Canada–U.S. Tariffs and HR Compliance: 10 Things Canadian Employers Should Check Before Cutting Hours or Jobs

Canada–U.S. tariffs do not suspend employment law. Review reduced hours, temporary layoffs, mass termination, ROEs, EI, Work-Sharing and policy steps before changing your workforce.

Why tariffs have become an HR compliance issue

Your business is losing orders because of tariffs. Costs are rising. Production is slowing.

Can you cut employees' hours? Temporarily lay people off? Eliminate positions? What must you do first?

That is where the Canada–U.S. tariff dispute becomes an HR compliance issue.

Tariffs do not rewrite employment standards. They do not automatically give an employer the right to reduce wages, cut hours, temporarily lay off employees or terminate positions without following the law.

The legal risk usually comes from how the employer responds to the business pressure.

This guide brings the key issues into one place: reduced hours, employment contracts, temporary layoffs, mass termination, discrimination and reprisal risk, Records of Employment (ROEs), Employment Insurance (EI), Work-Sharing, worker-retention supports, benefits, vacation pay, payroll records and the policies employers should review now.

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At a glance

If the business is considering… Check this before acting
Cutting hours or pay Employment contract + constructive-dismissal risk
Temporary layoffs Jurisdiction-specific layoff rules + contractual right to lay off
Permanent job cuts Statutory notice/pay + contract/common-law obligations
10, 25 or 50+ job losses Group/mass-termination rules may apply
Choosing who is affected Human-rights, accommodation, leave and reprisal protections
Layoffs or termination ROE, EI, payroll, vacation and benefit obligations
Temporary shortage of work Work-Sharing may help avoid layoffs
Reduced hours plus training Worker Retention Grant may help eligible employers

The safest sequence is:

Business problem → legal and policy review → workforce option → compliance check → employee communication → implementation.

Not:

Business problem → layoff → find out later what the rules were.


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1. What changed in the Canada–U.S. tariff dispute?

The trade situation is moving quickly, so employers should verify current tariff measures before relying on a particular rate for business planning.

In July 2026, the White House announced additional 50% duties on specified Canadian products under section 338 of the U.S. Tariff Act of 1930. A later presidential proclamation moved the effective date for the relevant duties to August 22, 2026. The White House stated that the measures cover specified Canadian goods, while exclusions and other trade measures continue to matter product by product. Official U.S. source: White House

Canada responded on August 25. The Department of Finance said the latest U.S. action applies to approximately $27.6 billion of Canadian goods and announced matching Canadian counter-tariffs of 15%, 25% and 50%, effective September 8, 2026, on $27.6 billion of U.S. imports. The targeted sectors include steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics and electronics. Official Canadian source: Department of Finance Canada

For HR teams, the most important development may be the government's workforce response. On August 28, Employment and Social Development Canada highlighted a $7.5-billion package of new and enhanced supports, including $3.5 billion in Rapid Response Supports for Workers and Employers, additional EI flexibilities, workplace training and a new Worker Retention and Retraining Program. Official Canadian source: ESDC

That is why this is no longer only a customs or trade story. It is also a workforce-management story.


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2. Why have tariffs suddenly become an HR issue?

The link is straightforward:

Tariffs → higher costs or fewer orders → production changes → workforce changes → HR compliance obligations.

Statistics Canada gives useful context. In the first quarter of 2026, 32.2% of all businesses reported a negative impact from U.S. tariffs during the previous 12 months. In manufacturing, the figure was 50.6%. At the same time, 23.2% of manufacturers reported increased sales of Canadian products. Official source: Statistics Canada

That last number matters. Tariffs do not automatically mean layoffs. Some businesses may lose U.S. demand while others gain Canadian demand.

