“Bait and Switch”: Requiring Employers to Pay Temporary Foreign Workers the Labour Market Opinion (LMO) Wage Rates

Many of the Clients of the ECLC are Temporary Foreign Workers (TFWs) who are in “low-skilled” (and therefore low-paying) positions.  Unfortunately, these individuals often find themselves in difficult situations because they are vulnerable on multiple levels: they are low-income, English is often not their first language, they are usually unfamiliar with the Canadian and Albertan legal and employment regulation systems, and they have few social support systems available to them.

In order to hire a TFW, an employer must apply to Human Resources and Skills Development Canada (HRSDC) to obtain a Labour Market Opinion (LMO).  The main purpose of the LMO is ensure that the employer has made attempts to hire a Canadian worker for the position before hiring a TFW, but the process also includes some elements designed to protect the TFW, including a requirement in most cases that an acceptable employment contract is in place between the employer and prospective TFW.  A positive LMO must be in place before a TFW is eligible to receive a Canadian Work Permit.  That Work Permit restricts the TFW to working for only that employer, and only in the job and location specified in the Work Permit.

One of the typical complaints from our TFW Clients is that their employer has failed to pay them the wage rate in the employment contract that had been submitted with the LMO.  The classic “bait and switch” scenario is that the TFW arrives in Canada expecting to be paid at the LMO wage rate, only to be told by the employer that they in fact will be receiving substantially less.  The excuse often provided by the employer is that the TFW needs to achieve a certain level of experience or achieve a Canadian or Albertan certification before there are eligible for the LMO rate.

In this situation, the TFW is in an extremely vulnerable position.  The TFW has just travelled to an unfamiliar country, is often in debt to foreign recruiters (notwithstanding that recruitment fees are illegal in Alberta), and often has economic obligations to his or her family in their place of origin.  Additionally, if the TFW does not accept the reduction in wage, and loses the position as a result, his or her Work Permit prevents them from seeking employment from another employer in Canada.  The result is that the TFW is under enormous pressure to not question or complain about the lower wage rate.  In some cases, the employer requests the TFW sign a new employment contract reflecting the lower wage, and the TFW feels they have no choice but to sign the new contract.

The case Koo v. 5220459 Manitoba Inc., 2010 MBQB 132 (“Koo”) appears to be one of the few, if only, reported decisions that has considered the issue of a discrepancy between an LMO wage rate and the wage actually paid.

In Koo, the Plaintiff TFW sued the Defendant employer for non-payment of the LMO wage rate.  Instead, the employer had paid a lesser wage.  The Court ruled that the employer was not liable for the higher LMO wage rate, in part because Justice Schulman concluded that the LMO in and of itself did not create an express or implied contract, and that after the parties had discussed the salary, the Plaintiff had accepted a lesser salary than what was in the LMO.

There are several characteristics about the Koo case that are important to note, some of which serve to distinguish it from the typical scenario that we encounter at the ECLC:

  • It appears that in Koo the rules for the particular employment position at issue (a “sushi chef”, which would typically be considered a “skilled position” under the immigration rules) did not require an employment contract to be submitted to HRSDC as part of the application process for the LMO [para. 6].
  • It is interesting to note that the Court mentions that the employer’s application for the LMO must include information about what would be the essential terms of any employment contract, including “the salary offered” [para. 4].  However, the Court goes on to conclude that in the LMO itself, “none of the essentials of a contract is present: offer, acceptance, privity, consideration and intention to create legal relations” [para. 10].  It is no doubt correct that the LMO itself does not create a contract between the employer and TFW, but it does not appear that the Court considered whether the LMO could create strong prima facie evidence of the existence of such a contract (for example, if the employer was required to provide information in the LMO application about what salary was offered to the TFW, that should in and of itself be strong evidence that such an offer was in fact made).  The reason for this lack of analysis may lie in some of the particular facts of the case, as described below.
  • There was a dispute on the evidence as to whether there was a discussion between the employer and the TFW about the wage prior to the TFW arriving in Canada.  The TFW’s evidence was that there had not been any discussion about wages.  The employer’s evidence was that there was a discussion prior to the offer of employment whereby the TFW would be paid $1,500.00 for the first month, and then at a salary commensurate with his demonstrated skills.  The Court accepted the employer’s evidence in part because it was hard for the Court “to believe that the plaintiff would pay his own fare to come to Canada without some discussion prior to receipt of the LMO about the level of salary to be paid” [para. 3].  In other words, it appears that the Court did not consider the case to be a “bait and switch” scenario because the TFW was not expecting to be paid the LMO wage rate, and did not base his decision to come to Canada on it.
  • Notwithstanding the Court’s finding that there was a discussion about wages consistent with what the employee was ultimately paid, it is extremely likely that the TFW also knew of the contents of the LMO (including the wage rate contained in it) prior to arriving in Canada.  This is evident because the Court found that the plaintiff provided the LMO document to an immigration officer upon his arrival to and entry into Canada [para. 2].  This raises the possibility that whatever prior informal discussion had taken place between the employer and employee about wages, the TFW could have reasonably relied on the terms in the LMO (a written document officially issued by the government) to take precedence in setting the terms of his employment. Unfortunately, there is no indication that this argument was raised in this case, and there is nothing in the decision to suggest that any evidence was led about whether in fact the plaintiff understood or relied in any way on the LMO, other than the fact that it was in his possession on arrival to Canada.
  • The Court does not consider the vulnerable position that most TFWs are in on arrival to Canada, and it does not appear that any issue of undue influence or inequality in bargaining power was raised in this case.

