Companies may not always consider the potential immigration issues arising from the conclusion of a corporate transaction – whether they are acquiring, being acquired, or reorganizing. The potential consequences of non-compliance are serious and could include a financial penalty of up to $1 million and public notice of a permanent ban from hiring foreign workers. We also discuss important questions to ask during a corporate transaction and best practices to help employers maintain a robust internal immigration compliance program.

Immigration Due Diligence

Various corporate transactions can have significant immigration implications, including amalgamations (also known as mergers), acquisitions, spin-offs, and name changes. An amalgamation is the fusion of two companies into one new legal entity, whereas an acquisition involves one company purchasing another. A spin-off entails a parent corporation divesting itself of a subsidiary.

All of these can have an impact on a company's ability to continue employing its existing foreign worker population and hire additional foreign workers. Disclosure to the relevant government authorities of the corporate transaction may be required. Immigration counsel can advise on the impact of a transaction and devise strategies that take into account the post-transaction interests and needs of all parties.

Important Questions to Ask

Undergoing a comprehensive due diligence process is essential in any business transaction. This includes conducting specialized immigration due diligence to identify risks related to immigration non-compliance. Such non-compliance may also create employment law risk and jeopardize the immigration status of employees.

Here are some questions that should be asked during the due diligence process:

  1. Are all foreign workers currently working for the employer authorized to occupy the position and does the employer have the proper documentation to ascertain this information (e.g., valid work permit without conditions that conflict with the employment itself, proof of permanent resident status or valid permanent resident card, valid social insurance number, etc.)?
  2. What procedures have been put in place to systematically verify the immigration status of each new employee before their first day of employment and to manage the expiry dates of each foreign worker's work permit?
  3. Will the qualifying relationship for foreign workers holding work permits issued under the Intra-Company Transfer category be maintained as a result of the transaction? And if not, what alternative work permit option has been identified to prevent an interruption in employment and/or the need to terminate the foreign worker's employment?
  4. Has the employer ever been subject to a compliance inspection under the Immigration and Refugee Protection Act or is it currently undergoing such an inspection? If so, has the employer ever been found to be non-compliant? If so, what sanction(s) was/were imposed? While most inspections are issued randomly, prior non-compliance naturally increases the likelihood that an employer will receive another inspection request.
  5. What fees/costs has the employer agreed to pay/reimburse in relation to the immigration process of the foreign workers it employs? Are there internal written policies on this topic? Provincial laws and federal immigration rules prohibit the direct or indirect recovery of certain immigration-related fees from foreign workers.
  6. Does the employer have any outstanding obligations with respect to the hiring of foreign workers under the Temporary Foreign Worker Program's Low Wage Stream (e.g., private health insurance, round-trip transportation costs, housing)?
  7. How many foreign workers working for the employer are currently on maintained status? Have any of them applied for a work permit extension that is likely to be refused?
  8. Are the terms and conditions of employment of foreign workers holding work permits under the Temporary Foreign Worker Program (work permits based on an a Labour Market Impact Assessment) the same as those outlined in the LMIA application and confirmation letter? Have changes been approved in advance by the government? Is there a procedure in place to review, at least annually, the conditions of each foreign worker to ensure compliance with TFWP rules?
  9. Are the terms and conditions of employment for foreign workers holding work permits under the International Mobility Program (work permits exempt from an LMIA) the same as those outlined in the offer of employment filed by the employer in its Immigration, Refugees and Citizenship Canada (IRCC) Employer Portal account? Have changes been approved in advance by the government? Is there a procedure in place to review, at least annually, the conditions of each foreign worker to ensure compliance with IMP rules?
  10. Could the transaction negatively impact pending immigration applications that are conditional on a particular corporate structure or employment relationship, such as certain provincial nominee-based permanent resident applications or work permit extensions?

Best Practices for Employers

Immigration compliance rules are complex and change from time to time. Employers should establish and maintain a robust internal immigration compliance program to ensure that they are not exposing themselves to legal risk. The potential consequences of non-compliance are serious and could include a financial penalty of up to $1 million, the inability to hire foreign workers for a certain period of time (including a permanent ban), public blacklisting, employment law exposure, and may also jeopardize the immigration status of employees.

Here are some best practices that employers should consider implementing, if they have not already done so:

  1. Stay up to date on employer compliance rules. The last set of major changes took effect on September 26, 2022. For more information, please refer to our bulletin titled, New Employer Immigration Compliance Obligations Effective September 26, 2022 on this topic.
  2. Ensure employment agreements contain particular language for employees who are not Canadian citizens or permanent residents. This language should address questions such as "What happens if the work permit application is refused or takes much longer than expected?" and "What happens if the employee is no longer authorized to work in the position?"
  3. Understand what fees (legal fees and government processing fees) can and cannot be recovered from the employee. To ensure consistency, draft internal policies outlining what fees will be covered by the employee and employer.
  4. Review and maintain proof of an employee's authorization to work in Canada before the first day of employment, track work permit expiries and initiate extensions timely, and remember that not all work permit holders are eligible for a work permit extension or permanent residence. Most pathways to permanent residence now require invitations to apply and given that demand is much greater than supply, many individuals want to become permanent residents but are unable to do so before their work permit expires, and this can create a host of costly and at times unresolvable issues for both employer and employee. Establish a longer-term immigration strategy for each foreign worker employee, particular key employees, to prevent unpleasant surprises further down the road.
  5. Maintain complete records (application forms, signed employment agreements, pay stubs, job descriptions, proof of benefits enrollment, etc.) as work permits can be audited for up to six years from the issue date.
  6. Ensure employment equity between employees that are foreign workers and employees that are Canadian citizens or permanent residents to avoid a potential discrimination claim and other associated risk. Recently, an employer was ordered to pay a former employee $60,000 after the B.C. Human Rights Tribunal found that he took advantage her immigration status.1
  7. Remember that corporate reorganizations (not just amalgamations and acquisitions) may create issues for employees holding work permits. As an example, let us assume that a Canadian company is splitting into two companies, the second of which will have no corporate relationship with its parent company outside Canada. It employs a foreign worker on a work permit under the intra-company transfer category. One of the conditions of this work permit is that the foreign worker's foreign employer and Canadian employer must have a qualifying relationship at all times. This worker will be transferred to the new independent company as soon as the corporate transaction closes. However, because the corporate relationship is being severed, the foreign worker needs a new work permit. Continuing to use the same work permit would be a breach of immigration rules. As the intra-company transfer work permit category is no longer an option, a creative immigration strategy may be required to prevent business interruption and lost revenue.

Key Takeaways

Non-compliance with immigration rules can create a host of legal and reputational consequences, whether or not a company is involved in a corporate transaction. Those involved in a corporate transaction may inherit or create legal risk if immigration due diligence is not performed. It is therefore essential for all companies to establish and maintain a robust internal immigration compliance program that keeps up with changes to immigration rules.

The authors wish to thank Zoe Zeitouni for her assistance in drafting this article.

Footnote

1. Kasagoni v. J Singh Enterprises dba Willingdon Husky and another (No. 3), 2023 BCHRT 65. (PDF)

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.