Statistics Canada also reported that manufacturing employment fell by nearly 36,000 workers (-2.3%) from December 2024 to December 2025. Motor-vehicle-parts employment fell 9.3%, and employment in iron and steel mills and ferro-alloy manufacturing fell 8.7%. Those numbers show workforce pressure in trade-sensitive industries, but they should not be read as proof that every job loss was caused by tariffs. Official source: Statistics Canada

Suggested chart: Tariff pressure and Canadian workplaces

Indicator Government data
Businesses reporting negative U.S.-tariff impact, Q1 2026 32.2%
Manufacturers reporting negative impact 50.6%
Manufacturers reporting higher sales of Canadian products 23.2%
Manufacturing employment change, Dec. 2024–Dec. 2025 -36,000 (-2.3%)

Editorial takeaway: base workforce decisions on documented business conditions—lost contracts, order volumes, production schedules, margin pressure or supply disruption—not simply on the existence of tariffs.


Tariff pressure on Canadian workplaces
32.2%
Businesses reporting a negative U.S.-tariff impact
50.6%
Manufacturers reporting a negative impact
23.2%
Manufacturers reporting higher sales of Canadian products
−36,000
Manufacturing jobs, Dec. 2024 to Dec. 2025 (−2.3%)

Source: Statistics Canada. Tariffs may affect businesses differently; these figures do not attribute every workforce change to tariffs.

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3. Before reducing employees' hours, check the employment agreement

Cutting hours can look easier than laying people off. Legally, it may not be.

A major unilateral reduction in hours, pay or another fundamental term of employment can trigger termination or constructive-dismissal issues depending on the jurisdiction, contract and circumstances.

Nova Scotia's Labour Standards guidance gives a simple example: reducing an employee from 40 hours to 20 hours without agreement can potentially engage termination rules. Alberta's Employment Standards guidance likewise warns that a temporary layoff may lead to a constructive- or wrongful-dismissal claim where the employment relationship does not permit the layoff. Official source: Nova Scotia Labour Standards Official source: Alberta Employment Standards

Use case

A parts manufacturer loses 30% of its U.S. orders and permanently cuts a long-term employee from 40 hours to 24 hours per week without agreement.

The company has not said, “You are terminated.” But the legal analysis does not end there. The employer should first check the employment agreement, any collective agreement, employment standards and potential common-law consequences.

Key point: “We did not fire anyone” does not necessarily mean there is no termination risk.


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4. A statutory temporary layoff is not automatically a contractual right to lay off

This is one of the most important distinctions in this guide.

Employment-standards legislation may describe how long a layoff can remain “temporary.” That does not always answer whether the employer had the contractual right to impose the layoff in the first place.

British Columbia states this particularly clearly: temporary layoffs must normally be expected in the industry, provided for in the employment contract, or agreed to between employer and employee. If the employee does not agree, the layoff may be treated as a termination. Official source: Government of British Columbia

Alberta's government guidance makes a similar warning: even though the Employment Standards Code permits temporary layoffs, courts have held in some cases that employees may still pursue constructive- or wrongful-dismissal claims where there is no collective agreement or contract allowing the layoff. Official source: Government of Alberta

So employers should ask two separate questions:

  1. Does employment-standards legislation allow this layoff to remain temporary?
  2. Does the employment relationship give us the right to impose it without triggering another claim?

Do not treat those as the same question.


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5. Province-specific temporary-layoff rules: they are not the same

There is no single Canadian temporary-layoff rule.

Jurisdiction Important rule to check
Federal A layoff of 3 months or less is one example that does not constitute termination. Longer layoffs can remain temporary in specified circumstances under the regulations.
Alberta Normally a maximum of 90 days in a 120-day period. Written temporary-layoff notice is required. Certain payment/benefit arrangements or collective agreements can affect the analysis.
British Columbia A contractual, industry or agreed basis for layoff is normally required. Maximum is generally 13 weeks in any 20-week period, unless a permitted exception or variance applies.
Manitoba A layoff of more than 8 weeks in a 16-week period generally becomes a termination, subject to specified exceptions such as continued wage or benefit/pension payments.
Ontario Generally up to 13 weeks in 20 weeks; specified conditions can permit a layoff of less than 35 weeks in 52 weeks. Since November 27, 2025, an approved extended layoff can be longer, but requires a written employee agreement and Director approval and must remain below statutory limits.
Saskatchewan A layoff means a temporary interruption longer than 6 consecutive workdays. Employees with more than 13 consecutive weeks of service generally require written notice of layoff or termination, or pay instead.
Nova Scotia Written notice generally applies to firing, suspension or layoff based on service. One exception covers a layoff or suspension of 6 days or less.

