Concerned about tariffs, layoffs, restructuring? You are not alone.
The current economic climate, marked by tariffs, economic uncertainty, layoffs and restructuring, has understandably created concerns for many employers and employees.
Employers
The impact of tariffs has led to significant changes within organizations, and employers should proceed with caution.
It’s important to remember that employment relationships are legal relationships, and decisions made in response to tariffs can have legal consequences. While decisions like layoffs and restructuring may seem logical from a business standpoint, these strategies can impact employees, and in turn, expose organizations to substantial liability:
- Dismissals – Employers have severance obligations upon termination. Just because your business is not doing well, does not mean your employees’ entitlements upon termination will be reduced. Dismissals should be handled properly with the advice of an employment lawyer to minimize potential liability.
- Constructive Dismissals – Employers cannot unilaterally make substantial changes to fundamental terms of employment, such as reducing an employee’s hours or compensation. This is referred to as a constructive dismissal of employment, and employees are legally entitled to severance as if they were dismissed outright.
- Temporary Layoffs – Contrary to popular belief, employers don’t automatically have the right to impose temporary layoffs. Unless the employee consents to it, a temporary layoff is a constructive dismissal of their employment, thereby exposing the employer to liability. During the COVID pandemic, many businesses assumed they could temporarily reduce their employees’ hours without any issues, but they learned their lesson the hard way – having to pay severance when they were already struggling financially.
It’s crucial to consider the potential legal consequences before implementing such changes. Ironically, you may end up having to pay more in severance than you save with these “cost-cutting measures”.
That said, this is not an all-or-nothing scenario. There are ways you can make changes without attracting liability. For one, you can be transparent with your employees and obtain their written consent, but even a well-intentioned effort on the employer’s part could prove to be costly if it’s not handled properly. We strongly recommend seeking legal advice before implementing any strategic business decisions, in order to maximize your rights and flexibility and minimize potential liability.
Employees
As many employers are implementing mass layoffs and restructuring, employees are understandably worried about their job security and the rippling effects of potential job loss in a volatile market. If your employer is making or trying to impose substantial changes to fundamental terms of your employment (e.g. demotions, reduced hours or compensation, temporary layoffs, etc.), you may be constructively dismissed.
If you are constructively dismissed or dismissed outright, whether as part of a mass termination or otherwise, you are entitled to severance under the employment standards legislation and potentially substantial compensation at common law. Your employer might tell you that they are relying on your employment agreement and that your contract limits your entitlements to the minimum under the statute. Chances are that your contract is unenforceable, and you are entitled to a lot more than what your employer would have you believe.
We strongly urge you to seek legal advice before agreeing to any such changes or signing any documents, such as new employment agreements or severance offers. An employment lawyer can help you get what you are entitled to; otherwise, you may be leaving money on the table.
We are here to assist you in navigating these complex employment law matters. As we always say, if you think you need an Employment Lawyer, you probably do!
