By Sean G McKinsley, B.A., RCIC, President and Managing Director, Canada Immigration and Visa Services https://civs.ca/
Business investors with business experience and capital to invest have several pathways to choose from in order to immigrate to Canada. Several immigration lawyers and officials have described the Owner/Operator Labour Market Impact Assessment (LMIA) as the most sought-after path for potential self-employed business investors; who either do not yet meet the narrow requirements for “self-employed” applicants[i] or do not have the support of a designated organization in order to qualify for an entrepreneur startup visa program. Very few investors have the capital to invest in the entrepreneurial/investment streams such as Immigrant Investor Venture Capital (IIVC) Pilot Program. The owner-operator LMIA pathway has been described as “filling the gap” in business immigration after the failure of other avenues such as IIVC pilot program which is deemed by some “to be buying your way to Canadian Citizenship.”[ii] In fact, the IIVC pilot program which aimed to attract wealthy immigrant investors’ applicants with a personal net worth of $10 million, (who must invest at least $2 million into a government-approved VC fund) is an utter failure with not even one permanent resident visa granted after one year of launch by 2016.[iii]
Book your free consultation with us today
Book my free consultation
What is an LMIA?
Employers in Canada can hire temporary workers to fill temporary labour or skill shortages through the Temporary Foreign Worker Program (TFWP) among other streams and programs.3[iv] However, before hiring a temporary foreign worker (TFW) through the TFWP, an employer needs to get a LMIA (unless the work category is excluded).[v] Government of Canada website defines LMIA as a document which an employer may need to get from Employment and Social Development Canada (ESDC) also known as Service Canada before hiring a foreign worker.[vi] A positive LMIA or a confirmation letter grants permission to the employer who proves that there is a need for a foreign worker to fill the job as no Canadian worker is available and that such hiring will not negatively impact the Canadian labor market.[vii]
- Employer– “An entity (e.g. person, business, corporation or organization) that makes an offer of employment to one or more foreign national(s) who provide labour in return for compensation for a specified period of time. The employer is generally the entity that hires, controls working conditions and remunerates the foreign nationa”[viii]
- Foreign national– “An individual who is not a Canadian citizen or permanent resident who is offered employment in Canada in exchange for compensation”.[ix]
Owner/Operator LMIA is a special class of applications within the TFWP whereby a self-employed individual wishing to enter Canada can do so by establishing or purchasing a business. A foreign national would be considered to be an owner-operator if they establish that they have controlling interest in the business and cannot be fired/ dismissed (only answerable to themselves).[x] Controlling interest according to guidelines and policy can be established by either[xi]:
- purchasing a business and be involved in its day-to-day operations (being a sole proprietor),
- by being the majority shareholder (holding at least 50.1% shares) or
- by providing an official document confirming that they hold the majority interest (even if they don’t hold 50.1% of total shares).[xii] There is no specified minimum percentage of shares to be held by a foreign national to be considered an owner-operator. In cases, where there are multiple owners of a business, the largest shareholder or the equal shareholder designated as the “employer” must apply for LMIAs to Service Canada for the other co-owners as “workers”.[xiii]
Individuals who only receive shares (less than to establish the controlling interest) as part of a compensation package are not subject to the term owner-operator.[xiv] The foreign nationals must demonstrate that they have the controlling interest prior to submitting their application and for the duration of their employment in Canada.[xv] (For a detailed explanation on this point refer to the material under- Four key scenarios),
Immigration and Refugee Protection Regulations (IRPR)
Owner-operators must meet specific requirements and uphold the conditions as set out in the Immigration and Refugee Protection Regulations (IRPR). Under section 203(1) of the IRPR,[xvi] work permits may be issued to foreign nationals whose proposed Canadian employer has obtained an opinion from ESDC on the following criteria:
- Genuineness– The officer has to decide whether the job offer is genuine under Section 200(5) of IRPR.[xvii] This provision has to be interpreted in light of the temporary foreign worker program (TFWP) policy published by Service Canada. Current TFW policy requires that an employer must be identified[xviii] and the employer/employee relationship established[xix] to allow ESDC to fulfill its regulatory responsibilities in the administration of the Temporary Foreign Worker (TFW) Program. Further as per policy, “An offer of employment is made by an employer or group of employers to a foreign national thereby establishing an employer—employee relationship”.19F[xx] In cases of owner-operator to establish employer-employee relationship but in the absence of a job offer, the controlling interest, the business plan or contract to purchase shares in a business are evaluated by ESDC as equivalent to a job offer in the context of the TWFP program.[xxi]
- Federal-Territorial/Provincial Agreements– Section 203 (1)(c) provides that the issuance of a work permit should not be inconsistent with the terms of any federal-provincial agreement that apply to the employers of foreign nationals[xxii];
