What do updates to ICTs mean for Canadian employers?

The Canadian government has issued updated guidance for its International Mobility Program (IMP), specifically targeting intra-company transferees (ICTs).

While the bulletin contains policy, procedures and guidance used by staff at Immigration, Refugees and Citizenship Canada (IRCC), it is posted on the department’s website “as a courtesy to stakeholders,” meaning employers and HR should take note in navigating cross-border talent mobility.

The changes affect employers seeking to transfer workers to Canada from related companies, along with foreign companies looking to establish new operations in Canada.

“The changes are part and parcel of several policy changes we've been seeing over the last while that are intended to reduce the number of temporary residents coming to Canada,” says Bill MacGregor, partner at Gowling in Kitchener, Ont.

Stricter conditions for specialized knowledge workers

The latest guidance from Ottawa clarifies the process for transferring highly skilled workers, managers and executives within multinational corporations (MNCs) to Canadian entities.

The IMP categories are not intended as a means to transfer an enterprise’s general workforce to affiliated entities in Canada, says the IRCC.

“They are intended to support the establishment of ‘certain qualifying enterprises’ and the movement of highly specialized workers, managers and executives to meet specific temporary business needs for a limited time.”

Key eligibility criteria include that ICT applicants must be employed by an MNC in an executive, managerial or specialized knowledge role for at least one continuous year within the past three years.

The applicant must move to a Canadian entity, typically in the same capacity, with their foreign position remaining open for their return at the end of the assignment. Importantly, “all applicants must demonstrate that their work will generate significant economic, social or cultural benefits, or opportunities for Canadian citizens or permanent residents within the validity period of the work permit being sought,” says the government.

‘Tightening up’ rules for specialized knowledge of ICTs

Previously, employees who had worked with a foreign affiliate for 12 months could qualify as specialized knowledge transferees. However, under the new guidelines, if a worker has less than two years of experience with the foreign company, they are "unlikely to meet the specialized knowledge test,” says MacGregor.

He questions whether this effectively means that officers will apply the two-year rule as a new minimum, even though the official requirement remains 12 months.

“It’s going to be [about] how is this interpreted,” he says. “If the guidelines become the de facto default rules, the common denominator has been raised in terms of what specialized knowledge workers will need to demonstrate.”

With the tightened-up category, “there'll be less availability of that type of transfer, because I think they'll be looking at it more closely and applying what appear to be more rigorous rules of interpretation,” says MacGregor.

The changes also suggest the IRCC is looking to decrease scenarios where a worker is being “parachuted in by the foreign-related company and not having much connection to the Canadian company,” he says.

Employers should be ‘discerning and selective’

The update with respect to the specialized knowledge category appears to focus on addressing improper use of the category, says Alexandra Cole, partner at Green and Spiegel in Toronto.

“The policy emphasizes that it is incumbent upon multinational companies to be discerning and selective to ensure that the workers who are being transferred truly possess advanced proprietary knowledge and an advanced level of expertise.”

In addition, the information and documentation in the work permit application must “be abundantly clear” that the transferee holds knowledge and expertise that is unusual and different from the general workforce and show how their skills are critical to the business of the Canadian enterprise, she says.

“The policy should not restrict Canadian employers from bringing in key talent who meet this definition, but it will certainly restrict employers from bringing in talent who are high performers but lacking the requisite experience and advanced knowledge per IRCC’s definition.”

Work must be related to Canada

In some ways, the update has made it more demanding on the caliber of people who would qualify for an intercompany transfer, says David Crawford, partner at Fragomen in Toronto.

“Typically, they would be expected to have at least two years’ experience in this sort of work, or relevant background, employment background, and they can't use part-time employment, so it's a little bit tougher for those individuals.”

The language in the update is tightening qualifying relationships for employers, so it's got to be a proper business doing proper stuff, and not a shell company, he says.

“They're scrutinizing whether the foreign national is actually working for the Canadian branch, which is another issue — you don't [for example] come in to do work for work that really is related to Argentina, and nothing to do with Canada.

“So, the general tone, if you think about it, is keeping a close eye that everything is genuinely in the interest of Canada and the protection of the local labour market.”

Limits on new Canadian operations

In addition, the guidelines state that the foreign enterprise must be an existing multinational corporation (MNC) with revenue-generating operations in at least two countries before establishing an enterprise in Canada.

“An enterprise outside of Canada cannot become an MNC by using the ICT work permit category to establish their first foreign enterprise in Canada.”

If you're based in another country, you cannot set up a related entity and use the ICT if Canada's the first place to do it, says Crawford.