As a result, while the decision in Koo may pose some difficulties to any future civil claim by a TFW to enforce the wage rate reflected in the LMO, there are sufficient peculiar facts in that case to make it distinguishable from the typical case that we see at the ECLC.

In contrast to Koo, the outcome of a recent complaint to the Employment Standards Branch of Alberta Employment and Immigration has provided cause for some optimism on this issue.  In the case (which we will not identify for privacy reasons), a TFW made a complaint to Employment Standards, claiming his former employer had paid him less than the wage set out in the LMO.  An Order of Officer was issued that required the employer to retroactively pay the employee the difference.  Prior to issuing the Order of Officer, the Employment Standards Officer issued an Assessment Letter that contained the following rationale for requiring the retroactive payment:

On the issue of the reduction of the LMO rate, it is to be emphasized that the wage rate per hour of a Temporary Foreign Worker (TFW) is provided for and set forth in the LMO issued by the Federal Government through the Human Resources and Skills Development Canada (HRSDC).  Noteworthy to mention is that when an Alberta employer wishes to hire a TFW, he must meet all obligations of the TFW Program.

As required by that program, when an employer makes an offer of employment to the targeted TFW, the offer sheet must contain the essential terms and conditions of employment including the financial/compensation package, which is actually a TFW’s primary consideration in accepting an offer of employment.  Those terms and conditions remain in full force and effect throughout the period of employment.  This is the Employment Contract. [emphasis in original]

Be it mentioned in this connection that Employment Contracts are essentially written agreements between an employer and an employee which detail the workplace duties and responsibilities of the employee and the compensation that the employer provides in return.  Said contracts, therefore, typically lay out the terms and conditions of employment which would govern and bind parties as they go through their employment relationship.

All these [sic] being said, any downward adjustment in the worker’s wage rate as set forth in the Employment Contract and the LMO issued by HRSDC for whatever reason should be effected only upon proper application with and approval of the said Federal agency.

In the complaint under consideration, there is absolutely no showing on the record that the downward adjustment effected on the claimant’s LMO wage rate was done upon prior application with and approval of HRSDC.  Thus, the subject wage reduction is to be considered void and without effect and the claimant is declared to be entitled to wages based on his original wage rate…

In this case, there was a requirement that a written employment contract signed by both the employer and employee be submitted in the application process for the LMO.  In that context, the rationale of the Employment Standards Officer in treating the terms contained in that signed contract (and reflected in the LMO) as the governing agreement makes good sense.

It appears, therefore, that Alberta Employment Standards is willing to enforce the wage terms of the LMO contract where the employer has refused to pay the employee in accordance with it.  This is positive news for TFWs who find themselves in such a vulnerable situation.

About Tim Patterson

Tim Patterson is a staff lawyer at the Edmonton Community Legal Centre where he serves low income clients. His primary areas of practice are housing, employment, and other areas of civil litigation. After graduating with an B.A. and LL.B. from the University of Alberta, he was called to the Alberta Bar in 2002, and practiced at a large law firm in Edmonton before moving to the ECLC. In his current practice setting, Tim has been able to pursue his interest in improving access to justice for those living with poverty.
This entry was posted in Civil Litigation, Employment Law, Immigration Law and tagged , . Bookmark the permalink.

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