Change Of Employer / Notification?

I hope someone will be able to advise the correct procedure for the following scenario, and also what the penalties might be !!!

Teacher arrived with a Non-Imm B visa, for 3 months, in May 2004. He started work for a language school in Province "A" and during the initial 3 month period he obtained all the correct paprework / work permit and the visa was extended for an additional 9 months to May 2005. During the course of that year he was relocated, by the language school, to a government school in Province "B". No change was made to the work permit and immigration were not told of any change.

In May 2005 he obtained a further one year extention, unitll May this year, using his original visa and paperwork / work permit for province "A" . At that time he was still working in Province "B", in the same government school but still under contract and employed by the language school in province "A". Around 4 months ago someone at the language school decided that it would be better to get him a work permit for the government school in Province "B" so that he would be working "legaly".

This is where it starts to get a bit messy.

A new contract was prepared between the teacher and the government school and all the correct paperwork was prepared to get a new work permit. The work permit for province "A" was cancelled and the day after that an application for a work permit in province "B" was submitted. Ten days later the new work permit was issued showing the teacher employed directly by the government school. This was all completed about 2 months ago. However Immigration have not been informed of the recent change of "employer". (It is also a "sham" contract as he is still paid by the language school in province "A" . I did say it was messy, and I hope that is a seperate issue)

Should Immigration have been told of the change? If so what are the penalties and what would be the best way to remedy the situation. He is keen to maintain continuity with his original visa just in case he wants to apply for residency in the future.

Helpful coments and suggestions would be appreciated. Many thanks.