Official sources: Federal Labour Standards, Alberta, British Columbia, Manitoba, Ontario, Saskatchewan, Nova Scotia.

Use case: Alberta metal fabricator

A 20-person fabricator loses a large U.S. customer but expects work to recover within eight weeks. Management wants to “send everyone home until orders return.”

That should trigger a structured review: written layoff notices, the 90-in-120-day rule, contracts, benefits, ROEs and whether Work-Sharing would preserve skilled employees more safely.


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6. Before terminating employees, check both statutory and contractual obligations

If the downturn is expected to be permanent, an employer may decide that termination is necessary.

The first layer is employment-standards minimums: statutory notice, termination pay, severance where applicable, final wages and vacation pay.

The second layer is the employment contract and applicable civil/common law. Statutory minimums are not always the employee's full entitlement. Saskatchewan's government guidance, for example, expressly notes that employment-standards notice is a legislative minimum and that employees may have greater common-law rights. Official source: Government of Saskatchewan

Unionized employers also need to check the collective agreement for layoff order, seniority, recall rights, bumping rights, notice and grievance procedures.

Tariff pressure explains the business reason for a restructuring. It does not erase these obligations.


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7. Mass and group termination thresholds can start at 10, 25 or 50 employees

This is where copying another province's layoff process can become expensive.

Jurisdiction General group/mass trigger Group notice requirement
Federal 50+ employees at a single industrial establishment on the same date or within 4 weeks 16 weeks to the Head of Compliance and Enforcement, plus other statutory steps
Alberta 50+ employees at a single location within 4 weeks At least 4 weeks' notice to the Minister; individual notice rules still apply
British Columbia 50+ employees at a single location within 2 months 8 weeks for 50–100; 12 for 101–300; 16 for 301+
Manitoba 50+ employees within 4 weeks 10 weeks for 50–100; 14 for 101–299; 18 for 300+
Ontario Generally 50+ employees at an establishment within 4 weeks 8 weeks for 50–199; 12 for 200–499; 16 for 500+
Saskatchewan 25+ employees in covered workplace(s) in a community with a common employer within 4 weeks 4 weeks for 25–49; 8 for 50–99; 12 for 100+
Nova Scotia 10+ employees within 4 weeks or less 8 weeks for 10–99; 12 for 100–299; 16 for 300+

Official sources: Federal, Alberta, British Columbia legislation, Manitoba, Ontario, Saskatchewan, Nova Scotia.

These are general rules; exemptions and special definitions can change the result.

Why the threshold table matters

Suppose the same company eliminates 30 jobs.

Ontario's newer mass-termination requirements

Where Ontario's mass-termination rules apply, the employer generally must submit Form 1 to the Director of Employment Standards. Employee mass-termination notice is not effective until the Director receives the form. Since July 1, 2025, affected employees must also receive the Employment Ontario Career Supports information sheet. Since November 27, 2025, eligible employees under mass-termination notice can take up to three unpaid, job-protected days of job-seeking leave during the notice period. Official source: Ontario Employment Standards Official source: Ontario job-seeking leave


General group or mass-termination trigger
Nova Scotia10
Saskatchewan25
Federal50
Alberta50
British Columbia50
Manitoba50
Ontario50

General statutory triggers only. Definitions, time windows, exclusions and notice obligations differ by jurisdiction.

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8. Do not make discriminatory or retaliatory layoff selections

A genuine business downturn does not give an employer a free hand to decide who loses work.

The selection criteria should be job-related, documented and consistently applied. Employers should check whether a proposed decision is connected to a protected human-rights ground, an accommodation request, pregnancy, disability, a protected leave, an employment-standards complaint, a workplace-safety right, union activity or another protected activity.

