On this page you will find:
- How Canada has changed its LMIA employer guidance
- How Service Canada determines who actually employs a foreign worker
- New restrictions affecting staffing and employment agencies
- Rules against treating temporary foreign workers as independent contractors
- What the changes mean for related companies and third-party arrangements
- Penalties employers can face for worker misclassification
- The latest Global Talent Stream Category A referral partner update
Canada has tightened its guidance on which businesses qualify as genuine employers when they apply to hire temporary foreign workers through the Labour Market Impact Assessment system.
Employment and Social Development Canada (ESDC) introduced a new employer test on September 18, 2026, across several streams of the Temporary Foreign Worker Program (TFWP).
The guidance sets out in much greater detail how Service Canada will determine which business actually employs a temporary foreign worker. It also explicitly restricts staffing agencies from obtaining LMIAs to place workers with other businesses and prohibits employers from classifying temporary foreign workers as independent contractors.
The changes apply across major parts of the TFWP, including the high-wage and low-wage streams, Global Talent Stream, applications supporting permanent residence and the Recognized Employer Pilot.
ESDC separately updated the list of designated referral partners for Category A of the Global Talent Stream on September 15.
The changes could have significant consequences for Canadian businesses that use staffing arrangements, related companies or other structures in which the organization applying for an LMIA may not directly supervise and pay the foreign worker.
Who Does Canada Now Consider An Employer For LMIA Purposes?
Under the new guidance, an employer is the entity that hires the temporary foreign worker, sets their working conditions and directly pays them.
The employer can be a person, business, corporation or organization.
Service Canada will not necessarily rely only on the name of the business that submits the LMIA application. Instead, officers can examine the actual working relationship to determine who functions as the employer.
Factors Service Canada can consider include:
- Who directly benefits from the worker’s labour
- Who decides where, when and how the work is performed
- Who pays the worker’s wages and other compensation
- Who determines the worker’s duties and expectations
- Who monitors the worker’s performance
- Who has the authority to dismiss the worker
- Who the temporary foreign worker considers to be their employer
- Who signs the employment agreement
- Who manages supervision, remuneration, payroll deductions and statutory benefits
The new guidance therefore focuses on the substance of the employment relationship rather than simply which organization appears on an application.
Employer Must Have A Genuine Relationship With The Foreign Worker
ESDC says an employer-employee relationship exists when an employer hires a worker, directs their duties and pays them for their work.
The employer must offer employment for a specified period in return for the worker’s labour.
Both parties must also sign an employment agreement on or before the worker’s first day of employment.
According to ESDC, this relationship helps ensure there is a genuine job offer with clearly established wages and working conditions. It also helps ensure workers receive applicable labour protections and that employers make required deductions such as income tax, Canada Pension Plan or Quebec Pension Plan contributions and Employment Insurance.
The change gives employers another reason to make sure the organization named on an LMIA accurately reflects the business that will actually employ and control the worker.
Staffing Agencies Face Explicit LMIA Restriction
One of the most important parts of the September 18 update concerns staffing and employment agencies.
ESDC now explicitly states that staffing or employment agencies that recruit workers for other businesses are not considered employers under the TFWP.
As a result, they cannot receive approval to hire a temporary foreign worker for another business where they do not have the required employer-employee relationship.
The distinction is important because recruitment agencies and third-party representatives can still play roles in the LMIA process.
Employers can use authorized third-party representatives to help with an application, for example. But acting as a recruiter or representative does not make that organization the worker’s employer.
The business applying for the LMIA must therefore be able to demonstrate that it genuinely employs the worker under the criteria established by Service Canada.
Temporary Foreign Workers Cannot Be Independent Contractors
ESDC has also made its position on worker classification explicit.
Employers cannot classify temporary foreign workers hired through the TFWP as independent contractors.
Service Canada says employers will not receive approval to hire a temporary foreign worker if an employer-employee relationship does not exist.
An employer also cannot obtain an approved LMIA and subsequently reclassify the foreign worker as an independent contractor.
Businesses cannot structure the working relationship to avoid payroll, compensation or other TFWP requirements.
ESDC says misclassification can weaken wage protections, avoid mandatory deductions and breach federal or provincial employment laws.
Related Companies May Need To Examine Their Employment Structures
The new employer test could also be important for businesses that operate through multiple related companies.
Service Canada can consider who benefits from the work, who controls the worker, who pays them and who has the power to dismiss them when deciding whether the LMIA applicant is genuinely the employer.
That means arrangements in which one company submits an LMIA but another company effectively directs and employs the worker could face greater scrutiny under the updated guidance.
