Canada: Immigration Changes Impact Canadian Franchisees - Moratorium On Food Service Industry Access To Temporary Foreign Worker Program

Last Updated: April 30 2014
Article by Kate Russell and Chad Finkelstein

In the latest of a series of developments under the Temporary Foreign Worker Program (TFWP), Minister Jason Kenney announced on April 24, 2014 that all restaurants would be barred from accessing the Program to hire foreign workers in Canada.  This general ban applies to positions of any skill level, from counter attendant to Chief Executive Officer.  No new or pending application for a Labour Market Opinion (LMO) will be processed until Employment and Social Development Canada (ESDC) completes an internal review that was sparked last year in response to a media firestorm surrounding perceived abuse of the TFWP.  Further details released on April 28, 2014 by the ESDC indicates that this moratorium may extend beyond the food service industry to other service sectors.

The denial of access to the Program against restaurants comes after Citizenship and Immigration Canada (CIC) began publishing the names of employers who were found to be non-compliant with the TFWP in early April. The first three employers to be named were restaurants, and the offenders have been subject to intense media scrutiny and public backlash since the announcement.  There have been calls for boycotts of the businesses, and we are witnessing transfers of ownership of some of these businesses from franchisee to franchisor as a result.  The investigation against at least one of the three employers was triggered by a complaint from a Canadian worker who claimed to have been let go from her job while foreign workers maintained their positions.

Based on details that have been published by the media, it seems that at least one of these employers may have been making an honest attempt to comply with the TFWP's onerous and convoluted requirements when they were determined to have gone afoul of the spirit of the Program.  Specifically, the TFWP is intended to ensure that Canadians are first in line for any job in Canada, but an employer who has been issued an LMO authorizing the employment of a foreign worker is subject to complex compliance requirements regarding the terms and conditions of work offered to the foreign worker.  The Program's employer compliance requirements can effectively require that foreign nationals be given preferential treatment over Canadians after the LMO has been issued.  These technical details have gone unreported by the media, which over the past year has repeatedly and grossly misrepresented the realities of the TFWP to incite public discord. 

Many small business owners contend that there is a shortage of low-skilled labour in many regions of the country, and these entrepreneurs must rely on the TFWP to staff their operations when no Canadian can be found.  It is not always the case that there is no qualified Canadian in the area, but rather there is no qualified Canadian who is willing to accept low-skilled work when they feel they can hold out for better, higher paying jobs.  Many employers have complained that it is difficult to keep Canadians employed in low-skilled roles for any period of time, for a variety of reasons.  The TFWP requires that employers offer a prevailing wage as set by the government, but the ESDC can and has required employers to offer wages above and beyond that rate if a qualified Canadian might be willing to accept the job at the higher wage.  Effectively, the ESDC is empowering Canadians to demand unreasonably high wages for low-skilled work by refusing to issue LMOs in such cases, and is requiring employers to hire those who may be unreliable Canadian workers in lieu of hard working foreign nationals.

It remains to be seen whether the ESDC will be challenged on the unconstitutionality of the TFWP, which effectively requires employers to discriminate against workers based on nationality.  In the meantime, many employers feel that they are left without any recourse when attempting to staff their businesses, and the restaurant industry has been singled out to be made a national example of by both the federal government and the media.  

For those restaurants who operate by way of a franchise model, the crisis management options are neither easy nor obvious.  Certainly, from a strictly legal perspective, each franchise agreement should provide that the franchisor has the right to terminate the agreement and the option to purchase the business should the franchisee conduct itself in a manner that is offside applicable laws or which brings harm to the brand's goodwill.

However, enforcing those provisions is not a decision that is arrived at lightly and it must be weighed against the reputational risk that the resulting media attention may garner, in light of the current, controversial events.  Franchisors are generally well-advised to stay out of the employment relationships between franchisees and their employees for a number of reasons.  Now might be a good time, though, for franchisors to conduct a form of audit of its franchisees' hiring practices so that any issues can be caught and managed before their brand name appears in headlines across Canada.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Kate Russell
Chad Finkelstein
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