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Primer on the Use of Offshore Employees in Outsourcing Transactions

Reading Time 6 minute read


Technology and Intellectual Property Bulletin

The outsourcing field and the use of temporary foreign workers has been in the news of late, so much so that the average Canadian may think that the temporary foreign workers program is synonymous with outsourcing transactions.  Outsourcing clients might also be forgiven for being confused.  The two activities, outsourcing to an offshore provider and the temporary foreign workers program are not synonymous; business processes can and generally will be outsourced without interaction with temporary foreign workers in Canada.  That being said, when might there be a need for an offshore provider to obtain a work permit?  In this brief primer, we consider three common scenarios where offshore outsourcing will touch on the work permit requirements in Canadian immigration laws. 

1. Training the Provider's Staff

The offshore provider may require training on unique or legacy Client systems or methodologies in order to undertake the outsourcing.  There are many options for conducting remote training, but there will be circumstances where the most productive option will be to have the provider's representatives attend at the client's location to undertake training on the particularities of the technologies/systems that are going to be used offshore and/or to participate in business meetings to properly understand the needs of the Canadian client.

In these circumstances, the provider's employees who come to Canada are not entering the Canadian labour market and therefore do not need to obtain a work permit.  Under immigration laws, these individuals can be admitted to Canada as business visitors.  However, if the purpose of their training visit also involves participation in the production of goods or provision of services while in Canada, then they may not qualify as business visitors unless their participation in the production of goods or services would be incidental to training and/or coordination as the principal motive of their stay in Canada.

It is likely that an offshore provider's employees who come to Canada solely to obtain training on client systems will not require a work permit, but depending on their country of origin, they may require a temporary resident visa.  In other words, while no work permit may be required, business visitors arriving from the source countries of the majority of offshore outsourcing providers (such as India and China) will require a temporary resident visa for any entry into Canada.  Pursuant to Section 179 of the Immigration and Refugee Protection Regulations ("Regulations"), an officer shall issue a TRV to a foreign national if it is established that the foreign national has applied in accordance with the Regulations, will leave Canada by the end of the period of authorized stay, holds a passport or equivalent document, meets the requirements applicable to the temporary resident class, is not inadmissible (i.e. for medical, criminality or other reasons) and has undertaken a medical examination if the person is going to remain in Canada for more than six (6) months.  Unfortunately, in practice it can be said that decisions on temporary resident visas can be made in a discretionary and sometimes arbitrary fashion.

2. Providing Transition In Services

The provider's employees may be required to provide services from the Client's site during a transition period before the outsourced work is transferred overseas.  If the provider has to bring in staff from its offshore operations to perform such transitional services, they would be entering the Canadian labour market and would require a work permit in order to do so and the provider may also be required to submit a labour market opinion documenting that it cannot provide the services without the offshore resources being brought to Canada. 

a) Providing Transition In Services Through a Local Affiliate - Labour Market Opinion is not Required

There are different avenues to obtain work permit for these offshore provider employees. If the provider has a Canadian affiliate located in Canada and it is the Canadian entity that is providing the services to the Client, then the provider can, under certain circumstances, temporarily transfer the applicable employees to Canada upon receipt of a work permit but without requiring a labour market opinion.  Again, as discussed above, if the employees are from a listed country a temporary resident visa will also be required. 

The visa officer who reviews the request for a work permit under such an intra-company transfer request for an exemption will evaluate the request based on Immigration Canada's Foreign Workers Manual, which requires that:

a) there be a corporate relationship between the employee's offshore provider/employer and the Canadian entity to which she is transferred,

b) that the employee have been employed by her employer out of Canada for at least one (1) year in the preceding three (3) years, and

c) that the position that the employee fills abroad and the position she will fill while in Canada require specialized knowledge or is senior managerial.

Some visa offices, such as the Indian office, will also look at the salaries to be paid to these employees in Canada and require that these salaries be comparable to prevailing Canadian wages for the particular position in the particular geographical region.  In these cases, impact on the labour market is not considered and Human Resources and Skills Development Canada (HRSDC) does not intervene.  Visa officers are not policy makers and they must assess an application taking into consideration compliance with the requirements contained in the applicable Immigration and Refugee Protection Regulations and in Immigration Canada's Foreign Workers Manual. 

a) Providing Transition In Services without a Local  Affiliate - Labour Market Opinion is Required

If the offshore provider does not have a Canadian affiliate to which its employees can be assigned temporarily to provide the transition in services to the Client, then either the Client or the offshore provider will also be required to obtain a positive labour market opinion from HRSDC. 

Under current law, a positive labour market opinion is issued once HRSDC is convinced that the prospective employer has made recruitment efforts in Canada to fill the position with a Canadian or permanent resident of Canada and that it was unable to find a suitable candidate in the Canadian labour market. The rules issued by HRSDC concerning advertisement are quite detailed and must be followed strictly.  As a response to recent media events, HRSDC is now working on instructions to its agents on additional criteria to be considered before issuing a labour market opinion which can be expected to address outsourcing transactions.  In the interim, HRSDC has begun sending a questionnaire to employers hiring IT workers asking whether the hiring is taking place in order to facilitate an outsourcing arrangement.

In summary, foreign employees of offshore outsourcing providers often can enter Canada as business visitors without a work permit for training purposes or where they are not going to be providing the service from Canada.  However if those employees are going to be providing the outsourced services from Canada they will require a work permit to do so, either as intra-company transferees or pursuant to a labour market opinion essentially indicating that there is no other Canadian alternative to using such employees. Further in most instances a temporary resident visa will be required to be obtained. 

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