The decision to suspend the food services industry from the Temporary Foreign Worker program will hurt businesses and their employees, says the restaurant industry association, an outcome the minister responsible for the move called “regrettable, but necessary.”

On Thursday, Employment Minister Jason Kenney suspended restaurants from accessing the program after reports of abuse emerged. In particular, McDonald’s announced it has temporarily halted its involvement in the program after it came under heavy criticism for hiring temporary foreign workers in British Columbia.

A C.D. Howe Institute study released Thursday also concluded that the program fuelled unemployment in B.C. and Alberta.

Restaurants Canada said Friday it is “disappointed” in Kenney’s decision, saying it will work with the federal government to “correct any abuses” in order to restore the industry’s access to the program.

“The majority of restaurant operators using the program operate in complete compliance and it is unfortunate that their businesses and employees will be hurt by this broad-stroke approach,” the organization said in a statement.

“Albertans in particular will remember what it was like a few years ago to find restaurants closed because of a shortage of workers.”

About two per cent of the 1.1 million workers employed in Canada’s restaurant industry are temporary foreign workers, the statement noted.

“In areas of the country with severe labour shortages, the TFW program is vital, allowing restaurants to remain in business, and to continue to provide jobs for their Canadian employees,” the organization said.

For its part, McDonald’s Canada said it is a “responsible, ethical and caring employer” that employs 85,000 people across the country. “McDonald’s hires Canadians first,” the company said in a statement.

It acknowledged, however, “that we have work to do to make things right with regard to our use of the Temporary Foreign Worker program.

“From the very outset, McDonald’s Canada has acted swiftly and forcefully to investigate and address any and all allegations.  We do not tolerate any misuse of the Temporary Foreign Worker Program, any breach of employment standards or any infractions of any kind against our employees.”

The company has both launched an internal review and hired a third-party auditor to probe its use of the program. In the meantime, the company said, it has halted its involvement with the program pending the results.

Wake-up call

On Friday, Kenney acknowledged that his decision would have an impact on businesses, many of which have “done their level best to follow the rules” and have been unable to find Canadians to hire.

“That’s regrettable, but I think it’s necessary,” Kenney told reporters in Vancouver. “I think it’s necessary to send a message that we mean what we say about the obligation actively to search for Canadians first.”

The move should also serve as a wake-up call to employers in all sectors, he said, “that we expect them to not just abide by the letter but by the spirit of the rules.”

Government officials are probing the reports of abuse, he said.

After some reforms to the program were brought in last year, Kenney said, his department has undertaken a second phase of review. Further reforms to the program can be expected “in the weeks to come,” he announced.

Kenney also said the government is particularly unhappy that wages have not kept up with inflation, which does not suggest a tight labour market. He also called on businesses to invest more in training, improve working conditions, and seek workers who are under-represented in the labour force.

‘Unfair’

Dan Kelly, president of the Canadian Federation of Independent Business, says there have only been a handful of reports of abuse among the tens of thousands of employers who use the program. The reports should be investigated, he said, but said it is “deeply, deeply unfair” that every food services employer has now lost access to the program.

“I have to tell you I personally believe there’s a heavy organized labour campaign to discredit the program,” Kelly told BNN Friday.

“I’m not suggesting for a second that there isn’t an employer or two that may be misusing the program, but we should be going after them instead of slapping all sorts of new rules or potentially abandoning the program for a giant sector of the economy.”

The program, which was first designed to address a shortage of skilled labour in Canada, brought 100,000 workers to Canada in 2002, to more than 330,000 in 2013, the C.D. Howe Institute report said.

Reforms to the program made it easier for employers to hire temporary foreign workers, the report said. However, during the period between 2002 and 2013, rising participation rates in the program led to a cumulative 3.9 percentage point hike in unemployment rates in B.C. and Alberta.

"These policy changes occurred even though there was little empirical evidence of shortages in many occupations," wrote the report's author, economist Dominique Gross.

"When controlling for differences across provinces, I find that changes to the TFWP that eased hiring conditions accelerated the rise in unemployment rates in Alberta and British Columbia."

New rules brought in late last year led to a “significant reduction” in applications in 2013 and the first four months of 2014, Kenney said Friday. A further drop in applications is expected when another set of reforms is brought in this year.

In a statement Friday, restaurant chain Tim Hortons said it supports the government for “any steps it takes” to strengthen the Canadian labour markets, but added that suspending access to “responsible users” of the temporary foreign workers program is “not an answer” to critical labour shortages in some markets.

“We support Minister Kenney’s view that any abuses of this program should be dealt with harshly, and we encourage the federal government to make independent audits mandatory for every company that uses this crucial program,” the statement said.

On Friday, Liberal MP Rodger Cuzner gave notice of motion to have Kenney and “workers who have lost their jobs” to temporary foreign workers appear before the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities to address problems with the foreign workers program.