Canada tightens rules, bars staffing agencies from sponsoring foreign workers

Canada has tightened employer requirements under its Temporary Foreign Worker Program (TFWP), restricting Employers of Record (EORs) and staffing agencies from sponsoring foreign workers for jobs controlled by third-party businesses.

Under the clarified Labour Market Impact Assessment (LMIA) rules, Employment and Social Development Canada (ESDC) will focus on the entity that exercises actual control over the employment relationship when determining who qualifies as an employer, Travelobiz reports.

This includes assessing who directs and supervises the foreign worker while they are employed in Canada.

The clarification means that contractual arrangements alone may no longer be sufficient for an organisation to qualify as the employer for an LMIA application where another company exercises day-to-day control over the worker.

Staffing agencies face LMIA restrictions

Under the rules, staffing and employment agencies that recruit foreign workers for another Canadian company may not qualify as the employer for LMIA purposes where the worker ultimately performs their duties under the control of the third-party business.

This means a staffing agency cannot obtain an LMIA as the employer where another company is responsible for directing and supervising the foreign worker’s day-to-day activities.

The Canadian government has also clarified that temporary foreign workers cannot simply be classified as independent contractors as a way of avoiding employer obligations, including payroll and tax requirements.

EORs face LMIA sponsorship limits

Employers of Record can continue to operate under other employment arrangements, subject to applicable provincial employment laws.

However, an EOR that does not exercise the required control over a worker’s employment relationship may not qualify as the sponsoring employer for an LMIA application.

The clarification places greater emphasis on the substance of the employment relationship rather than the contractual structure businesses use to employ foreign workers.

This could particularly affect companies that use EOR arrangements to hire workers in Canada without establishing their own local employment infrastructure.

What you should know

Canada has introduced a series of changes to its immigration and foreign-worker programmes as the government tightens oversight of temporary migration and employer-supported immigration pathways.

On September 21, 2026, Nairametrics reported that Canada introduced new instructions under the Atlantic Immigration Program (AIP) for permanent residence applicants whose employment circumstances change while their applications are being processed. Applicants affected by changes to their employer, job or employer ownership may be given 90 days to provide additional documentation.

In August, Ontario clarified that fully remote jobs do not qualify for certain employer-supported applications under the Ontario Immigrant Nominee Program (OINP). Foreign workers applying through eligible employer job offers generally need a role linked to a qualifying physical workplace in Ontario.

Canada has also tightened access to the Temporary Foreign Worker Program in recent years. Nairametrics reported in January 2025 that LMIA applications under the low-wage stream would not be processed in Census Metropolitan Areas with unemployment rates of 6% or higher, subject to exemptions for sectors including agriculture, food processing, construction and healthcare. The government had also reduced the proportion of temporary foreign workers that most employers could hire from 20% to 10% of their workforce.