McDonald's Canada has suspended further use of the temporary foreign worker program after criticism that several franchises at the fast-food chain were favouring foreign workers over seemingly qualified Canadian applicants.

The company said it would temporarily "freeze" all Labour Market Opinions, or the application process by which employers must show that no Canadian worker can do the job. It has also agreed to a third-party audit on its use of the program.

The move comes amid controversy over Canada's temporary foreign worker program, which has seen rapid expansion in the past decade. Critics contend it depresses wages in some sectors and discourages employers from hiring Canadian workers at a time when the unemployment rate remains above pre-recession levels, while employers say they need temp workers to fill positions that Canadians are unwilling to do. The federal government tightened the rules last year in an effort to ensure employers weren't abusing the program.

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A study to be released Thursday finds the program has led to higher domestic unemployment in British Columbia and Alberta, and that further changes to it are warranted.

Allegations of abuse in the program have swirled around three McDonald's franchises in Victoria and a pizza restaurant in Weyburn, Sask., with accusations that some employers are favouring foreign workers over available Canadians. Earlier this month, the federal government placed the three McDonald's franchises in Victoria on its blacklist, while investigators look into whether other employees or job applicants have been affected.

McDonald's Canada said Wednesday it has agreed to a third-party audit of all its corporate and franchised restaurants that employ temporary foreign workers. McDonald's Canada now employs about 3,400 temporary foreign workers, about 4 per cent of its total work force in Canada of more than 85,000 people. Once the audit is finished, the company will decide about "next steps" in its participation in the program.

Meanwhile, a new study to be released Thursday by the C.D. Howe Institute takes a critical look at the temporary foreign worker program.

It concludes that a since-cancelled fast-track version of the program actually led to higher unemployment in B.C. and Alberta. The report adds to the growing chorus of criticism that the program is being managed in the absence of reliable labour force information that would show where and if such a program is truly needed.

The report notes that while Ottawa introduced a $275 fee per application in 2013 in response to public criticism of the program, other countries impose much higher fees that encourage employers to look harder for domestic workers and also raise money to fund training programs. The United States, for instances, charges up to $2,325 for similar visas and uses part of the fee to fund training.

In Singapore, companies pay varying levels of fees depending on the skill and the industry involved.

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"Although the [Canadian] fee might cover administrative costs, it is hardly large enough to provide a strong incentive for employers to search for domestic workers to fill job vacancies," the report by Dominique Gross, a professor of public policy at Simon Fraser University states. "It is far lower, for example, than the cost of relocating a domestic worker from another province."

Growth has been particularly strong in the services sector. The number of approved foreign worker positions in accommodation and food services has grown to 44,740 from 4,360 in 2006 – an increase of 926 per cent, The Globe and Mail reported this week, citing data compiled by Employment and Social Development Canada. The actual number of allowed foreign workers in the sector is not clear because the data only captures approved positions under a process called a Labour Market Opinion. Not all approved LMOs lead to hires, while employers are also able to bring in workers without an LMO through trade deals and other means.

"Our government will not tolerate any abuse of the temporary foreign worker program," said Alexandra Fortier, spokeswoman for Employment Minister Jason Kenney, adding that employers caught lying on their applications about their efforts to hire Canadians could face fines and jail time.

"Our message to employers is clear and unequivocal - Canadians must always be first in line for available jobs."

McDonald's said it has been in "close communication" with ESDC and that it uses the program in markets where there are "local labour challenges." The company said temporary foreign workers already employed at McDonald's will keep their jobs, and that it plans to continue participation in the program in the future.