Employer Audits and Compliance – Frequently Asked Questions

Canada has two federal government departments that manage job offers for foreign workers.

Employment and Social Development Canada (ESDC) operates the arm of the Temporary Foreign Worker Program that is responsible for issuing a Labour Market Impact Assessment, (LMIA) to the employer to hire a foreign worker. They approve the LMIA on various conditions regarding wages and terms of employment.

Immigration, Refugees and Citizenship Canada (IRCC) operates the arm of the Temporary Foreign Worker Program that is responsible for issuing work permits. When the work permit is LMIA-exempt (unless it is an open work permit), the employer must submit their offer of employment through IRCC’s online employer portal for approval before hiring a foreign worker. IRCC must approve the wages and working conditions of the job offer.

Both departments have compliance programs, namely a compliance unit that is responsible to follow up on employment arrangements to ensure that the employer provided honest information when seeking to hire a foreign worker, and followed the requirements of either department from the time the worker started employment.

The follow-up inspections performed by either of these departments under federal regulations are called Employer Compliance Reviews, or audits. They may take place over the phone, through the mail or with an onsite inspection by investigators.

Here are some of the most frequently asked questions our office gets from businesses that find themselves facing Employer Compliance Audits.

An Employer Compliance Review is a process whereby the Integrity Unit of either ESDC or IRCC requests certain documentation from an employer to verify that the employer followed through on their commitments made during the process of hiring a foreign worker.

Generally speaking, compliance auditing starts with a telephone call and then a letter is sent. The letter will advise which specific temporary foreign workers the Integrity Unit is focusing on, and what records they wish to see for them. The initial documentation requested generally includes a copy of the work permit, some payslips and a description of the duties the foreign worker is performing.

If you retained counsel earlier to obtain the LMIA or to submit the electronic offer of employment, then you should notify them about the compliance audit and find out if they are willing, and have the necessary experience, to assist you with the audit response.

This would be a good point to engage experienced counsel if you don’t have someone already, or prefer not to proceed with your current representative. It is important to receive competent legal advice at the outset of the compliance auditing process to fully understand the requirements so that you don’t inadvertently cause more issues for yourself. It is an investigation after all, not a courtesy call to see how your foreign workers are helping your business.

There are different avenues for a company to be selected for an audit. The government seeks to eventually audit every company that has participated in the Temporary Foreign Worker Program, in order to provide every employer with a strong incentive to comply. It’s most likely that you were selected for an audit randomly and there is no specific reason other than system integrity. Audits are also initiated in response to complaints made against employers, and when a company has a prior history of issues with either of the federal agencies, ESDC or IRCC.

You will be requested to provide documentation and explanations to the investigator through the regular mail service. After you provide the initial set of documents, you will receive a letter from the unit in about 3-4 weeks time. The letter will either state that your records look fine and the audit is closed, or it will ask for further documents to explore areas of concern. Again, we recommend that you get some competent advice before you respond to the initial request so that you can keep the audit process as efficient as possible in your situation. Officers have been known to make requests that are outside the scope of their regulatory authority, and competent counsel will recognize these instances and push back appropriately.

Compliance audits can take anywhere from about 3 weeks to more than a year, depending on the situation. When your payroll records match the LMIA approval or electronic job offer, and you meet all Provincial labour standards, and the worker’s duties match their work permit, you will likely receive a letter indicating your audit report is positive, and stating that your audit has concluded. In other words, you have met your obligations, or they have accepted your explanations for anything they were concerned about.

Regarding providing explanations, the more complicated the issue at hand, the longer this process will take. You will definitely be asked to provide an explanation for any discrepancies between what was approved and what has happened since. A back and forth dialogue will ensue, via paper mail, until the Integrity Unit is either satisfied that you have acted in good faith, or they decide to level some sanction against your business for violations of the program.

An understanding of the framework of laws and regulations that govern the authority of the Integrity Unit is essential when an employer is asked to provide explanations relating to any deviations, because there can be significant legal penalties applied to violations. It is crucial that you meet your obligations concerning the audit procedures, but wise to have independent professional guidance on exactly what those are in your case.

You can probably best ascertain that issue on your own, based on your understanding of the employment of foreign workers at your place of business.

The main goal is for the government to assess for themselves your organization’s adherence to the terms agreed to when they gave approval.

You will need to produce the data to show you are complying. And of course they expect your paper trail for employees will meet generally accepted accounting principles. If you maintain proper records for your employees, follow all Provincial Labour standards and have upheld the employment contract you signed with the foreign worker(s), your organization’s adherence should be obvious, and it is quite unlikely that you will be in any sort of trouble. The quicker you can prove that, the shorter your audit trail should be!

However, if your company has been lax regarding compliance with employment laws and standards, or outright changed the conditions of employment for your foreign workers after they started to work, you will have some explaining to do. Depending on the intentions of the employer and the magnitude of the deviations, you may find yourself in trouble. And yes, your operations can be pretty severely affected, as the regulatory guidelines give compliance auditors the authority to level various types of sanctions if they determine you are in violation.

Sanctions for non-compliance can range from being required to pay back to the foreign nationals any wages or benefits that were required but not provided, to being blacklisted by the government and not being able to use the temporary foreign worker program for a period of time. That means your current foreign workers will not be renewed as well as no new foreign worker approvals. There can also be significant fines against the company and, in cases of serious abuse, criminal charges against the employer. The laws and regulations in this area can be pretty strict to protect the integrity of Canada’s labour market. Employers who wish to benefit from this program are expected to follow the rules.

If you had submitted an LMIA application that was not processed before the Employer Compliance Review process started, the pending LMIA will not be processed until the compliance audit is complete. Everything is on hold regarding any new LMIAs for employees as far as Service Canada is concerned.

Compliance auditors can ask the Employer to provide records for 6 years following the first day the temporary foreign worker started to work for the company. It includes records of the hiring process as well. That means you need to ensure your human resources people keep any records related to an LMIA application or an electronic job offer for at least 6 years. This includes copies of advertising, copies of the application, any resumes received and any follow up activities that might have been required as part of a transition plan for any employees on a path to becoming permanent residents.

Most of the records that you will need to provide during compliance audits are kept as a normal part of doing business. Documents like payslips and employee time sheets are the crucial pieces of information for any compliance audit, whether conducted by Employment and Social Development Canada if the audit concerns LMIA compliance or IRCC for LMIA-exempt work permits. If you were responsible to pay for the worker’s airfare from their home country, you need to keep proof that you made those payments.

However, you may also wish to collect additional documentation as a matter of best practice for your business, to ensure you can adequately demonstrate later to compliance auditors the employment relationship you have with your temporary foreign workers. To that end, it is wise to keep the following for every foreign worker:

• written requests for time off or vacation
• doctors’ notes if part time hours or light duty is required
• termination notices – both if the employer is terminating the worker, or the worker is quitting

Let’s face it, compliance auditing is never any fun. But if you are honouring your end of the bargain when hiring foreign workers, have implemented tracking procedures to know what is happening with your foreign nationals and are keeping good records, you should have no fears that your compliance audit should go smoothly. But if ever in doubt about how to handle something, especially if you are relying on this program to continue to employ foreign workers at your business, it’s much better to seek help proactively rather than risk surprises later when your turn comes around for compliance auditing.

At The Way Immigration , we are very familiar with the requirements of the Temporary Foreign Worker Program and the regulatory guidelines for compliance audits. We are able to provide guidance and advice on any compliance issues or questions you have, and identify the applicable compliance requirements in your situation. We have helped many businesses to conclude the employer compliance audits in a positive fashion. Our office would be pleased to assist your organization to respond to an Employer Compliance Audit.