Planning to hire a foreign worker in Canada through an LMIA?
There is an important detail employers cannot afford to overlook.
The federal government has clarified which entities can qualify as employers for Labour Market Impact Assessment (LMIA) purposes under Canada’s Temporary Foreign Worker Program (TFWP).
And the big change is about something many businesses may not expect: who actually controls the employment relationship?
For employers using staffing companies, employment agencies or an Employer of Record (EOR) arrangement, this clarification could significantly change how they approach an LMIA application.
The Big LMIA Question: Who Is Actually the Employer?
An LMIA is not simply about finding a company willing to hire a foreign worker.
The government is looking at the actual employment relationship.
Under the clarified approach, Employment and Social Development Canada (ESDC) will focus on which entity controls the employment relationship in practice.
That means employers need to look beyond contracts and paperwork.
Who directs the worker?
Who supervises them?
Who controls their day-to-day employment?
Those practical details matter when determining whether an entity qualifies as an LMIA employer in Canada.
Staffing Agencies May Not Be Able to Get LMIAs for Third-Party Businesses
This is where things get particularly important for businesses using recruitment or staffing arrangements.
According to the provided guidance, staffing and employment agencies that recruit workers for other businesses are not considered employers under the program when the foreign worker will ultimately work for a third-party business in Canada.
As a result, these agencies cannot obtain LMIAs for foreign workers who will actually work for another Canadian business.
So, if Company A recruits a worker but Company B controls the worker’s employment, simply placing the worker through Company A does not automatically make Company A the qualifying employer for LMIA purposes.
For businesses considering an LMIA work permit, understanding this distinction is critical.
What About Employer of Record Arrangements?
This is arguably the biggest issue for businesses using an Employer of Record Canada model.
The federal government has clarified that EORs do not qualify as LMIA sponsors.
In practical terms, an EOR cannot simply act as the LMIA employer for a foreign worker who will actually be employed and controlled by another business.
This effectively prevents the EOR model from being used for LMIA-based work permits in the circumstances described by the guidance.
That is a major consideration for companies that previously relied on EOR structures when hiring foreign workers.
Why Does This Matter for LMIA-Based Work Permits?
An LMIA is connected to a specific employment relationship.
The government needs to determine whether the business applying for the LMIA is actually the employer responsible for the foreign worker.
If an EOR is listed as the employer but another company controls the worker’s day-to-day employment, the arrangement may not satisfy the applicable employer requirements.
This means businesses should not assume that changing the name on an employment agreement solves the problem.
The actual working relationship matters.
Foreign Workers Cannot Simply Be Classified as Independent Contractors
There is another important clarification.
Temporary foreign workers cannot be classified as independent contractors simply to avoid payroll, tax or other program obligations.
In other words, calling someone a contractor does not automatically change the nature of the relationship.
If the actual circumstances show an employment relationship, businesses cannot rely on a contractor label to avoid their responsibilities.
For employers considering an LMIA application, this makes it even more important to properly assess the structure of the employment arrangement before proceeding.
What Should Canadian Employers Check?
If your business already employs foreign workers or is preparing an LMIA application, this is the time to look closely at your structure.
Ask some straightforward questions:
- Who actually controls the worker?
- Who supervises the worker every day?
- Which company directs the worker’s duties?
- Who is responsible for the employment relationship?
- Is a staffing agency involved?
- Is an EOR being used?
- Does the paperwork match the real working arrangement?
- Is the worker being incorrectly classified as an independent contractor?
These questions can help identify potential problems before an LMIA renewal or work permit extension Canada application is submitted.
What Does This Mean for EOR Companies?
The clarification does not mean that EOR companies can no longer operate in Canada.
The restriction described in the source applies specifically to LMIA applications.
EORs may continue operating in other employment contexts, subject to applicable provincial employment laws.
So the issue is not simply whether an EOR is legally operating.
The real question is whether that EOR can serve as the employer for the purpose of an LMIA-based work permit.
Under the clarified rules, it cannot act as the LMIA sponsor in the arrangements described.
What If You Already Have an LMIA-Based Worker?
This is where employers should be especially careful.
Businesses with foreign workers currently holding LMIA-based work permits should review their existing employment arrangements before applying for an LMIA renewal or work permit extension.
A structure that previously appeared acceptable may need to be reassessed under the clarified employer requirements.
This is particularly important for cross-border employment arrangements.
Cross-Border Employment Can Make Things Complicated
Cross-border arrangements can create another layer of complexity.
The guidance emphasizes the importance of determining which entity actually controls and supervises the foreign worker.
For example, imagine a foreign company sends a worker to Canada while continuing to control the worker’s employment relationship.
The Canadian company may not automatically meet the employer-employee relationship requirement simply because the worker is physically working in Canada.
The actual control and supervision structure needs to be examined.
This is why businesses should avoid treating LMIA requirements Canada as a paperwork exercise.
The relationship needs to work in practice—not just on paper.
What Should Employers Do Before an LMIA Renewal?
If you are preparing an LMIA renewal, do not wait until the application is ready to discover that your employment structure creates a problem.
Start by reviewing the current arrangement.
Look at the employment contract, reporting structure, supervision, payroll arrangements and day-to-day responsibilities.
Then compare the paperwork with what actually happens in the workplace.
If the company named as the employer does not control the worker’s employment in practice, that could raise questions under the clarified approach.
How This Could Affect Foreign Workers
For foreign workers Canada employers are planning to hire, the change also matters indirectly.
A worker may have the required qualifications and experience, but the LMIA process still depends on whether the employer and employment arrangement meet the program requirements.
That means the worker’s immigration application and the employer’s structure cannot be treated as completely separate issues.
The employer relationship is part of the equation.
VisaNexa: Get the Employment Structure Right Before Applying
The latest clarification shows why Canadian employers should look beyond simply asking, “Can we get an LMIA?”
The better question is:
“Does our actual employment arrangement meet the LMIA employer requirements?”
For businesses hiring foreign workers, using staffing arrangements or considering an Employer of Record, getting this distinction right can help prevent avoidable issues during the immigration process.
VisaNexa helps employers and foreign workers understand Canadian immigration pathways, including LMIA applications, Canadian work permits, Temporary Foreign Worker Program requirements and employer-supported immigration options.
If you are planning an LMIA-based work permit, reviewing the employment relationship before submitting the application can be an important step.
Because when it comes to LMIA rules, who actually employs the worker matters—not just who appears on the paperwork.
