Spousal working restrictions under NAFTA
An Overview of Canadian Business Concerns

Canadian Chamber of Commerce
Ottawa, Ontario
November 6, 1995


Chapter XVI of the NAFTA includes an Article (1602) which calls upon the Working Group to consider "...the waiving of labour certification tests or procedures...for spouses of business persons [professionals, intra-company transfers, and traders and investors] who have been granted temporary entry for more than one year..."

The Canadian Chamber of Commerce's involvement with this issue dates back to the fall of 1994 when corporate members of the Chamber expressed concerns that the above-mentioned working restrictions were limiting the ability of North American companies to rationalize their human resources on a regional North American basis. Following this, in April, 1995 the issue was discussed at a meeting of the Committee on Canada-United States Relations, comprised of senior business executives from both sides of the border. A joint resolution was adopted calling upon the respective NAFTA governments to work towards the reduction or elimination of such working restrictions.

An ad hoc working group comprised of Chamber members from various industry sectors across Canada was formed to examine the issue further. The Chamber's working group held a series of teleconferences, and compiled a collection of individual corporate experiences with such work restrictions under NAFTA. The following represent some of the major concerns raised by Canadian Chamber member companies:

Human Resources Mobility and the Competitiveness of North American Companies

The Canadian Chamber of Commerce believes that the evolving business environment has made the regional and global mobility of human resources a key determinant of competitive advantage for North American firms. This is a crucial complement to the increased mobility of other factors of production, such as capital and technology.

The ability to transfer employees between operations is critical for a multinational corporation. It allows for important training opportunities, and permits experienced employees from the parent country to temporarily fill positions when qualified personnel are not available in the host country, and vice-versa. However, the inability of spouses and dependent children to work in such instances quite often results in the unwillingness of key personnel to relocate. This has negative repercussions for the competitiveness of individual firms. At present, existing working restrictions under NAFTA on employment pertaining to spousal and dependent children are a major impediment to efficient human resources allocation by North American firms.

While companies operating within NAFTA require qualified and experience North American managers, many of the best employees are essentially immobile because of the inability of their spouses to work. The Canadian Chamber of Commerce believes that the unwillingness of NAFTA governments to issue work permits to spouses due to concerns about protecting the domestic work force is short-sighted. It limits the ability of North American firms to compete with companies in other trading blocks, such as the EU, where such restrictions do not exist.

Lack of Human Resources Mobility and Cost Implications for North American Companies

 International transfers are very expensive for the firm, and growing tax and currency differentials (between Canada and the U.S.) have raised their cost. This constraint on personnel mobility is further compounded by the fact that professional/managerial, two income families are the primary candidates for development moves. In most cases, neither the employer nor the employee can afford to replace the lost income which a transfer under the present regime could entail.

As a result, the success of transfers (which are not rejected by the employee) are often placed at risk due to emotional complications. Case studies bear witness to the fact that many assignments terminate because of unhappiness and stress associated with the inability of the spouse to work. This increases the cost of worker mobility and further limits the number of employees which can be transferred.

A final cost factor relates to the US Equal Employment laws which allow American employees to sue an employer by arguing that they were turned down for a promotion or job due to the transfer of an employee from Canada. Giving spouses/dependents working privileges would eliminate this costly scenario.

Recommendation:

Based on the above arguments, the Canadian Chamber of Commerce strongly urges the Canadian government, through the work of the NAFTA Working Group on Temporary Entry of Business Persons, to avctively seek an elimination of working restrictions in all three NAFTA countries placed upon spouses and dependent children of professionals, traders and investors, and intra-company transfers within the NAFTA countries. We believe an elimination of such resitrctions will significantly improve the ability of North American companies to rationalize their human resources on a North American basis, and therefore increase their competitiveness not only within NAFTA, but globally.