Tariffs And The Workforce: Managing Legal Risks In Times Of Economic Disruption

The global business landscape is once again facing significant disruption. The U.S. government announced 25% tariffs on Canadian goods and 10% tariffs on Canadian energy products, originally scheduled to take effect on February 4, 2025, but since paused for a period of 30 days. In response, the Canadian government has imposed retaliatory tariffs on U.S. imports. These developments are expected to have profound implications for businesses, particularly those with operations across North America.

While much of the focus will be on the broader economic impacts, it's essential for businesses to also consider how these changes could affect workforce management. The ripple effects of these tariff decisions may require immediate action, particularly with respect to employment decisions. Below, we highlight certain workforce-related issues that businesses may need to address in the coming weeks.

• Workforce adjustments As companies navigate the economic fallout from the tariffs, some may be forced to make tough decisions about workforce reductions, temporary layoffs or compensation adjustments. It is crucial that these actions be managed in compliance with Canadian labour laws, collective bargaining agreements and any existing employment contracts. Mishandling these changes could expose businesses to legal risks, including wrongful/unjust dismissal claims. For more detailed guidance on managing temporary layoffs, we recently published an article discussing the legal considerations employers must keep in mind when implementing temporary layoffs in response to economic disruption. You can read that article here.
• Reviewing employment contracts and policies Given the shifting economic environment, it may be an ideal time for employers to revisit their employment contracts and workplace policies. This could include examining policies related to remote work, compensation changes or temporary layoffs, ensuring that they are aligned with current legal standards and the business's operational needs. Regularly updating and reviewing these documents can help mitigate future challenges.
• Termination and severance considerations In some cases, businesses may need to make permanent reductions to their workforce. It is important to understand the legal requirements surrounding notice periods, severance obligations and related matters. Ensuring compliance with these regulations can help businesses avoid costly legal disputes, including litigation.
• Workplace health & safety For businesses adjusting their workforce models—whether by shifting employees to remote work or restructuring operations—there are ongoing health and safety considerations that must be addressed. Employers will need to ensure that their workplace safety protocols remain up to date and compliant with applicable laws, particularly if changes to the work environment are being implemented.

Moving forward

The potential impact of the new tariffs on businesses, particularly in terms of workforce decisions cannot be underestimated. The legal complexities involved in managing these changes highlight the importance of staying informed and being proactive.

We are closely monitoring the evolving situation and will continue to provide updates as necessary. While it is too early to fully understand the long-term effects of these tariffs, businesses should take steps to ensure that they are legally prepared to manage their workforce in these uncertain times.