Canada Tightens LMIA Employer Eligibility: Staffing Agencies and EORs Barred from Sponsoring Foreign Workers

OTTAWA, September 29, 2026 — Employment and Social Development Canada (ESDC) has issued updated guidance that fundamentally narrows which entities can qualify as employers for Labour Market Impact Assessment (LMIA) purposes under the Temporary Foreign Worker Program (TFWP), effectively ending the Employer of Record (EOR) model for LMIA-based work permits.

The guidance, published on September 18, 2026, across multiple TFWP program-requirement pages, establishes that Service Canada will assess the actual employment relationship in practice rather than relying on contracts or paperwork .

Canada tightens LMIA employer eligibility, barring staffing agencies and EOR models from sponsoring foreign workers

The Core Test: Who Actually Controls the Worker?

Under the updated framework, an eligible employer for LMIA purposes is the entity that:

Criterion	What It Means
Hires the worker	The entity that formally engages the foreign national
Establishes terms	Sets wages, hours, and conditions of employment
Pays wages directly	Issues payroll and administers statutory deductions
Maintains responsibility	Bears legal responsibility for the employment relationship

Service Canada may consider several factors when assessing who the real employer is, including who determines where, when and how work is performed, who supervises and evaluates performance, who has authority to terminate, and which entity the worker recognizes as their employer .

Staffing and Recruitment Agencies Cannot Sponsor LMIAs

The guidance explicitly states that staffing or employment agencies that recruit workers for other businesses are not considered employers under the TFWP .

This means an agency cannot obtain an LMIA for a foreign worker who will ultimately work for a third-party Canadian business. As Service Canada explains, an employer-employee relationship does not exist in that arrangement .

IRCC's help centre reinforces this principle: a human resource placement agency cannot submit offers of employment on behalf of a company, because the temporary worker will be working directly for the client company, not the agency .

Employer of Record (EOR) Model Effectively Closed for LMIAs

The updated guidance confirms that Employers of Record (EORs) do not qualify as LMIA sponsors .

This represents a significant change from the previous approach, under which EOR arrangements were generally permitted if they complied with applicable immigration and labour laws. Under the clarified rules, an EOR cannot serve as the legal employer for the purpose of an LMIA-based work permit when another business actually controls the worker's day-to-day employment .

The restriction applies specifically to LMIA applications. EORs may continue operating in other employment contexts, subject to applicable provincial employment laws .

Independent Contractor Classification Prohibited

The guidance also prohibits classifying temporary foreign workers as independent contractors where an employer-employee relationship actually exists .

Employers cannot reclassify a worker as a contractor after receiving a positive LMIA, nor can they structure the relationship to avoid payroll, tax, or other program obligations. Misclassification can result in administrative monetary penalties, bans from the TFWP, and public disclosure of violations .

Which LMIA Streams Are Affected?

The updated employer definition appears across multiple TFWP streams, including :

• High-Wage Stream

• Low-Wage Stream

• Global Talent Stream

• Agricultural Stream

• Seasonal Agricultural Worker Program

• In-Home Caregiver positions

• LMIAs supporting permanent residence

• Recognized Employer Pilot

What Employers Should Review

Before submitting a new LMIA application, employers should confirm :

Checkpoint	Question
Applicant is the real employer	Is the entity applying the same one that will hire and employ the worker?
Employment agreement	Is it signed by the correct entity?
Payroll responsibility	Will the applicant directly pay wages and deductions?
Control of work	Who sets schedule, duties, and location?
Termination authority	Who has the power to dismiss?
No third-party arrangement	Does a staffing or client placement shift actual control elsewhere?
Employee classification	Is the worker treated as an employee, not a contractor?

Quick Reference Summary

Aspect	Details
Guidance Date	September 18, 2026
Core Test	Who controls the employment relationship in practice
Staffing Agencies	Not considered employers; cannot obtain LMIAs for third-party workers
EOR Model	Does not qualify as LMIA sponsor
Independent Contractors	Cannot be used to avoid TFWP obligations
Affected Streams	All major TFWP streams
Consequences	Monetary penalties, bans, public disclosure

Read Also

• Canada’s Working Holiday Insurance Trap: Why One Document Can Cut Your Permit in Half

• Canada Adds UK to CPTPP Work Permit Provisions – New LMIA-Exempt Pathway for British Professionals

For the latest immigration updates, visa policy changes, and 2026 developments worldwide, visit: visasupdate.com/blog/category/canada

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