For example, Alberta's Human Rights Commission states that an employer cannot terminate an employee because of a protected ground and warns employers not to disguise a discriminatory termination as another type of decision. Official source: Alberta Human Rights Commission

Ontario's Employment Standards Act also prohibits reprisals for exercising rights under the Act, including taking or becoming eligible for protected leave. Legislation source: CanLII

Use case

An employer needs to eliminate five of 20 positions. Four employees currently on medical or family-related leave are selected because management assumes they will be “easier to operate without.”

Even if the overall restructuring is financially legitimate, the selection method itself can create a separate legal problem.

The better approach is to define objective business criteria first—such as role elimination, required skills, legitimate operational need or documented performance factors—and then test the outcome for protected-ground or reprisal risk before finalizing decisions.


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9. ROEs and EI after tariff-related layoffs

HR and payroll must work together when employment stops or earnings are interrupted.

Service Canada generally requires an employer to issue a Record of Employment (ROE) when an employee experiences an interruption of earnings. One common trigger is seven consecutive calendar days with no work and no insurable earnings, although exceptions apply.

For electronic ROEs on weekly, biweekly or semi-monthly pay periods, the deadline is generally five calendar days after the end of the pay period in which the interruption occurs. Paper ROEs generally must be issued within five calendar days of the interruption or the date the employer becomes aware of it. Official source: Service Canada ROE guide

Temporary EI measures matter in 2026

For eligible claims starting between March 30, 2025 and October 10, 2026, the normal one-week EI waiting period is temporarily waived. Canada has also temporarily suspended the normal allocation of certain separation earnings, such as vacation pay, pay in lieu of notice and severance pay, for claims or allocations within the applicable period. Eligible long-tenured workers can receive up to 20 additional weeks of regular benefits, to a maximum of 65 weeks, for qualifying claims within the announced dates. Official source: Government of Canada

Employers should describe the interruption accurately on the ROE and avoid promising employees that they will qualify for EI. Service Canada determines entitlement.


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10. Consider Work-Sharing before terminating employees

If the shortage of work is expected to be temporary, Canada's Work-Sharing Program may be one of the most important options to investigate.

Work-Sharing is an agreement among the employer, employees and the Government of Canada. Eligible employees agree to reduce normal working hours and receive EI Work-Sharing benefits. The goal is to share available work and avoid layoffs. Official source: Government of Canada

This is not just a theoretical program.

Government statistics for the period beginning March 29, 2026, through the week ending August 22, 2026 show:

Work-Sharing measure Result
Applications received 362
Agreements approved 266
Employees in approved applications 7,665
Estimated layoffs averted 3,014
Average processing time 6 business days

Official source: Service Canada Work-Sharing statistics

Earlier federal briefing material covering January 2025 through January 31, 2026 stated that approximately 80% of Work-Sharing applications were tariff-related, covering more than 50,000 employees and potentially preventing around 19,000 tariff-related layoffs. Official source: ESDC parliamentary briefing

Use case

An employer has enough work for 70% of its normal production level and expects customer demand to recover. Instead of permanently losing trained staff, Work-Sharing may allow eligible employees to share reduced work while receiving EI support.

That can be materially different from terminating experienced employees and trying to recruit them back months later.


Work-Sharing results since March 29, 2026
362
Applications received
266
Approved agreements
7,665
Employees covered
3,014
Estimated layoffs averted

Source: Service Canada; latest data extracted for the week ending August 22, 2026.

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11. Tariff-specific Work-Sharing measures run through March 31, 2027

The federal tariff special measures for Work-Sharing are currently extended through March 31, 2027.

Among the important flexibilities, tariff-special-measure agreements can be extended to a maximum total duration of 76 weeks, compared with the ordinary program's shorter maximum. The program also contains expanded temporary flexibilities for qualifying employers and employees. Official source: Government of Canada

Employers should not wait until the planned layoff date to explore the program. Service Canada states that employers are required to submit Work-Sharing applications at least 10 business days before the requested agreement start date. The six-business-day figure in the statistics table is the recent average processing time, not a guaranteed turnaround time. Official source: Service Canada statistics


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12. Worker Retention Grant: use reduced hours for training

The Worker Retention Grant for Work-Sharing Employers adds another option for eligible organizations.

