Employment considerations arising from US tariffs

Many companies across Canada are anxiously waiting to see whether the Trump administration in the US will follow through on the tariffs that were announced in January 2025. While some tariffs were paused, tariffs on steel and aluminum came into effect March 12, 2025. The Trump administration has also threatened tariffs on lumber. 

The imposition of tariffs will undoubtedly impact workplaces and may require temporary or permanent workforce reductions or other workplace changes to mitigate the economic impact. Below we provide a brief outline of some of the options that employers can consider if workforce reductions or other changes cannot be avoided in response to the tariffs. 

To avoid temporary or permanent workforce reductions, an employer can register for the federal Work-Share Program if certain requirements are met. The program is available when an employer experiences a decrease in normal levels of business activity that is beyond the employer’s control. The program essentially allows an employer to share available work between employees over a reduced work week for a certain maximum period.  

Employees who agree to participate in the program will have their pay reduced by a corresponding amount and will receive Employment Insurance (EI) benefits to make up the difference. 

We are monitoring updates from the federal government on special measures for affected industries, including the steel and aluminum and forestry sectors. These sectors have historically benefitted from special measures to help employers in these sectors navigate economic downturns. 

Changes in compensation or other fundamental employment terms 

Employers may be considering changes to terms and conditions of employment to avoid layoffs or terminations, especially changes that involve a reduction in job duties and/or compensation. Both duties and compensation are considered fundamental terms of employment, and any significant changes that are unilaterally imposed could create risk of constructive dismissal claims. 

• Change to job duties: If the change involves duties, we recommend that employers review employment contracts to determine whether the employer has any discretion (and how much) to change duties without an employee’s consent. Employment contracts often include some language that allows an employer to change duties that are consistent with an employee’s qualifications and experience. 
• Pay cut: Compensation reductions should be approached with caution. Generally speaking, a reduction in an employee’s overall compensation by more than 10 per cent could give rise to a credible constructive dismissal claim. However, it is important to carefully review incentive plans, employment agreements and past practice to determine how much discretion the employer has to make changes to compensation. 

If employee consent cannot be obtained for significant changes, then one strategy is to provide advance notice to employees that certain changes will be implemented on a future date. If the employee does not accept the changes, then the advance notice would mitigate any common law entitlements that the employee may have on termination of employment. 

Any changes to fundamental employment terms should be approached with caution and based on legal advice to mitigate severance liabilities. 

Temporary layoffs 

Layoffs may be appropriate where an employer needs to reduce the workforce on a temporary basis. It is important to appreciate that layoffs do not always equal termination of employment. A layoff essentially allows an employer to temporarily place an employee on unpaid leave, during which time the employee may claim EI benefits. If the layoff exceeds the maximum period allowed under employment standards legislation, then it is considered a termination of employment that entitles an employee to severance. 

In most cases, a temporary layoff is only permissible if the employee has consented to the layoff. That consent is normally secured through individual employment contracts and employers should accordingly start by reviewing employment contracts to ensure that the necessary consent is in place. Unionized workplaces will typically address layoff protocols and timelines in their collective agreements. 

In some industries, such the logging industry in British Columbia, layoffs may be implemented as a matter of past practice even if there is no consent. Unless an employee has either consented or the layoff is considered standard practice in the industry, a layoff will likely be considered a constructive dismissal. That means an employee can choose to resign and claim termination pay. 

Employers should consult applicable employment standards legislation for the specific requirements and process to implement layoffs in each province. A layoff will be permitted for only a certain maximum period of time, after which the employee must be returned to their regular work schedule. Employment standards legislation may also address issues such as benefits continuation during the layoff period and the recognition of seniority rights. 

If you need to implement layoffs, we recommend seeking legal advice to avoid common mistakes. In particular, the layoff notification should include certain language that communicates the temporary nature of the layoff and should avoid certain terms that may trigger unintended consequences. 

Terminations 

An employer can always terminate employees if permanent workforce reductions are unavoidable. Employees terminated in these circumstances will be entitled to at least the minimum amount of termination notice or pay in lieu of notice (and any other applicable minimum benefits and entitlements) in accordance with applicable employment standards legislation. The minimum amount of termination notice will also depend on whether the termination occurs as part of a “group” or “mass” termination (where a group of employees are terminated over a specified period of time). If the threshold for group or mass terminations is triggered, then employers should be careful to comply with the group or mass termination provisions in applicable employment standards legislation. These often include additional requirements that do not apply to individual terminations (such as providing advance notice to the government). 

Employers should also carefully review individual employment contracts to determine whether employees are entitled to increased or enhanced severance packages that exceed the minimum amount of termination notice and entitlements in applicable employment standards legislation. It is important to consider the terms of contractual severance entitlements, including whether an employee is entitled to benefits continuation (even if not legally required under applicable employment standards legislation), whether payment of an enhanced severance package will require an employee to sign a release, and whether an employee would be subject to any duty to mitigate. 

If the termination provision in the employment contract is not enforceable because it does not comply with applicable employment standards legislation or does not unambiguously remove an employee’s common law entitlements on termination, then it is important to keep in mind that such a terminated employee would be entitled to reasonable notice under the common law, which is typically more than the minimum amount of termination notice or pay in lieu of termination notice under applicable employment standards legislation. Common law reasonable notice is determined by considering the employee’s age, length of employment, character of employment, and availability of comparable employment having regard to the employee’s qualifications and experience. 

Human rights issues 

Employers seeking to implement layoffs and group terminations are typically forced to do so under difficult circumstances. Timelines may be tight and there may be immense pressure on human resources teams to move quickly and maximize cost savings for the employer. Even in such an unforgiving environment, the onus will be on the employer to ensure that employees are not selected for termination or layoff on the basis of or for reasons related to a characteristic that is protected under applicable human rights legislation. There are steps that employers can implement to prevent such mistakes, including removing certain personal data from the information that is provided to those selecting employees for termination or layoff, and documenting the business case for each position that is eliminated. We recommend consulting with legal counsel to minimize risks associated with group terminations or layoffs. 

As noted above, there may be special considerations in unionized workplaces. The employer should consult the applicable collective agreement to ensure that they understand the appropriate protocols for implementing terminations or layoffs, including any selection criteria that must be applied. 

Michelle McKinnon is a partner in the Employment and Labour Group at Cassels in Calgary.