Canada: Tripartite Arrangements: Employers, Recruitment Firms & Foreign Workers

Last Updated: July 30 2015
Article by Lori Brienza

The "commercialization" of migration has become increasingly common worldwide. As the need for temporary foreign workers has expanded, the use of a recruiter specializing in international talent has had a corresponding increase. Locally, many Alberta employers rely on third party recruitment firms to assist them in filling their labour shortages with foreign workers. Entering into this kind of engagement can be very beneficial (and expensive), particularly where an employer's labour strategy requires the ability to fill temporary labour needs relatively quickly.

Recruiters essentially act as brokers, drawing on information about available positions locally and foreign labour pools in order to connect employers with foreign talent. This "tripartite" relationship between the employer, the recruitment firm, and the foreign worker can however create unique legal challenges for all parties involved.

For starters, Alberta, Saskatchewan, Manitoba, British Columbia, and Nova Scotia have all introduced legislation to regulate the activities of recruiters, including their licensing. In Alberta, an employer seeking to recruit and hire foreign nationals through a recruitment company must ensure that their recruiter is licensed by Service Alberta under the Fair Trading Act, RSA 2000, c F-2. Confirmation must also be obtained that no placement or recruitment fees have or will be charged to any foreign worker.

At the engagement stage, employers and third party recruitment firms should carefully consider the terms and conditions that will govern their prospective relationship. The recruitment of foreign workers necessarily introduces an additional party, Citizenship and Immigration Canada ("CIC"), to the arrangement. This is because the hiring of a foreign worker is ultimately dependent upon the receipt of work permit approved by CIC. Even where eligibility requirements are met, the outcome of a foreign national's work permit application cannot be guaranteed. As such, parties will want to carefully consider compensation clauses for services rendered.

A decision of the Alberta Court of Queen's Bench rendered May 2014 considered the contractual terms governing the relationship between an employer and a third party recruitment firm. In Northern Alberta Consultancy Inc. (SK Personnel) v Flint Energy Services Ltd., 2014 ABQB 279 ("SK Personnel"), the Court considered with whom the risk lay – the employer or the recruiter – in the event that CIC rendered a work permit refusal. The recruitment firm argued that the employer could not unilaterally terminate the agreement on the basis of CIC's refusal while taking the 'benefit' of the work performed by it.

The compensation scheme in SK Personnel required that certain milestones be met prior to payment to the recruitment firm. The greatest percentage of payment became due and owing once a worker arrived in Canada. Ultimately, the Court held that by structuring the terms and conditions of compensation in this manner, the recruiter assumed the risk of non-payment in the event that a milestone was not reached; even where the failure to reach the "milestone" was not the fault of either party. This decision highlights the importance of each party's understanding of their expectations and obligations prior to entering into a tripartite relationship.

In addition to contractual considerations, the impact of the immigration process on tripartite arrangements must be considered. In most cases, an employer generally requires a Labour Market Impact Assessment ("LMIA") confirmation from Employment and Social Development Canada ("ESDC") to hire a foreign worker. The LMIA confirms that hiring a foreign national will have a neutral or positive effect on the Canadian labour market. In order to be eligible for a LMIA confirmation, there must be an "employment relationship" with the foreign worker and clear terms of employment. The "employer" will then be held accountable to ESDC for compliance with the rules of the Temporary Foreign Worker Program as well as the terms of the foreign worker's employment. The parties to a tripartite arrangement must carefully consider who will carry out ESDC's "employer" obligations as they relate to the employment of foreign workers.

For ESDC's purposes, the "employer" has the authority to determine how the work will be performed by the foreign worker and directly benefits from the work performed. The employer also assumes responsibility for ensuring that the conditions of a LMIA and employment contract are met at all times throughout the employment relationship. This includes the requirement to pay foreign workers' wages in accordance with the LMIA confirmation or arrange for payment by another entity. In a tripartite employment arrangement, where the employer retains the services of a third party recruitment firm to locate, supply and pay temporary foreign workers to meet labour requirements, the recruitment company and the employer may be required to jointly apply for an LMIA and agree to certain attestations set out therein.

By jointly applying for the LMIA, the employer and the third party recruitment firm may be inadvertently holding themselves out to be co-employers of the foreign worker, despite an intention or agreement otherwise. This representation could lead to compliance issues for the employer. As a result, when applying for a LMIA in the context of a tripartite arrangement, we recommend that each party provide an accurate description of its obligations and requirements to the foreign worker under the contractual agreement for recruitment services. Doing so will minimize the risk associated with being inadvertently named the "employer", or being held accountable for a particular obligation contractually assumed by the other party.

We have highlighted a few of the legal challenges that may arise from entering into tripartite arrangements. These issues can be easily resolved by developing a strategic plan in advance of entering into a tripartite arrangement. The parties should consider and discuss expectations and obligations with respect to recruitment, the specific immigration processes required to hire or retain foreign workers, compliance with the TFWP, and compensation for services rendered.

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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Lori Brienza
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19 Dec 2017, Webinar, Calgary, Canada

McLennan Ross previously conducted a webinar on June 6, 2017 about the passage of Bill 17, during which we reviewed the changes to the Employment Standards Code and the Labour Relations Code. During that webinar, we identified a number of issues which would depend upon the language of the Regulations, which had not yet been developed.

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We have been preparing for legalization day since Bill C-45 was first introduced. With October 17th just around the corner, our Corporate, Labour & Employment, and Insurance groups have the answers to your questions.

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