With the ongoing threat of severe trade disruptions and economic uncertainty in the air, business owners who have been economically impacted by the tariffs might be contemplating changes to their workforce.
But according to the lawyers at Emond Harnden LLP, measures such as layoffs, dismissals, or other workplace changes can be complex and come with certain risks if not handled appropriately and with care.
“The primary risk is claims of constructive dismissal by the individual employee or employees,” said Veronica Blanco Sanchez, an associate with the Ottawa-based labour and employment law firm.
“If you’re reducing hours or duties, you will want to make sure you handle those situations appropriately to avoid a complaint or potential Ministry investigation under the Employment Standards Act,” she explains. Changes to terms and conditions of employment or the provisions of an employment contract could also bring about constructive dismissal claims.
“Short-term thinking can result in long-term impacts, including financial impacts.”
The federal Work-Sharing Program may be an option
Blanco Sanchez highlighted Service Canada’s Work-Sharing Program, designed to help employers avoid layoffs during a temporary period of decreased business activity outside the employer’s control — a potentially welcome relief for both employers and their staff.
The program provides income support to employees eligible for employment insurance benefits and who agree to temporarily reduce their hours and share available work.
The Work-Sharing Program was recently expanded to include special measures, effective until March 6, 2026, to address the impact of tariffs. These include expanded employer and employee eligibility, a waiver of the cooling-off period usually required between work-sharing agreements, and doubling of the maximum length of work-sharing agreements to 76 weeks.
Understand your risks if making workforce changes
If employers have to consider other measures, Blanco Sanchez said it’s important that business owners understand the associated risks and obligations.
Under the Employment Standards Act (ESA), “a temporary layoff must be a maximum of 13 weeks, which is approximately three months, in a period of 20 consecutive weeks,” said Blanco Sanchez. While the maximum period could be up to 35 weeks in a year, employers who wish to take advantage of that extended temporary period must meet one of several conditions.
“The most common of those is you must continue payments on employee benefits, whether that’s a retirement pension or insurance plan.”
But even then, Blanco Sanchez noted that layoffs may carry additional risk for employees also covered by the common law. Since the common law can be more restrictive, a temporary layoff that meets the requirements of the ESA could still be considered constructive dismissal.
Similarly, employers considering termination should also keep in mind that employees subject to the common law may have entitlements that exceed the minimum notice and severance requirements outlined in the ESA.
Additionally, employers who may be eliminating 50 or more employees at an establishment (as defined under the ESA) in a four-week period should be aware of the ESA’s provisions on mass termination.
Blanco Sanchez noted that workforce adjustments in unionized workplaces must adhere to relevant collective agreements (Emond Harnden works with both unionized and non-unionized workplaces).
And if your organization embraced remote work during the COVID pandemic and is now paring back on virtual hires, there are provincial or territorial rules to be aware of that may apply when making these kinds of workforce changes.
Unsure how to proceed? Seek legal advice
Developments like the special tariff-related measures under the Work-Sharing Program, or nuances around temporary layoffs and employee entitlements upon termination, highlight the value in working with firms specialized in the practice of labour and employment law such as Emond Harnden.
The firm keeps clients up-to-date on relevant developments regarding the ever-changing economic situation and its impact on employers, and advises on ways clients can protect their businesses and employees.
“We can walk you through some of your options and help you arrive at the least disruptive, least costly, and least risky way to make the change you need to make,” Blanco Sanchez said. She recommended that business owners looking to make workforce changes seek advice from a lawyer before taking action.
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This article is intended to provide readers with general information only. It should not be regarded or relied upon as legal advice or opinion. Accessing, reading, relying on or otherwise using this article does not, under any circumstances, create a lawyer-client relationship between you and Emond Harnden.