- Language Restrictions- Section 203(1.01) of IRPR states that if the offer of employment does not require the ability to communicate in English or French then there would be a negative effect on the labour market in Canada; unless among other things, the employer (owner operator) proves that the requirement of ability to communicate in the other language is a “bona fide requirement” for performing the duties associated with the employment.[xxiii] If the offer of employment does not require the ability to communicate in any specific language or requires in any language other than English or French than the officer can assess the genuineness of the offer based on reasonable employment needs of the employer under Section 200(5)(b)).[xxiv] “Reasonable employment needs are those needs which could easily be seen as taking place within the context of the goods and services that the employer business provides and should make basic business sense”.[xxv] Depending upon the decision of the assessing officer the employer has to change the language requirement accordingly. If the employer disagrees with the decision that a language is required and refuses to agree to the change on the LMIA the file can be refused under the Genuineness criteria. In typical LMIA cases, language proficiency proof in the form of a valid IELTS language test with a CLB of 5.0 in each of the 4 components should be submitted. But it is to be kept in mind that there are no set language requirements and suitability is decided on a case by case basis by immigration officers. [xxvi]
- Labour Market Factors – There are seven labour market factors identified in Section 203(3) of the IRPR, to determine the impact the employment of the foreign worker on the Canadian labour market. When assessing owner-operator applications, the focus is on not all the factors but job creation or retention and/or skills transfer for all Canadian citizens and permanent residents and whether their business would also likely have a positive, or at least neutral effect on the Canadian labour market[xxvii] Specific details regarding job specifications along with their timeframes can be recorded which will provide a benchmark and context for future assessment of LMIA applications.[xxviii] Service Canada could then be better positioned to review more documentation from the employer, as well as determine the employer’s progress to-date as per Section 203(3)(g).[xxix]
Four key scenarios and respective considerations in owner-operator applications
The owner-operator guide used for internal reference by officers administering the TFWP mention four common scenarios and the respective considerations that officers have to satisfy themselves with:
- New Start-up Business- This scenario applies to a foreign national where the individual is 100% owner of a startup company not in operation in Canada yet but dependent on a positive LMIA and Work Permit (WP). The owner-operator guidelines considerations state that the TFW can be considered owner-operator for the purposes of the LMIA if they can demonstrate that they have considerably prepared to open and operate the business (e.g. have incorporated the business, applied for a business license, entered into a lease agreement, securing contracts, etc.), have a viable business plan, have the intent and plan to retain/hire Canadian citizens and permanent residents within a reasonably short timeframe. If the officer is not satisfied than “refusal can be issued on Actively Engaged (“The employer must have an operating/functioning business, providing either a good or service related to the job offer made to the TFW in Canada.”) as well as on Reasonable Employment Need (current script on “Anticipatory work” may need to be modified to suit the situation).”[xxx]
- Complete Purchases/Ownership Change of Existing Canadian Business: When the foreign employee-investor acquires 100% interest of an existing Canadian business, and the LMIA application voluntarily includes documents such as share purchase agreement, notice of articles, central securities register, CRA# shareholding/ownership documents indicating purchase/ownership change has been completed, then these documents would be considered as sufficient proof of the foreign national’s relationship to the business.[xxxi] Other requirements still have to be satisfied though. An Employer Note is required to indicate change of ownership if the previous owner had previously submitted LMIAs and the previous employer ID must be deactivated.[xxxii]
- Pending Purchase of Existing Business: When the current owner intends to sell 100% of the Canadian business to the immigrant investor, but completion of purchase/ownership change is contingent on a LMIA and WP then the TFW can be considered owner-operator for the purposes of LMIA based on the following such as intention of the parties especially the TFW. For example, Immigration authorities would consider the stage of completion of the transaction (tentatively signed share purchase agreement, monies in an escrow account), how viable the business is and whether the investor has a plan to hire or retain Canadian workers in a short timeframe. If the parties fail to satisfy the officer on the genuineness of the transaction, then the LMIA application can be refused as technically the foreign national is not owner-operator yet and no recruitment was conducted. The existing owner could also submit the LMIA application to hire the foreign investor into a specific position in the business pending purchase. The investor can work in that position until the purchase is completed. After the purchase, the new owner-operator will submit a new LMIA to support themselves.[xxxiii]
- Partial Purchase of Existing Business: When the owner operator has partially purchased a Canadian Business but is still not a 100% owner, then an officer will assess who has the largest share in the business to determine if the investor be considered a Principal Owner or Co-owner. Other important consideration is if existing owners/directors will continue to be involved in the operation and management of the business why the foreign national’s involvement is required. Is the transaction really genuine or in other words is there a reasonable employment need?[xxxiv]
Other Key Considerations[xxxv]
- In owner-operator LMIA applications, the burden of proof is on the investor to provide information to prove their shareholding/ownership status.
