the applicant can request ESDC waive the transition plan requirement where the owner/operator will be in Canada for a short period of time and will be returning to her home country once she completes her duties.
SPECIALIZED SERVICE TECHNICIANS/ SERVICE PROVIDERS EXEMPTION
An employer is also exempt from the LMIA advertising requirements when the work the Temporary Foreign Worker will perform requires a specialist with proprietary knowledge and/or experience related to that work, the duration of the work is limited and there is no opportunity for Canadians to be trained.
Application. The applicant’s submission letter will request an exemption to the minimum advertising requirements under the specialized service technicians/ service provider category. In its submissions, the employer should include descriptions of:
- The nature of the employer’s business in order to provide some context about the role the specialized provider will fill.
- The project or the role the employee will undertake, in detail.
- The employee’s specific experience, including the number of years the employer has employer her and any proprietary knowledge of the employer’s products or services that she holds.
- How the employee’s role in this position is critical to the success of the project or more broadly, the success of the business.
Required Documents. Again, an employer must provide the supporting documentation required for a typical LMIA application, including incorporation and tax documentation, proof that the company is actively engaged in business and a job description and copy of the employee’s resume. In addition, however, an employer should support its application in the specialized service technicians/ service providers category with a letter from the company or the employer to which the employee will be providing her services that includes:
- The purpose for which the company requires the services of the specialized service provider.
- The duration for which the employer will require the services of the specialized service provider.
- A description of the role and responsibilities the specialized service provider will be required to fulfill.
- A description of the service provider’s specialized knowledge and experience, including an explanation of why this knowledge is unique and proprietary.
- An explanation of why the specialized knowledge is crucial for the position.
Transition Plan. When an employer needs to hire a specialized service provider for a short period of time to perform a specific task or complete a specific project, as is often the case, the employer can ask ESDC to waive the transition plan requirement due to the short duration of the employee’s time in Canada.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Immigration Law Team to discuss this topic or any other legal issue.
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