Compliance Audits

Compliance audits are one of the most serious regulatory mechanisms used by IRCC and ESDC/Service Canada to monitor employers who hire foreign workers under either the LMIA-based or LMIA-exempt streams. These audits allow the government to verify whether employers have complied with all conditions of the Temporary Foreign Worker Program (TFWP) or International Mobility Program (IMP). The consequences of non-compliance are severe: monetary penalties reaching into the millions, multi-year bans on hiring foreign workers, permanent bans for serious or repeat violations, reputational damage through public disclosure, revocation of LMIAs, and work permit refusals for future candidates. A single audit failure can cripple a business’s operations and long-term ability to access global talent.

Let's have a comprehensive, litigation-grade guide to Compliance Audits, focusing on employer obligations, audit triggers, request timelines, evidence standards, worker interviews, penalties, remediation measures, reconsideration requests, and strategic response plans. It is designed for Canadian employers, HR departments, global mobility teams, and immigration practitioners.

Compliance Regime Overview

The Employer Compliance Regime (ECR) applies to all employers who hire foreign nationals using:

• an LMIA (TFWP),
• an employer-specific LMIA-exempt work permit (IMP),
• any pathway requiring an Offer of Employment through IRCC's Employer Portal.

Once an employer hires a foreign worker, they become subject to audits for a six-year period following the work permit issuance.

Audit Triggers

Compliance audits may be:

1. Random

Selected without cause to ensure system integrity.

2. Targeted

Triggered by:

• worker complaints,
• flagged inconsistencies,
• pattern of prior non-compliance,
• sector-based enforcement initiatives.

3. Risk-Based

Triggered by suspected violations, such as:

• wage inconsistencies,
• unsafe work conditions,
• misrepresentation in applications,
• job duties inconsistent with LMIA/Offer of Employment.

Employer Obligations Subject to Audit

Audits verify employer compliance with the following legislated conditions:

• paying the foreign worker the approved wage,
• ensuring job duties match those on the LMIA or Employer Portal,
• providing working conditions consistent with Canadian standards,
• record-keeping for 6 years,
• providing safe and adequate housing (low-wage/agricultural streams),
• paying transportation costs (low-wage/SAWP),
• not recovering prohibited recruitment or employment fees,
• complying with provincial labour standards.

Stages of a Compliance Audit

1. Document Request Letter

The employer receives a detailed list of required documents with a short deadline (often 15–30 days). Requested documents may include:

• payroll records,
• timesheets,
• bank statements,
• employment contracts,
• recruitment proofs,
• housing inspection reports,
• transportation receipts (if applicable),
• health and safety records,
• proof of compliance with employment standards.

2. Employer Interviews

ESDC or IRCC may interview:

• HR managers,
• supervisors,
• foreign workers,
• payroll staff.

Inconsistencies between employer explanations and worker reports are a major red flag.

3. Worksite Visits

Officers may conduct on-site inspections to observe working conditions, confirm job duties, and inspect housing conditions (if applicable).

4. Analysis and Findings

The government reviews the evidence and issues:

• Compliance confirmation, or
• a Notice of Preliminary Finding (NPF) of non-compliance.

5. Notice of Final Determination

If the employer fails to disprove the findings, the government issues a final determination listing:

• violations,
• penalties,
• ban periods (if any),
• public disclosure details.

Penalties for Non-Compliance

Penalties vary depending on severity, history, and number of foreign workers affected.

1. Administrative Monetary Penalties

Penalties range from $500 to over $1,000,000, depending on:

• type of violation,
• employer size,
• degree of harm,
• intent or negligence,
• number of workers affected.

2. Hiring Bans

• 1-year ban,
• 2-year ban,
• 5-year ban,
• 10-year ban,
• permanent ban (for severe or repeated offences).

3. Public Disclosure (“Blacklist”)

Non-compliant employers appear on IRCC’s public non-compliance list, leading to:

• reputational harm,
• difficulty attracting workers,
• scrutiny from other regulatory bodies.

Common Violations Identified in Audits

• paying lower wages than approved,
• assigning duties outside the approved NOC,
• unsafe or unsuitable housing conditions,
• deducting prohibited fees,
• not providing transportation reimbursements,
• incomplete or inaccurate record-keeping,
• inconsistencies between LMIA and actual working conditions,
• misrepresentation or omission in previous applications.

Responding to a Notice of Preliminary Finding (NPF)

This is the employer’s critical opportunity to challenge or mitigate allegations. A well-crafted response includes:

• detailed legal submissions,
• explanatory narratives for any discrepancies,
• corrective measures,
• evidence demonstrating compliance,
• remedial payroll adjustments where applicable.

Grounds to Dispute Audit Findings

• errors in wage calculation,
• misinterpretation of job duties,
• administrative oversight rather than intentional violation,
• incorrect application of employer size criteria,
• worker misunderstanding of conditions,
• force majeure (e.g., temporary business disruption),
• reasonable justification under the ECR framework.

Reconsideration Requests

If the final determination is issued, employers may request:

• reconsideration, or
• Judicial Review in the Federal Court.

Judicial Review may overturn penalties based on:

• unreasonable findings,
• procedural fairness violations,
• misinterpretation of evidence,
• incorrect application of law.

Preventative Compliance Planning

The strongest defence is proactive compliance. Essential practices include:

• annual internal audits,
• standardized payroll systems,
• accurate job descriptions and duty logs,
• policy manuals for supervisors,
• HR training on foreign worker conditions,
• housing inspection documentation,
• centralized record-keeping systems.

Role of Skilled Counsel in Compliance Audits

Lawyers support employers by:

• assessing risks before audits,
• assembling documentary evidence,
• drafting submissions to refute allegations,
• negotiating with ESDC/IRCC investigators,
• preparing reconsideration and JR filings,
• implementing long-term compliance systems.

With strong legal guidance, employers can successfully navigate audits, minimize penalties, and maintain uninterrupted access to foreign talent crucial to their operations.