Employers with an approved and implemented Work-Sharing agreement can apply for funding to provide weekly income top-ups to eligible employees who are working reduced hours and taking training.

The Government of Canada says the grant can increase income replacement from approximately 55% to about 70% while participating employees train. Applications are scheduled to remain open until December 31, 2026 at 3 p.m. Eastern Time. Official source: Government of Canada

The employer must commit to offering training opportunities for at least 40% of the weeks covered by the grant agreement. Training can include online, in-person, facilitator-led, peer-to-peer, on-the-job and other eligible learning. Official source: Government of Canada eligibility rules

The top-up is employment income. The grant calculation includes employer EI premiums and CPP contributions, so this is a program HR and payroll should administer together—not simply an HR initiative.

Do not confuse this grant with the newer Worker Retention and Retraining Program announced in the August 2026 federal support package. They are separate measures.


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13. Benefits, vacation, payroll and records still matter during workforce reductions

The termination letter is only one part of the compliance process.

Before implementation, build an employee-by-employee reconciliation covering:

Rules differ by jurisdiction. Alberta, for example, requires final earnings to include amounts such as wages, overtime, vacation pay, general-holiday pay and termination pay, with statutory payment deadlines. Nova Scotia states that, once proper notice is given, an employer may not change the employee's pay or other conditions such as benefits during the notice period and must pay accumulated vacation pay within the required period. Official source: Alberta Official source: Nova Scotia

Practical rule: do not let HR issue termination or layoff communications until payroll and benefits administration have confirmed the downstream treatment.


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14. What policies should employers review now?

This is where the tariff story directly connects to an employer's policy manual.

Policy / procedure Why review it now?
Temporary Layoff Policy Does it reflect the rules for the employee's jurisdiction and the employment contract?
Hours of Work / Scheduling Policy Who can change schedules, and how are reductions communicated?
Payroll Policy How will final earnings, deductions and top-ups be processed?
Benefits Policy What continues during notice or temporary layoff, and what requires insurer confirmation?
Termination of Employment Policy Does the process address statutory notice, documentation and approvals?
ROE Procedure Who issues the ROE, when, and who verifies the reason/code?
Accommodation / Human Rights Policy Does the selection process screen for discrimination and accommodation obligations?
Leave Policies Are employees on protected leave being treated lawfully?
Employee Communication / Change Management Procedure Who communicates changes, in what order, and with what approved wording?
Records / Privacy Policy Are restructuring records documented, secured and retained appropriately?

Canada Policy Manual connection

An employer responding to tariff disruption should not review one isolated “layoff policy.” The safer approach is to review the connected policy chain:

Temporary Layoff → Hours & Scheduling → Payroll → Benefits → Termination → ROE → Accommodation & Human Rights → Leaves → Employee Communication → Records.

That is also a useful internal-audit sequence for employers updating an employee policy manual after a major business disruption.


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15. Tariff Workforce Response Checklist for Employers

Before cutting hours, imposing temporary layoffs or eliminating positions, check all 10 items:

  1. Confirm jurisdiction. Is the employee provincially regulated or federally regulated?
  2. Document the business reason. Keep evidence of lost orders, increased costs, production reductions or other genuine operational impacts.
  3. Review contracts and collective agreements. Do not assume the statute is the entire answer.
  4. Test reduced-hours options. Could a material unilateral change create termination or constructive-dismissal risk?
  5. Check temporary-layoff rules. Confirm notice, duration, benefits, recall and contractual authority before implementation.
  6. Model the termination scenario. Calculate statutory entitlements and check contractual/common-law exposure.
  7. Count affected employees. Test whether group/mass-termination thresholds and government-notification rules are triggered.
  8. Audit the selection criteria. Screen for human-rights, accommodation, protected-leave and reprisal concerns.
  9. Check alternatives. Investigate Work-Sharing, tariff special measures, the Worker Retention Grant and other applicable government supports.
  10. Coordinate the exit administration. Confirm benefits, vacation, final pay, ROEs, records and employee communications before notices are released.