“You've got to have something established in the UK or France or Australia or Singapore or anywhere else, and then set up an entity in Canada which can be used for intercompany transfers.”

In addition, they're going to make sure that the relationship between businesses — the foreign entity and the Canadian one — are part of the same organization, “not just a franchise of one that's doing business with another, but it's not really a related entity,” he says.

MacGregor believes that for large multinational companies with established operations in Canada, these changes will mean “business as usual” because the types of managers and specialists they transfer are typically essential personnel with highly specialized skills.

However, the documentation and evidence required to support ICT applications may increase, he says.

Remote work and requirement for physical premises

In a move that might seem out of step with the rise of remote work, the updated ICT guidelines reaffirm the need for a physical commercial premise in Canada.

MacGregor sees this as a surprising decision given the growing acceptance of remote business models.

“It doesn’t make any logical sense to me… why having a physical lease and a premise suddenly makes you a viable company in Canada.”

One unintended consequence might be that Canadian businesses will be leasing commercial premises for the sole purpose of meeting the requirement, so temporary workers will be required to report to an office and their local workforce will not, says Cole.

“As we start to see the practical application of this part of the policy, we are hopeful that the policy might be updated to include more nuanced guidance and transparency so Canadian businesses know what to expect if they do decide to submit an application for a remote temporary foreign worker.”

Potential Issues with reclassifying ICT workers

Another area where HR professionals need to tread carefully is when reclassifying ICT workers from one category to another, such as moving a specialized knowledge worker to a managerial position.

The new guidelines emphasize that employers must obtain a new work permit before making such changes. Failure to do so could lead to compliance issues.

Previously, there was ambiguity regarding promotions and many Canadian employers would promote ICT workers during their time in Canada as a natural career progression, says Cole.

“Of course, a new Work Permit was always needed before that role change from a specialized knowledge worker to a manager could take effect, but IRCC generally accepted this as continuing to meet the eligibility criteria as a ‘similar’ role.”

This was beneficial where a worker was approaching the five-year cap placed on ICT specialized knowledge workers, she says.

“A promotion to a managerial role would mean another two years, as managers are subject to a cap of seven years.”

Now, the policy makes clear that to be able to make this transition, the temporary foreign worker must have worked in a managerial position within the three-year period preceding their initial transfer to Canada, says Cole.

“This is going to be very restrictive as most ICT specialized knowledge workers do not hold managerial roles prior to transfer to Canada.”

“We might see greater reliance on the Temporary Foreign Worker Program (TFWP) as in many cases Canadian employers will now need to obtain a Labour Market Impact Assessment (LMIA) to move the worker into a managerial position.”

Again, we’ll want to see what Ottawa requires in terms of the documentation and tightening up of things, says Crawford.

“I think it would be contrary to Canada's interests to create barriers in in areas where we want to see economic growth.”

While there has been increased focus on immigration numbers, such as cutbacks to international student levels, he says, “I'm sure the government doesn't want to lose the quality of people who can remain in the country to help grow the economy.”

Wage compliance under enhanced scrutiny

The new guidelines also bring more attention to wage compliance for ICTs. The government has mandated that wages for transferees should not be lower than the prevailing wage for the occupation and location of the work.

This applies to general ICTs under the Immigration and Refugee Protection Act (IRPA), but MacGregor notes that even for ICTs coming under free trade agreements like the Canada-United States-Mexico Agreement (CUSMA) or Canada-European Union Comprehensive Economic and Trade Agreement (CETA), wages will likely face closer scrutiny.

“For what I call general ICT… there's always been a mandatory wage floor requirement, so then employers have to make sure that they're paying the prevailing wage for the occupation and for the location, for those types of intercompany transfers,” he says.

“Now, with the language in the guidelines to officers, I think they've, in effect, removed that [distinction] and basically officers will likely apply a prevailing wage analysis to any specialized knowledge transfer under general FERA [Foreign Exchange Regulation Act] provisions or under a free trade agreement.”

As much as possible, Canadian employers should be prepared to offer the prevailing wage to ICT workers, including managers and executives, says Cole.

“If they cannot operationally offer a higher wage to meet the prevailing wage, and the wage they are offering is substantially lower than prevailing, they might reconsider if supporting a work permit for the TFW is the right decision as it is likely to be an issue in the assessment of the application, and without appropriate justification could lead to a refusal.”

Much will depend on how these guidelines are interpreted by immigration officers in practice, says MacGregor.

For instance, the prevailing wage analysis is not explicitly mandated for all free trade agreement ICTs, yet the guidelines suggest that officers should consider it.

“Will they still retain some discretion to allow that where the prevailing wage might not be met in some cases?” he says. “That’s what I think remains to be seen.”