- For high-wage owner-operator applications, transition plan requirements apply. A transition plan “describes the activities you are agreeing to undertake to recruit, retain and train Canadians and permanent residents and to reduce your reliance on the Temporary Foreign Worker Program.”[xxxvi]
- For low-wage owner-operator applications, CAP on low wage position requirements apply.[xxxvii]
Benefits of owner-operator LMIA applications
As mentioned earlier, there are several benefits of applying through an owner-operator LMIA compared to other business immigration streams. As long as the foreign national has a viable business plan and the transaction is genuine, the probability of a positive –owner-operator LMIA application is there. As per the data presented by the Canadian government between the period from April 1, 2015 to March 31, 2016, the results are as follows:[xxxviii]
The highlights are that only 1% out of the total 42,550 LMIAs processed during that period were cancelled/revoked and only 16% of the applications had a negative decision. The processing time for owner-operator LMIA application is short but it varies according to the circumstances. There is no requirement of having a certain total net worth or making any non-guaranteed investment in a Canadian government designated investment fund. Further, owner-operator LMIA applications are also exempt from advertising requirements where the employer intending to employ a TFW has to first advertise the position to Canadian Citizens and Permanent residents.[xxxix]
Path to Permanent Residence
After the ruling of a positive LMIA, a work permit is granted (valid for 1-2 years) and in most cases the owner would be in a position to apply for a permanent resident visa through the Federal Skilled Express Entry or under the Provincial Nominee Program. From November 19, 2016, the express entry comprehensive ranking system points awarded for job offers (including those based on Owner/Operator LMIAs) have been reduced from 600 points to either 200 points for senior managerial positions, or to 50 points.39F[xl] The limited points now may strengthen the applicant’s Express Entry application but will not automatically guarantee an “Invitation To Apply” (ITA) under provincial nomination programs for Permanent Residence like before.40F[xli]
The Owner Operated LMIA stream is a suitable option to facilitate admission to Canada as a foreign worker which can become a path to a permanent residency at a later stage. Although the application and assessment process can be rigorous (as there are specific guidelines on the minimum level of investment required or the relevant business experience that the applicant should demonstrate to be approved), if the project is genuine and a comprehensive business plan is submitted, the issuance of a positive LMIA and work permit to a foreign national is a possibility given the high approval rate of LMIA applications in general. The future looks promising as under Citizenship and Immigration Canada‘s (CIC) 2018 Immigration Plan (from now to 2020), about 565,000 newcomers will be admitted through Canada’s economic immigration programs including Express Entry and Provincial Nominee Programs[xlii]
DISCLAIMER: This guide is being offered for informational purposes only by Sean G McKinsleyCanada Immigration and Visa Services Inc (CIVS) While CIVS has made every effort to present accurate and reliable information, we hereby disclaim any liability for any errors, omissions or inconsistencies in this guide. Due to the continuing policy and/or program changes, information included in this guide may not be current as of your reading. Please check before using information contained in this guide. Use of this guide and its contents is voluntary. CIVS or any of the authors of this guide is in no way responsible for your use of the information contained in this guide or the results of that use. All information provided in this guide is for informational purposes only, and as such should not be construed as advice. You should consult the appropriate website, and corresponding legislation in the appropriate area before acting upon any information contained in this guide. Nothing in this guide should be construed as possessional advice. This guide features information from many sources and should not be confused with an official reflection of policy and programming.
DATE OF PRODUCTION: December 13, 2018 by Sean G McKinsley, Managing Director, Canada Immigration and Visa Services
Book your free consultation with us today
Book my free consultation
[i]Felt, Meghan and McInnes, Sarah, “The Nuances of Labour Marketing Impact Assessments (LMIA): 2 Key Exemptions to Minimum Advertising Requirements”, retrieved from https://www.mcinnescooper.com/publications/legal-update-the-nuances-of-labour-marketing-impact-assessments-lmia-2-key-exemptions-to-minimum-advertising-requirements/ (last accessed on July 13, 2018.)
[ii] Ing, Victor, “Owner/Operators Filling the Gap in Business Immigration Programs”, retrieved from http://canadian-visa-lawyer.com/owneroperators-filling-the-gap-in-business-immigration-programs/ (last accessed on July 13, 2018.)
[iii] Mas, Susana, “Millionaire immigrant investor program lures only 7 instead of 60”, CBC News, retrieved from http://www.cbc.ca/news/politics/immigration-investor-pilot-program-1.3331204, (last accessed on July 13, 2018.)