The one sentence to remember

Tariff pressure may explain why an employer needs to change its workforce, but it does not exempt the employer from employment law.


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16. Frequently Asked Questions

Can Canadian employers lay off workers because of U.S. tariffs?

Yes, a genuine shortage of work may lead an employer to consider layoffs or terminations. But tariffs do not create a special exemption from employment standards, employment contracts, human-rights obligations or other applicable law.

Can an employer reduce hours instead of laying employees off?

Possibly. However, a substantial unilateral reduction in hours or pay can create legal issues. Review the employment agreement, applicable legislation, collective agreement and potential constructive-dismissal implications before making a material change.

Is a temporary layoff automatically legal if it fits within the province's time limit?

Not necessarily. A statutory rule about the maximum duration of a temporary layoff does not always establish the employer's contractual right to impose the layoff. British Columbia and Alberta government guidance expressly highlight this distinction.

What is Canada's Work-Sharing Program?

Work-Sharing helps eligible employers avoid layoffs during a temporary reduction in normal business activity. Participating employees agree to reduced hours and receive EI Work-Sharing benefits, subject to program requirements and approval.

How long can tariff-related Work-Sharing last?

Under the current tariff special measures, qualifying agreements can be extended to a maximum total duration of 76 weeks. The special measures are currently scheduled through March 31, 2027.

What is the Worker Retention Grant?

It is a separate federal grant for employers with an approved and implemented Work-Sharing agreement. It can fund income top-ups for eligible employees who work reduced hours and participate in training. The government says it can raise income replacement from about 55% to approximately 70%.

When do mass-termination rules apply?

It depends on jurisdiction. Within the jurisdictions covered by this guide, the general threshold begins at 10 employees in Nova Scotia, 25 in Saskatchewan, and 50 in the federal jurisdiction, Alberta, British Columbia, Manitoba and Ontario. Time periods, definitions, notice requirements and exemptions vary.

Does a layoff require a Record of Employment?

An employer generally must issue an ROE when an employee experiences an interruption of earnings. The seven-day rule is a common trigger, but special situations and exceptions apply. Employers should use Service Canada's current ROE guide.

Are there temporary EI measures for tariff-affected workers in 2026?

Yes. Current federal measures include a temporary waiver of the one-week waiting period, temporary treatment of separation earnings and additional weeks for qualifying long-tenured workers, each subject to specific eligibility rules and dates. The current measures discussed in this guide run to October 10, 2026 for qualifying claims or allocations.

Should employers wait until layoffs are announced before checking Work-Sharing?

No. If the work shortage is temporary, employers should investigate Work-Sharing early. Service Canada requires applications at least 10 business days before the requested start date.

Which HR policies should be reviewed first?

Start with Temporary Layoff, Hours and Scheduling, Payroll, Benefits, Termination, ROE procedures, Accommodation/Human Rights, Leave, Employee Communication and Records/Privacy policies. These policies interact during a workforce reduction.


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Final takeaway

The Canada–U.S. tariff dispute has become an HR compliance issue because trade pressure can force employers to make decisions about people, not just prices.

For one employer, the right response may be Work-Sharing and training. For another, it may be a carefully planned temporary layoff. For another, permanent restructuring may be unavoidable.

What should not change is the process.

Verify the business need. Identify the correct jurisdiction. Read the contract. Check the statute. Test group-termination thresholds. Review the selection criteria. Coordinate payroll and benefits. Explore workforce-retention options. Then communicate and implement.

The tariffs may be unprecedented. The employer's compliance process should not be improvised.


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Key Takeaways

Disclaimer: This article provides general educational information about workplace compliance. Employment obligations depend on the applicable legislation, employment agreement, collective agreement, employee circumstances and facts of each case. It is not legal advice. Rules and government programs can change, especially during an active trade dispute. Employers should verify current official government information and obtain appropriate professional advice before implementing significant workforce changes.