The rules do not automatically prevent related businesses from participating in the TFWP. However, the company applying for an LMIA needs to demonstrate that the actual employment relationship supports its claim to be the employer.
ESDC already examines relationships between affiliated employers as part of TFWP compliance. Its Global Talent Stream guidance defines affiliates to include employers controlled by another employer, employers under common control and employers that do not operate at arm’s length.
Trucking Sector Already Under Scrutiny Over Misclassification
The updated guidance has particular relevance for Canada’s trucking and road transportation sector.
ESDC specifically directs employers reading the new rules to federal guidance on worker misclassification in the road transportation industry.
The link reinforces the government’s focus on arrangements where workers who function as employees are instead treated as independent contractors.
For LMIA employers, the September 18 guidance removes any ambiguity about the TFWP position – a temporary foreign worker hired under an approved LMIA must remain in an employer-employee relationship consistent with the LMIA and employment agreement.
What Are The Penalties For Misclassifying A Temporary Foreign Worker?
Employers that breach TFWP requirements can face significant consequences.
ESDC says misclassification can result in administrative monetary penalties and bans from the Temporary Foreign Worker Program.
Employers can also be publicly identified on federal or provincial government websites.
More broadly, employers participating in the TFWP must comply with the conditions contained in their LMIA, LMIA decision letter and the Immigration and Refugee Protection Regulations. Employers generally have to retain relevant records for six years so they can demonstrate compliance if inspected.
Global Talent Stream Referral Partners Updated
ESDC made another change to the Global Talent Stream shortly before introducing the new employer guidance.
On September 15, it updated its list of designated referral partners for Category A of the Global Talent Stream.
Category A targets innovative Canadian companies seeking unique and specialized foreign talent to help them scale up and grow. Unlike Category B, employers cannot simply apply under Category A without a referral.
A designated referral partner must refer the company and vouch for its legitimacy and eligibility. The employer must include a completed referral form with its application or ESDC will consider the application incomplete.
The current list includes pan-Canadian organizations such as the Business Development Bank of Canada, Council of Canadian Innovators, Global Affairs Canada’s Trade Commissioner Service, Invest in Canada and the National Research Council’s Industrial Research Assistance Program.
There are also regional partners across Ontario, Quebec, Alberta, British Columbia, Manitoba, Saskatchewan and Atlantic Canada.
Employers considering Category A should therefore check ESDC’s current referral-partner list rather than relying on an older list.
What Do The New LMIA Rules Mean For Employers?
The September 18 changes do not appear to create a new category of LMIA or change the Temporary Foreign Worker Program through new legislation.
Instead, ESDC has added detailed operational guidance explaining how Service Canada will determine whether an LMIA applicant is genuinely the employer of the foreign worker.
The fact that ESDC introduced the employer section across several major TFWP streams makes the change particularly important.
Employers should make sure the business submitting an LMIA is also the entity that will genuinely employ the worker – including paying wages, setting working conditions, directing the work and meeting the obligations attached to the LMIA.
Businesses using staffing agencies, contractors, related companies or more complicated employment structures may need to pay particular attention to the new guidance.
For temporary foreign workers, the rules also make clear that an approved LMIA cannot be used to bring someone into Canada as an employee and then shift them into an independent-contractor arrangement.
Frequently Asked Questions
What changed in Canada’s LMIA rules on September 18, 2026?
ESDC introduced detailed new guidance explaining how Service Canada determines who qualifies as the genuine employer of a temporary foreign worker. It looks at factors including who pays the worker, controls their duties, benefits from their work and has authority to dismiss them.
Can a staffing agency get an LMIA for workers placed with another company?
Not where the agency is simply recruiting workers for another business and does not have the required employer-employee relationship. ESDC now explicitly states that staffing or employment agencies recruiting workers for other businesses cannot be approved to hire TFWs for those businesses.
Can an LMIA worker be treated as an independent contractor?
No. ESDC says employers cannot classify temporary foreign workers as independent contractors. They also cannot obtain an LMIA and later reclassify the worker as a contractor or restructure the relationship to avoid payroll, compensation or other TFWP requirements.
What happens if an employer misclassifies a temporary foreign worker?
Misclassification can lead to enforcement action under the Temporary Foreign Worker Program. Consequences can include administrative monetary penalties and bans from the program. An employer may also be publicly named by federal or provincial authorities.
What changed under the Global Talent Stream in September 2026?
In addition to the September 18 employer guidance, ESDC updated its list of designated Category A referral partners on September 15. Category A employers need a referral from an approved partner and must submit the completed referral form with their application.