A major source of news recently has been American President Donald Trump’s imposition of new tariffs on many countries that trade with the United States including Canada. This has obviously caused a lot of concern for Canadians as America is Canada’s largest trading partner. Canadians are concerned that economic instability resulting from tariffs may cause economic harm to Canada leading to job losses and a recession.

An employer has the right to terminate or dismiss an employee without having to provide termination pay to the employee only as long as the employer has provided reasonable notice of the employer’s intentions to dismiss the employee. This does not change in time of economic hardship, employers should not simply assume that they can “layoff” an employee if they are experiencing business difficulties due to tariffs or any other economic issue. This is because absent an enforceable contractual term or a history of the employer laying off and recalling the employee, an employer cannot simply tell their employee that there is no work and that they are laid off and may recall them at a later date.

The term “lay off” is confused by employers and employees alike all the time.  For instance, an employee may use this term to indicate that their employer has told them they have no work available for them and that they can no longer employ them. This is not what a “lay off” is.  A layoff is a cessation of work but not of employment. This means that if a layoff is lawfully implemented by the employer, a layoff allows the employer to pause work without pay and without it being deemed a breach of the employment relationship (i.e. termination). It will allow the employer to essentially put work “on hold,” and not have to pay the employee their salary during this period of a temporary break.

In most cases that we see at Zeilikman Law, the employer does not abide by the above and a “lay off” is really a dismissal. Employers will owe the employee termination pay and / or severance pay when they dismiss an employee even in situations where the employer is experiencing business hardships and even if those hardships are beyond the control of the employer. There are certain factors that will determine how much notice or pay in lieu of notice that the employer will be expected to pay. Ontario’s Employment Standards Act, 2000, sets out what an employee’s minimum statutory notice period should be. Further, if an employee is federally regulated, the employee’s minimum notice period is set out in the Canada Labour Code, 1985. These are statutory minimum requirements owed to employees. Employees can be entitled to longer notice periods under the common law in addition to statutory entitlements. The amount of common law notice is determined based on certain factors such as age, length of service, character of employment and the ability of the employee to find similar or alternative employment.

Further, employers cannot make unilateral changes to the employment relationship to try to counteract potential economic problems even if they do not actually dismiss the employee. For example, an employer can reduce the number of hours the employee is expected to work or make changes that reduce the employee’s compensation. These actions still may lead to a claim by the employee that they have been constructively dismissed and they could be entitled to termination and / or severance pay.

Talk to an Employment Lawyer

We strongly encourage employers to seek legal advice from an employment lawyer before making any changes to an employment relationship to minimize liability. Employers cannot assume that the situation in Ontario is like that of the United States as American employers have more freedom to use temporary layoffs as a tool to blunt economic difficulties without liability. Ontario has more protections for employees both under legislation and the common law and Ontario employers need to be more careful.

We also strongly encourage employees to seek legal advice from an employment lawyer as well as if they face a dismissal from their employment as they could be entitled to compensation regardless of whether the reason is financial hardship due to an economic situation like tariffs.