[iv] Information retrieved from https://www.canada.ca/en/immigration-refugees-citizenship/services/work-canada/hire-foreign-worker/temporary/find-need-labour-market-impact-assessment.html?_ga=2.73401554.1162186710.1531516580-646925551.1531516580 (last accessed on July 13, 2018.)
[vii] Information retrieved from http://www.cic.gc.ca/english/helpcentre/answer.asp?qnum=163&top=17 (last accessed on July 13, 2018.)
[viii] Employment and Social Development Canada, “Policy, Temporary Foreign Worker Program”, effective date December, 23, 2016.
[x] Supra note viii and also see, Employment and Social Development Canada, “National TFWP, Q & A”, definition of “Owner-Operator” effective date, August 29, 2016.
[xi] Ibid, also see Employment and Social Development Canada, “Owner-Operator Guidance – TFW in WT”
[xii] Information retrieved from https://www.canada.ca/en/employment-social-development/services/foreign-workers/variations.html (last accessed on July 13, 2018.)
[xiii] Employment and Social Development Canada, “Owner-Operator Q&A- TFW in WT”, Service Wiki.
[xiv] Employment and Social Development Canada, “National TFWP, Q & A”, definition of “Owner-Operator” effective date, August 29, 2016.
[xv] Information retrieved from https://www.canada.ca/en/employment-social-development/services/foreign-workers/variations.html (last accessed on July 13, 2018.)
[xvi] Section 203 of Immigration and Refugee Protection Regulations regulations, retrieved from http://laws-lois.justice.gc.ca/eng/regulations/SOR-2002-227/page-42.html#docCont, (last accessed on July 13, 2018.)
[xvii] See Section 200, Division 3, Issuance of Work Permits, Immigration and Refugee Protection Regulations, retrieved from http://laws-lois.justice.gc.ca/eng/regulations/sor-2002-227/page-41.html#h-106, (last accessed on July 13, 2018.)
[xviii] Employment and Social Development Canada, “Policy, Temporary Foreign Worker Program”, effective date December, 23, 2016.
[xxii] Section 203 of Immigration and Refugee Protection Regulations regulations, retrieved from http://laws-lois.justice.gc.ca/eng/regulations/SOR-2002-227/page-42.html#docCont, (last accessed on July 13, 2018.)
[xxiv] Employment and Social Development Canada, “National TFWP, Q & A”, definition of “Owner-Operator” effective date, August 29, 2016.
[xxvi] Information retrieved from https://www.canada.ca/en/immigration-refugees-citizenship/corporate/publications-manuals/operational-bulletins-manuals/temporary-residents/foreign-workers/eligibility/assessing-language-requirements.html, (last accessed on July 13, 2018.)
[xxvii] Employment and Social Development Canada, Key Considerations, “Owner-Operator Guidance – TFW in WT” and Employment and Social Development Canada, “Policy, Temporary Foreign Worker Program”, effective date December, 23, 2016.
[xxviii] Employment and Social Development Canada, “Owner-Operator Q&A- TFW in WT”, Service Wiki.
[xxx] Employment and Social Development Canada, Key Considerations, “Owner-Operator Guidance – TFW in WT”
[xxxv] Employment and Social Development Canada, Key Considerations, “Owner-Operator Guidance – TFW in WT”
[xxxvi] Information retrieved from, https://www.canada.ca/en/employment-social-development/services/foreign-workers/median-wage/high/requirements.html#h2.5 (last accessed on July 13, 2018.) and see Employment and Social Development Canada, Key Considerations, “Owner-Operator Guidance – TFW in WT”
[xxxvii] “Cap on Low wage positions”- https://www.canada.ca/en/employment-social-development/services/foreign-workers/median-wage/low/requirements.html and see Employment and Social Development Canada, Key Considerations, “Owner-Operator Guidance – TFW in WT”
[xxxviii] Data retrieved from, https://www.canada.ca/en/employment-social-development/corporate/transparency/laws-regulations/interpretation-policy.html#h4.3 (last accessed on July 13, 2018.)
[xxxix] Information retrieved from https://www.canada.ca/en/employment-social-development/services/foreign-workers/variations.html (last accessed on July 13, 2018.)
[xl] Hardy, Christopher, “Owner/Operator Labour Market Impact Assessment and its importance for Permanent Residence applications in 2017”, retrieved from, https://www.mccarthy.ca/en/insights/blogs/canadian-employer-advisor/owneroperator-labour-market-impact-assessment-and-its-importance-permanent-residence-applications-2017 (last accessed on July 13, 2018.)
[xlii] Information retrieved from https://www.cicnews.com/2017/11/canada-welcome-nearly-one-million-new-immigrants-through-2020-119798.html#gs.9wrqe1o, (last accessed on July 13, 2018.)