LMIA Audits (ECR)

YOU SELECTED THIS OPTION BECAUSE:Your company received an ECR (Employer Compliance Review) or notice of an “Investigation” by ESDC/CIC and you need some assistance with the response.

Second to a CRA business audit, receiving notice of an Employer Compliance Review (ECR) or “Inspection” from a Canadian government agency (ESDC, CIC, MIDI) can be one of the most daunting and stressful events that an HR manager or business owner will incur.

For the most part, an ECR may be the product of a computerized random check. (ESDC has publically stated a goal of auditing 25 percent of all incoming LMIA applicants!) In other instances, an ECR may be triggered on the basis of a risk-assessment in a given industry or trade or based on material variances from a prior filing (against a new filing).

The majority of ECRs are conducted following an LMIA application – i.e. during the assessment of an existing LMIA application (generally a renewal).

So what is an ECR and what is an “Inspection” and what to do if we get one?
 

An ECR is basically a review on whether (a) wages, (b) working conditions (including venue location) and (c) employee duties, as declared (in blood!) on a prior LMIA (LMO) application, are consistent with the actual reported wages, working conditions and duties of the foreign worker during the actual period of work. While some allowance are made for small variances, a problem or “violation” will occur if an employer has actually paid a lower or higher (but especially a lower) wage than originally declared on an LMIA (LMO) application. This is especially true if the actual wage (versus the original wage declared on the LMIA application) falls below the set prevailing wage. Other examples of “violations” can include variances in venue (declaring that the foreign worker was working in Calgary when he’s actually working in Edmonton or Grand Prairie), or job title (working as an accountant when he’s actually an accounts payable clerk).

An Inspection is more or less the same as an ECR but may also include a review/inspection of employee records (T-4, paystub) to determine if there was any unauthorized work beyond the expiration of the foreign worker’s work permit.  An inspection may involve an on-site visit (usually with notice) and it may involve interviewing the foreign worker and other employees or managers (with their written consent).

If you receive an ECR or Notice of Inspection, we invite HR managers to contact our firm to explore a strategy and a response.

Whether we discover a “problem” or not, we will advise accordingly to management, discuss/recommend an appropriate response to ESDC (or other relevant government agency), and include remedial action. Generally, it is best to volunteer any issue as soon as possible to minimize penalties and sanctions. 

Consequences of non-compliance

The consequences of non-compliance will vary greatly from one employer to another (fines range from $500 to $100,000).  Financial penalties are obviously proportionate to the size of the business, the degree of the “violation”, and the number of antecedents or prior violations.  

The consequence of unauthorized work by the foreign worker will also depend on whether the employer was in the know or not.  In most cases, a violation will prevent the employer from obtaining an LMIA in the future for a period of 2 years.  (It can be assumed, although not necessarily if the error is relatively small, that the existing LMIA will automatically be refused.)

In other words, sanctions are case-specific. 

Finally, the consequences of a violation are real for the foreign worker as well. Generally, the foreign worker’s work permit (if he has one) will be revoked. He may be asked to leave Canada within 30 days and barred from entering Canada for a year (called an exclusion order). In more extreme cases, particularly if misrepresentation was found on the foreign worker’s application for a work permit, a 5-year bar may be imposed which would prevent the worker from returning even as a visitor.

In short, the consequences of a violation following an ECR or inspection are both real and expensive for any business. We would urge employers to contact a licensed professional for assistance in responding to an ECR or Inspection.