Immigration liabilities in mergers and acquisitions, part one

By Jacqueline Bart and Carrie Wright

Law360 Canada (October 4, 2022, 10:35 AM EDT) --
Jacqueline Bart
Jacqueline Bart
Carrie Wright
Carrie Wright
There is nothing more frustrating than completing a long and complex project, only to discover that you have overlooked a key component in making that project a success. In mergers and acquisitions, corporate lawyers, in-house counsel, tax experts and many others spend countless hours conducting due diligence, poring over details of contracts, sales numbers, capital, patents, customer base, litigation, IT, marketing and so many others. With such an exhaustive list, it can be easy to overlook a key component that should factor into any M&A due diligence process — immigration issues.  

Any changes to an organization’s structure, ownership, or even name can create potential issues for employees working in Canada under work permits, as well as open up the organization to significant liabilities under Canada’s immigration compliance regime. Immigration issues should therefore form an integral part of any M&A due diligence process.

Canada’s compliance regime

Canada’s Immigration and Refugee Protection Regulations, SOR/2002-227 (IRPR), provide a robust system for ensuring employers’ compliance with the terms and conditions outlined in an immigration application for the entry of a foreign worker. Employers of temporary foreign workers are expected to comply with a number of conditions. Some conditions are specific to the employee, such as ensuring the employee is provided with the proper title, job duties, remuneration, benefits and hours of work and demonstrating that a job offer is genuine, while other conditions are more general, such as abiding by federal and provincial laws that regulate employment, making reasonable efforts to provide a workplace free of abuse, and remaining actively engaged in the business in respect of which an offer of employment was made.

If temporary foreign workers are employed based on a Labour Market Impact Assessment (LMIA), employers will also need to ensure that the employment of the foreign national will result in benefits to the Canadian job market outlined in an application for a LMIA, including job creation or retention, development or transfer of skills to Canadians, or hiring or training of Canadians. Employers must also maintain all documentation confirming the above conditions for a period of six years from the date that the foreign national began employment.

An employer who is found non-compliant with any of the above conditions may defend their actions in an effort to mitigate liability; however, the justifications for non-compliance are very limited and are prescribed by law in the IRPR. Justifications include: changes in federal or provincial law; changes to collective agreements; a dramatic change in economic conditions; a good faith error of interpretation of the employer’s obligations; an unintentional accounting or administrative error; force majeure; or similar circumstances.

Findings of non-compliance can incur significant penalties, both financial and practical. From a financial perspective, employers can be subject to administrative monetary penalties for non-compliance, ranging from $500 to $100,000 per violation, to a maximum of $1 million per year per employer. Calculations of these penalties are based on a complex formula that is based on the type of violation and whether it is committed by an individual or small business, or a large business, factoring in the compliance history of the employer, the severity of the violation and whether there was voluntary disclosure of the non-compliance.

In addition to administrative monetary penalties, employers can face a period of ineligibility on future LMIA and work permit applications, for a period of one, two, five or 10 years, or permanently for more serious situations of non-compliance, as well as the revocation or cancellation of current and pending LMIA and work permits and the publication of the employer’s name on a public government website for an indefinite period of time.

Employers can also be liable for offences under the Immigration and Refugee Protection Act, S.C. 2001, c. 27 (IRPA), such as employing a foreign national in a capacity in which the foreign national is not authorized under the IRPA, or offences of misrepresentation or counselling misrepresentation, the penalties for which can include both fines and jail terms.

This is the first of a two-part series. Read the second article: Immigration liabilities in mergers and acquisitions, part two.

Jacqueline Bart, and Carrie Wright,, are partners at BARTLAW LLP, Canadian Immigration, Barristers and Solicitors, Toronto, 416-601-1346.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author's firm, its clients,
The Lawyer’s Daily, LexisNexis Canada, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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