March 30, 2021

Owner/Operator Labour Market Impact Assessments Changing April 1st, 2021 – Legal How and Why Remains Unknown

Much has been written about the policy changes to the Owner/Operator Labour Market Impact Assessments (LMIA) effective April 1^st, 2021. Some argue it is the demise of the program.  Some argue the program has already been curtailed by internal undisclosed policy guidelines this past year.  

The interesting questions for me are the how and why.  Employment and Social Development Canada (ESDC) officials have commented the Temporary Foreign Worker Program (TFWP) was not designed for owner/operator (O/O) LMIAs, but where is the grounding in law?  One would also question at a time when economic recovery is at the forefront of many countries’ agendas, why would Canada step away from a program that can combine invested workers in start-ups or other businesses.  So, the legal how and the rationale as to why remain unclear – at least to me.    

First, it is unclear why a start-up business seeking to employ an owner/operator must demonstrate a client base to be considered actively engaged.  Additional requirements like advertising will also be a reality post April 1^st.  Practically speaking, an owner/operator or start up company does not require clients to otherwise begin operation of a business.  The need for advertising may be similarly questioned. 

Second, these are policy changes being applied in many cases as law. Yet, although policy can be applied in a mandatory way, it must allow for reasonable departures. See Frankie’s Burgers Lougheed Inc. et al. v. Canada (E.S.D.C), 2015 FC 27, par. 91, Marcom Resources Ltd. v. Canada (Employment, Workforce Development and Labour), 2020 FC 182, pars. 28-30. Therefore, if an applicant applies post-April 1st with good rationale under the old policy, then what?

Aside from law by policy, ESDC seemingly continues to apply undisclosed internal guidelines to LMIA assessments. Two examples as discussed above as it relates to O/O cases, the definition and assessment of active engagement, neither of which are publicly available. It is very difficult for applicants to know what factors are used to determine if a business is actively engaged.

In so far as public guidance for LMIA applicants it describes if an employer has not received a positive LMIA decision in the past two years, they must submit at least one of the following documents to demonstrate the business is legal and provides a good or service:

• municipal/provincial/territorial business license (valid, i.e., not expired);
• T4 Summary of remuneration paid;
• PD7A Statement of account for current source deductions;
• an attestation confirming that you are engaged in a legal business that provides a good or a service in Canada where an employee could work and a description of the main business activity. Permanent residency stream only, confirmation that the business has been operating for at least one year must also be included in the attestation;
• if you are a foreign employer without a Canada Revenue Agency number whose business address and operation is outside of Canada, you may submit your contract or invoice for the goods or services that you are providing in Canada; or
• a copy of the Coasting Trade letter of authority issued by the Canada Border Services Agency for positions onboard a foreign-vessels undertaking coastal trade in Canadian waters.

Yet, ESDC maintains that start-up businesses are prohibited from applying for an O/O LMIA, but where in law? There is no requirement that the business must be in operation for a specified period of time to be granted an LMIA unless the employer is hiring a skilled foreign worker to support an application for permanent residence. It can feel like applicants are chasing an ever-moving and non-transparent target.

As above, this Court has consistently found that an Officer’s reliance solely on internal administrative guidelines, which are not binding, can unreasonably fetter officers’ discretion, especially when an officer relies upon such guidelines to the exclusion of important evidence provided in an application. Of course, for the process to be fair and reasonable, an applicant must have a reasonable opportunity to respond and provide further information to address an officer’s concern.

Third, the rationale for this decision is equally puzzling as it is not at all clear why this program, in particular at this time, has been seemingly phased out. It would appear that we need investment, we need more ingenuity, and this has been a good testing ground for many businesses in the past – arguably start-ups all the more attractive given the state of the economy post-COVID-19.

Of course, it is open to ESDC to go through the rigorous process of regulatory amendment. At least then, changes, requirements, and policy impact assessments will be transparent, debated and consulted upon in both Parliament and the Senate. Doing much of this through policy may be nimble but likely continued to be faced with further legal challenges.  

Thank you for reading, stay safe and as soon as you have the chance, roll up that sleeve for a shot in the arm for our fight against COVID-19!