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Ontario employers are facing increased costs from international tariffs, many businesses are considering restructuring, temporary layoffs, or job changes to stay afloat. But without careful planning, these steps could lead to costly legal consequences.
In this article, we explore how tariffs are affecting business operations in Ontario and what employers need to know about managing employment relationships lawfully during restructuring.
Tariffs Are Pushing Businesses Toward Restructuring
As tariffs increase the cost of goods and supply chains tighten, employers are reevaluating their workforce strategies. Responses often include:
- Reducing employee hours
- Cutting wages or bonuses
- Reassigning duties
- Implementing temporary layoffs
These may be necessary business decisions, but they also carry legal risks. Mishandling employment changes can trigger claims of constructive dismissal, termination of employment, and other liabilities under Ontario law.
Understanding Constructive Dismissal in Ontario
Under Ontario law, constructive dismissal occurs when an employer makes a unilateral change to the terms of employment without the employee’s consent. For example:
- Lowering wages or removing benefits
- Reduction in hours
- Changing to ob responsibilities
Even if the business reasons are legitimate, such changes may entitle the employee to treat the employment as terminated which can lead an employee to seek damages at common law.
Can Employers Use Temporary Layoffs?
Employers may temporarily layoff an employee but only under certain conditions. The Employment Standards Act, 2000 (ESA) allows for temporary layoffs if they meet certain conditions. An employer may temporarily layoff an employee:
- Up to 13 weeks in a 20-week period, or
- Up to 35 weeks in 52 weeks, if wages or benefits are maintained
However, under common law it may still be treated as a termination of employment unless:
- The employment contract includes a valid provisions that is enforceable for a temporary layoff, or
- The employee consents to the temporary layoff
If neither applies, you could face a wrongful dismissal claim, even if you followed ESA timelines. It is advised to seek legal advice before implementing any temporary layoffs to avoid potential liability.
Reducing Labour Costs Without Triggering Dismissal
If you’re looking to reduce employment costs without immediate layoffs, you may consider changing compensation, roles, or hours. But doing so unilaterally risks constructive dismissal.
There are two legally supported strategies:
1. Provide Consideration
When altering the terms of an employment contract, offer the employee something of value in return. Some examples include but not limited to:
- A one-time bonus
- Extra vacation days
- A promotion or new title
Courts require fresh consideration since continuation of employment alone doesn’t count.
2. Provide the Employee Notice of Changes
Alternatively, an employer can notify employees of the proposed changes and provide advance notice equal to their common law entitlement to notice of termination. This limits liability by giving employees time to consider or reject any changes to the terms.
Key steps:
- Provide a written letter outlining the changes and when they take effect
- Make clear that rejecting the change will result in termination on the notice date
- Include a revised employment agreement with the new terms
- Allow the employee to accept the change any time during the notice period
This method respects both the employee’s rights and the employer’s need to adapt.
When to Seek Employment Legal Advice
To avoid liability related to constructive dismissal Ontario and wrongful termination, it’s essential to consult a qualified legal professional before implementing any changes.
Legal guidance can help you:
- Review contract enforceability
- Navigate layoff rules under ESA and common law
- Structure notice periods and updated agreements
- Avoid triggering unintended termination of employment
Final Takeaway: Protect Your Business Through Planning
Tariffs may be unavoidable but legal missteps are not. Ontario employers should take a strategic approach when restructuring, laying off employees, or modifying terms of employment.
With the right planning and sound employment legal advice, you can reduce overhead while staying compliant and avoid disputes that could cost far more than the savings.
The information provided in this article is for general informational purposes only and is not intended as legal advice. Readers should consult with a qualified legal professional to obtain Employment Legal Advice customized to their specific circumstances. The authors and publishers of this article disclaim any liability for actions taken based on its content.
Plan your restructuring the right way — contact HR Enable Inc. at 905-483-5115 for expert employment law guidance and support.