Ever since steam updated its privacy and friend system, Shift Happens has an issue if your Privacy Settings in Steam are set to "strict":

If you use very strict privacy settings other poeple, even friends, can't see what games youre playing. Therefore its not possible to join or host a game in Shift Happens.

To fix this issue you need change your privacy settings to at least "Friends Only"!

Go to Profile -> My Privacy Settings -> Game details need NOT to be set to Private -> change "My profile:" to "Friends Only" -> set "Game details:" to "Friends Only"

Your friend should now be able to join your game.